UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  
 
 FORM
10-Q
 (Mark One)
 þ
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the quarterly period ended June 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
August 6, 2009, 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
                27Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                32Item
      4. Controls and Procedures
                32PART
      II – OTHER INFORMATION
                34Item
      1. Legal Proceedings
                34Item
      1A.  Risk Factors
                34Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                34Item
      3. Defaults Upon Senior Securities
                34Item
      4. Submission of Matters to a Vote of Security Holders
                34Item
      5. Other Information
                34Item
      6. Exhibits
                35
  
  PART I - FINANCIAL
INFORMATION
 Item
1. Consolidated Financial Statements
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
BALANCE SHEETS
 
 June 30, 2009
                              
                              
                              December 31, 2008(Unaudited)AssetsInvestments
      in portfolio securities at fair value (cost: $273,750,848 and
      $294,432,215, respectively)
                              
                              $
                              199,368,528
                              
                              
                              $
                              244,229,568Investments
      in corporate notes at fair value(cost:
      $11,563,571 and $11,586,899, respectively)
                              
                              
                              7,824,900
                              
                              
                              
                              6,350,000Investments
      in commodity derivative instruments at fair value(cost:
      $269,525 and $774,095, respectively)
                              
                              
                              1,400,375
                              
                              
                              
                              8,212,872Investments
      in U.S. Treasury Bills, at amortized costwhich
      approximates fair value
                              
                              
                              76,151,096
                              
                              
                              
                              -Total
      investments
                              
                              
                              284,744,899
                              
                              
                              
                              258,792,440Cash
      and cash equivalents
                              
                              
                              37,678,624
                              
                              
                              
                              133,805,575Interest
      receivable
                              
                              
                              3,521,030
                              
                              
                              
                              2,410,360Prepaid
      and other current assets
                              
                              
                              995,853
                              
                              
                              
                              1,940,282Deferred
      tax assets
                              
                              
                              6,509,431
                              
                              
                              
                              200,000Total
      current assets
                              
                              
                              48,704,938
                              
                              
                              
                              138,356,217Deferred
      tax assets
                              
                              
                              -
                              
                              
                              
                              3,600,000Total
      assets
                              
                              $
                              333,449,837
                              
                              
                              $
                              400,748,657Liabilities
      and stockholders' equity (net assets)Current
      liabilitiesAccounts
      payable and accrued expenses
                              
                              $
                              507,387
                              
                              
                              $
                              512,926Management
      and incentive fees payable
                              
                              
                              1,647,178
                              
                              
                              
                              2,016,214Dividends
      payable
                              
                              
                              2,595,384
                              
                              
                              
                              8,867,563Income
      taxes payable
                              
                              
                              90,605
                              
                              
                              
                              3,529,308Current
      portion of long-term debt
                              
                              
                              75,000,000
                              
                              
                              
                              75,000,000Total
      current liabilities
                              
                              
                              79,840,554
                              
                              
                              
                              89,926,011Deferred
      tax liabilities
                              
                              
                              980,346
                              
                              
                              
                              -Long-term
      debt, less current portion
                              
                              
                              15,000,000
                              
                              
                              
                              45,000,000Total
      liabilities
                              
                              
                              95,820,900
                              
                              
                              
                              134,926,011Commitments
      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
                              
                              
                              315,184,191
                              
                              
                              
                              315,184,191Undistributed
      net investment income (loss)
                              
                              
                              (2,571,090
                              )
                              
                              
                              (3,420,716
                              )Undistributed
      net realized capital gain (loss)
                              
                              
                              1,984,349
                              
                              
                              
                              2,038,312Net
      unrealized appreciation (depreciation) of portfolio
      securities,corporate
      notes and commodity derivative instruments
                              
                              
                              (76,990,141
                              )
                              
                              
                              (48,000,769
                              )Total
      stockholders’ equity (net assets)
                              
                              
                              237,628,937
                              
                              
                              
                              265,822,646Total
      liabilities and stockholders' equity (net assets)
                              
                              $
                              333,449,837
                              
                              
                              $
                              400,748,657Net
      asset value per share
                              
                              $
                              10.99
                              
                              
                              $
                              12.29
 
 (See
accompanying notes to consolidated financial statements)
  1
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For the Three Months Ended
                                        
                                        
                                        For the Six Months EndedJune 30, 2009
                                        
                                        
                                        June 30, 2008
                                        
                                        
                                        June 30, 2009
                                        
                                        
                                        June 30, 2008Investment
      incomeInterest
      income
                                        
                                        $
                                        6,372,337
                                        
                                        
                                        $
                                        7,578,124
                                        
                                        
                                        $
                                        12,566,875
                                        
                                        
                                        $
                                        16,530,241Royalty
      income (loss), net of amortization
                                        
                                        
                                        (2,773,803
                                        )
                                        
                                        
                                        574,589
                                        
                                        
                                        
                                        (3,668,103
                                        )
                                        
                                        
                                        1,120,438Commodity
      derivative income, net of expired options
                                        
                                        
                                        1,880,229
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,054,081
                                        
                                        
                                        
                                        -Other
      income
                                        
                                        
                                        57,940
                                        
                                        
                                        
                                        44,520
                                        
                                        
                                        
                                        116,739
                                        
                                        
                                        
                                        84,890Total
      investment income
                                        
                                        
                                        5,536,703
                                        
                                        
                                        
                                        8,197,233
                                        
                                        
                                        
                                        14,069,592
                                        
                                        
                                        
                                        17,735,569Operating
      expensesManagement
      fees
                                        
                                        
                                        1,647,178
                                        
                                        
                                        
                                        1,838,009
                                        
                                        
                                        
                                        3,481,026
                                        
                                        
                                        
                                        3,638,215Professional
      fees
                                        
                                        
                                        319,899
                                        
                                        
                                        
                                        224,390
                                        
                                        
                                        
                                        486,626
                                        
                                        
                                        
                                        433,369Insurance
      expense
                                        
                                        
                                        199,959
                                        
                                        
                                        
                                        198,812
                                        
                                        
                                        
                                        400,180
                                        
                                        
                                        
                                        397,629Interest
      expense and fees
                                        
                                        
                                        1,096,709
                                        
                                        
                                        
                                        1,440,572
                                        
                                        
                                        
                                        2,094,551
                                        
                                        
                                        
                                        3,881,648State
      and excise taxes
                                        
                                        
                                        7,066
                                        
                                        
                                        
                                        23,196
                                        
                                        
                                        
                                        12,685
                                        
                                        
                                        
                                        32,712Other
      general and administrative expenses
                                        
                                        
                                        745,589
                                        
                                        
                                        
                                        713,063
                                        
                                        
                                        
                                        1,542,538
                                        
                                        
                                        
                                        1,451,664Total
      operating expenses
                                        
                                        
                                        4,016,400
                                        
                                        
                                        
                                        4,438,042
                                        
                                        
                                        
                                        8,017,606
                                        
                                        
                                        
                                        9,835,237Net
      investment income (loss) before income taxes
                                        
                                        
                                        1,520,303
                                        
                                        
                                        
                                        3,759,191
                                        
                                        
                                        
                                        6,051,986
                                        
                                        
                                        
                                        7,900,332Benefit
      (provision) for income taxes
                                        
                                        
                                        376,672
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,718,665
                                        
                                        
                                        
                                        -Net
      investment income (loss)
                                        
                                        
                                        1,896,975
                                        
                                        
                                        
                                        3,759,191
                                        
                                        
                                        
                                        7,770,651
                                        
                                        
                                        
                                        7,900,332Net realized capital
      gain (loss) on portfolio securities, corporate notes
      and commodity derivative instruments
                                        
                                        
                                        (53,963
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (53,963
                                        )
                                        
                                        
                                        -Net
      increase (decrease) in unrealized appreciation(depreciation)
      on portfolio securities, corporatenotes
      and commodity derivative instruments
                                        
                                        
                                        (4,429,340
                                        )
                                        
                                        
                                        1,611,339
                                        
                                        
                                        
                                        (28,989,372
                                        )
                                        
                                        
                                        (134,823
                                        )Net
      increase (decrease) in stockholders' equity(net
      assets) resulting from operations
                                        
                                        $
                                        (2,586,328
                                        )
                                        
                                        $
                                        5,370,530
                                        
                                        
                                        $
                                        (21,272,684
                                        )
                                        
                                        $
                                        7,765,509Net
      increase (decrease) in stockholders' equity (net assets)resulting
      from operations per common share
                                        
                                        $
                                        (0.12
                                        )
                                        
                                        $
                                        0.25
                                        
                                        
                                        $
                                        (0.98
                                        )
                                        
                                        $
                                        0.36
 
 (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
                              
                              
                              21,628,202
                              
                              
                              $
                              21,628
                              
                              
                              $
                              315,184,191
                              
                              
                              $
                              (3,420,716
                              )
                              
                              $
                              2,038,312
                              
                              
                              $
                              (48,000,769
                              )
                              
                              $
                              265,822,646Net
      increase in stockholders'
      equity (net assets)resulting from
      operations
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              7,770,651
                              
                              
                              
                              (53,963
                              )
                              
                              
                              (28,989,372
                              )
                              
                              
                              (21,272,684
                              )Dividends
      declared
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (6,921,025
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (6,921,025
                              )Balance
      at June 30, 2009 (unaudited)
                              
                              
                              21,628,202
                              
                              
                              $
                              21,628
                              
                              
                              $
                              315,184,191
                              
                              
                              $
                              (2,571,090
                              )
                              
                              $
                              1,984,349
                              
                              
                              $
                              (76,990,141
                              )
                              
                              $
                              237,628,937
 
 (See
accompanying notes to consolidated financial statements)
  3
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 For The Six Months EndedJune 30, 2009
                              
                              
                              June 30, 2008Cash
      flows from operating activitiesNet
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                              
                              $
                              (21,272,684
                              )
                              
                              $
                              7,765,509Adjustments
      to reconcile net increase (decrease) in stockholders' equity (net
      assets)resulting
      from operations to net cash used in operating activitiesPayment-in-kind
      interest
                              
                              
                              (1,378,292
                              )
                              
                              
                              (1,728,817
                              )Net
      amortization of premiums, discounts and fees
                              
                              
                              6,267,170
                              
                              
                              
                              (589,096
                              )Change
      in unrealized (appreciation) depreciation on portfolio
      securities,corporate
      notes and commodity derivative instruments
                              
                              
                              28,989,372
                              
                              
                              
                              134,823Effects
      of changes in operating assets and liabilitiesInterest
      receivable
                              
                              
                              (1,110,670
                              )
                              
                              
                              (735,432
                              )Prepaid
      and other current assets
                              
                              
                              944,429
                              
                              
                              
                              957,395Current
      portion of deferred income taxes
                              
                              
                              (6,309,431
                              )
                              
                              
                              -Non-current
      deferred income taxes
                              
                              
                              4,580,346
                              
                              
                              
                              -Accounts
      payable and accrued expenses
                              
                              
                              (374,575
                              )
                              
                              
                              (527,287
                              )Income
      taxes payable
                              
                              
                              (3,438,703
                              )
                              
                              
                              -Purchase
      of investments in portfolio securities, corporate notesand
      commodity derivative instruments
                              
                              
                              (23,212,163
                              )
                              
                              
                              (81,412,478
                              )Redemption
      of investments in portfolio securities, corporate notesand
      commodity derivative instruments
                              
                              
                              39,532,549
                              
                              
                              
                              28,551,706Net
      sale (purchase) of investments in U.S. Treasury Bills
                              
                              
                              (76,151,096
                              )
                              
                              
                              (14,033,251
                              )Net
      cash used in operating activities
                              
                              
                              (52,933,748
                              )
                              
                              
                              (61,616,928
                              )Cash
      flows from financing activitiesProceeds
      from the issuance of common stock, net of underwriting
    costs
                              
                              
                              -
                              
                              
                              
                              62,790,415Borrowings
      under revolving credit facility
                              
                              
                              32,000,000
                              
                              
                              
                              108,000,000Repayments
      on revolving credit facility
                              
                              
                              (62,000,000
                              )
                              
                              
                              (99,750,000
                              )Offering
      costs from the issuance of common stock
                              
                              
                              -
                              
                              
                              
                              (739,265
                              )Dividends
      paid
                              
                              
                              (13,193,203
                              )
                              
                              
                              (16,012,804
                              )Net
      cash provided by (used in) financing activities
                              
                              
                              (43,193,203
                              )
                              
                              
                              54,288,346Net
      increase (decrease) in cash and cash equivalents
                              
                              
                              (96,126,951
                              )
                              
                              
                              (7,328,582
                              )Cash
      and cash equivalents, beginning of period
                              
                              
                              133,805,575
                              
                              
                              
                              18,437,115Cash
      and cash equivalents, end of period
                              
                              $
                              37,678,624
                              
                              
                              $
                              11,108,533
 
 (See
accompanying notes to consolidated financial statements)
  4
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 June
30, 2009
 (Unaudited)
 
 Portfolio
      Company
                                                                                                                                                                                      
                                                                                                                                                                                      Energy
      Industry Segment
                                                                                                                                                                                      
                                                                                                                                                                                      Investment
      (2) (4)
                                                                                                                                                                                      
                                                                                                                                                                                      Principal
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Cost
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Fair
      Value (3)TARGETED
      INVESTMENTS (24)Venoco,
      Inc. (1)
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      Senior
      Notes (7)
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      12,000,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      11,942,577
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      10,860,000Production
      and Development
                                                                                                                                                                                      
                                                                                                                                                                                      (8.75%,
      due 12/15/2011)Chroma
      Exploration &
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      9,711
      Shares Series A Participating
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,221,710
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Production,
      Inc. (1)
                                                                                                                                                                                      
                                                                                                                                                                                      Production
      and Development
                                                                                                                                                                                      
                                                                                                                                                                                      Convertible
      Preferred Stock (9)8,868
      Shares Series AA Participating
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,089,870
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      500,000Convertible
      Preferred Stock (9)8.11
      Shares Common Stock (5)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Warrants
      (5) (11)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Resaca
      Exploitation Inc. (1)
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      Senior
      Secured
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      9,098,889
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      8,541,955
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      8,541,955Production
      and Development
                                                                                                                                                                                      
                                                                                                                                                                                      Revolving
      Credit Facility(The
      greater of 8.0% or LIBOR + 5.50%,due
      7/01/2012)Common
      Stock (6,574,216 shares) (5) (6) (20)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      3,235,256
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      3,235,256
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      1,687,916Rubicon
      Energy Partners,
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      LLC
      Units (4,000 units) (5)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -LLC
      (8)
                                                                                                                                                                                      
                                                                                                                                                                                      Production
      and DevelopmentBSR
      Loco Bayou, LLC (1) (10)
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      Senior
      Secured
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,654,935
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,192,489
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      1,330,401Production
      and Development
                                                                                                                                                                                      
                                                                                                                                                                                      Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, LIBOR + 8.50%default,
      due 8/15/2009) (9)Overriding
      Royalty Interest
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      20,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      18,205
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      20,000Warrants
      (5) (12)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      10,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      10,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Sonoran
      Energy, Inc. (1)
                                                                                                                                                                                      
                                                                                                                                                                                      Oil
      & Natural Gas
                                                                                                                                                                                      
                                                                                                                                                                                      Warrants
      (5) (13)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      10,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      10,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Production
      and DevelopmentNighthawk
      Transport I, LP (1)
                                                                                                                                                                                      
                                                                                                                                                                                      Energy
      Services
                                                                                                                                                                                      
                                                                                                                                                                                      Second
      Lien
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      13,022,642
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      12,492,212
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Term
      Loan B(The
      greater of 21.0% or LIBOR + 16.50%,w/
      PIK option available up to 6.0%,due
      10/03/2010) (9)LP
      Units (5)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      224
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      224
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -Warrants
      (5) (14)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      850,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      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) (9)Alden
      Resources, LLC (1) (21)
                                                                                                                                                                                      
                                                                                                                                                                                      Coal
      Production
                                                                                                                                                                                      
                                                                                                                                                                                      Senior
      Secured
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      36,497,815
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      34,216,680
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      28,728,083Multiple-Advance
      Term Loan(LIBOR
      + 8.00% cash, LIBOR + 11.0%default,
      due 1/05/2013)Royalty
      Interest
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,660,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2,565,017
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      7,500,000Warrants
      (5) (15)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      100,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      100,000
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      -
  5
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 June
30, 2009
 (Unaudited)
 (Continued)
 
 Portfolio
      Company
                                                                                  
                                                                                  Energy
      Industry Segment
                                                                                  
                                                                                  Investment
      (2) (4)
                                                                                  
                                                                                  Principal
                                                                                  
                                                                                  
                                                                                  Cost
                                                                                  
                                                                                  
                                                                                  Fair
      Value (3)TARGETED
      INVESTMENTS (24) - ContinuedTammany
      Oil & Gas, LLC (1)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Senior
      Secured
                                                                                  
                                                                                  
                                                                                  28,872,804
                                                                                  
                                                                                  
                                                                                  
                                                                                  28,719,666
                                                                                  
                                                                                  
                                                                                  
                                                                                  28,719,666Production
      and Development
                                                                                  
                                                                                  Multiple-Advance
      Term Loan(The
      greater of 11.0% or LIBOR + 6.00%,due
      3/21/2010)Overriding
      Royalty Interest (6)
                                                                                  
                                                                                  
                                                                                  200,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  192,211
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,000,000TierraMar
      Energy LP (8)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Class
      A Preferred LP Units (5)
                                                                                  
                                                                                  
                                                                                  17,710,788
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,710,788
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,500,000Production
      and Development
                                                                                  
                                                                                  Overriding
      Royalty Interest
                                                                                  
                                                                                  
                                                                                  20,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  16,350
                                                                                  
                                                                                  
                                                                                  
                                                                                  300,000Anadarko
      Petroleum Corporation
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Multiple-Advance
      Net Profits Interest
                                                                                  
                                                                                  
                                                                                  29,931,369
                                                                                  
                                                                                  
                                                                                  
                                                                                  30,017,373
                                                                                  
                                                                                  
                                                                                  
                                                                                  30,367,3732007-III
      Drilling Fund (1)
                                                                                  
                                                                                  Production
      and Development
                                                                                  
                                                                                  (Due
      4/23/2032)Formidable,
      LLC (1) (19)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Senior
      Secured
                                                                                  
                                                                                  
                                                                                  38,615,809
                                                                                  
                                                                                  
                                                                                  
                                                                                  38,615,809
                                                                                  
                                                                                  
                                                                                  
                                                                                  5,600,000Production
      and Development
                                                                                  
                                                                                  Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, LIBOR + 8.50%default,
      due 5/31/2008) (9)Warrants
      (5) (16)
                                                                                  
                                                                                  
                                                                                  500,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  500,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -DeanLake
      Operator, LLC (8)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Class
      A Preferred Units (5)
                                                                                  
                                                                                  
                                                                                  13,900,255
                                                                                  
                                                                                  
                                                                                  
                                                                                  13,900,255
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,000,000Production
      and Development
                                                                                  
                                                                                  Overriding
      Royalty Interest
                                                                                  
                                                                                  
                                                                                  20,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  18,456
                                                                                  
                                                                                  
                                                                                  
                                                                                  100,000Bionol
      Clearfield, LLC (1)
                                                                                  
                                                                                  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 (1)
                                                                                  
                                                                                  Alternative
      Fuels and
                                                                                  
                                                                                  Senior
      Secured Notes
                                                                                  
                                                                                  
                                                                                  11,402,395
                                                                                  
                                                                                  
                                                                                  
                                                                                  9,850,326
                                                                                  
                                                                                  
                                                                                  
                                                                                  9,850,326Specialty
      Chemicals
                                                                                  
                                                                                  (15.00%,
      due 3/06/2015)BioEnergy
      International Warrants (5) (17)
                                                                                  
                                                                                  
                                                                                  502,759
                                                                                  
                                                                                  
                                                                                  
                                                                                  502,759
                                                                                  
                                                                                  
                                                                                  
                                                                                  502,759BioEnergy
      Holding Units (5)
                                                                                  
                                                                                  
                                                                                  1,296,771
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,296,771
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,296,771Greenleaf
      Investments, LLC (1)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Senior
      Secured
                                                                                  
                                                                                  
                                                                                  11,674,268
                                                                                  
                                                                                  
                                                                                  
                                                                                  11,449,553
                                                                                  
                                                                                  
                                                                                  
                                                                                  11,449,553Production
      and Development
                                                                                  
                                                                                  Multiple-Advance
      Term Loan(The
      greater of 10.50% or LIBOR + 6.50%,due
      4/30/2011)Overriding
      Royalty Interest (6)
                                                                                  
                                                                                  
                                                                                  100,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  69,323
                                                                                  
                                                                                  
                                                                                  
                                                                                  400,000ATP
      Oil & Gas Corporation (1)
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Limited
      Term Royalty Interest
                                                                                  
                                                                                  
                                                                                  32,814,792
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,266,351
                                                                                  
                                                                                  
                                                                                  
                                                                                  8,415,540Production
      and DevelopmentBlack
      Pool Energy
                                                                                  
                                                                                  Oil
      & Natural Gas
                                                                                  
                                                                                  Senior
      Secured
                                                                                  
                                                                                  
                                                                                  17,000,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  16,678,185
                                                                                  
                                                                                  
                                                                                  
                                                                                  16,678,185Partners,
      LLC (1)
                                                                                  
                                                                                  Production
      and Development
                                                                                  
                                                                                  Multiple-Advance
      Term Loan(The
      greater of 12.00% or LIBOR +8.00
      % cash, 14.00% or LIBOR +10.00%
      PIK, due 10/24/2011)Overriding
      Royalty Interest (5) (6)
                                                                                  
                                                                                  
                                                                                  10,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,000Warrants
      (5) (22)
                                                                                  
                                                                                  
                                                                                  10,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,000Subtotal
      Targeted Investments (61.83% of total investments)
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  $
                                                                                  273,750,848
                                                                                  
                                                                                  
                                                                                  $
                                                                                  199,368,528
  6
  NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 June
30, 2009
 (Unaudited)
 (Continued)
 
 Issuing
      Company
                                                                                                                
                                                                                                                Energy
      Industry Segment
                                                                                                                
                                                                                                                Investment
      (2) (4)
                                                                                                                
                                                                                                                Principal
                                                                                                                
                                                                                                                
                                                                                                                Cost
                                                                                                                
                                                                                                                
                                                                                                                Fair
      Value (3)CORPORATE
      NOTES (24)Pioneer
      Natural Resources Co.
                                                                                                                
                                                                                                                Oil
      & Natural Gas
                                                                                                                
                                                                                                                Senior
      Notes, 7.2%, due 2028
                                                                                                                
                                                                                                                $
                                                                                                                10,000,000
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                11,563,571
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                7,824,900Production
      and DevelopmentSubtotal
      Corporate Notes ( 2.43% of total investments)
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                11,563,571
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                7,824,900COMMODITY
      DERIVATIVE INSTRUMENTS (24)Put
      Options (18)
                                                                                                                
                                                                                                                Put
      Options with BP Corporation North America, Inc. to sell up
    to
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                128,700
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                881,229237,750
      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
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                519,14632,750
      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 Derivatives ( 0.43% of total investments)
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                269,525
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                1,400,375GOVERNMENT
      SECURITIES (23)U.S.
      Treasury Bills
                                                                                                                
                                                                                                                U.S.
      Treasury Bills, 0.06%, due 07/16/2009
                                                                                                                
                                                                                                                $
                                                                                                                50,000,000
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                49,998,750
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                49,998,750U.S.
      Treasury Bills
                                                                                                                
                                                                                                                U.S.
      Treasury Bills, 0.06%, due 07/16/2009
                                                                                                                
                                                                                                                
                                                                                                                26,153,000
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                26,152,346
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                26,152,346Subtotal
      Government Securities (23.62% of total investments)
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                76,151,096
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                76,151,096CASHSubtotal
      Cash (11.69% of total investments)
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                37,678,624
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                37,678,624TOTAL
      INVESTMENTS, CASH AND CASH
      EQUIVALENTS
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                399,413,664
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                322,423,523LIABILITIES
      IN EXCESS OF OTHER ASSETS
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                (84,794,586
                                                                                                                )NET
      ASSETS
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                237,628,937
  7
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 June
30, 2009
 (Unaudited)
 (Continued)
 
 NOTES TO CONSOLIDATED
SCHEDULE OF INVESTMENTS
  (1)
                Portfolio
      company is not controlled by or affiliated with the Company as defined by
      the Investment Company Act of 1940.
 (2)
                Percentages
      represent interest rates in effect at the end of the period and due dates
      represent the contractual maturity
dates.
 (3)
                Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 (4)
                All
      investments are in entities with primary operations in the United States
      of America.
 (5)
                Non-income
      producing securities.
 (6)
                Securities
      are subject to restrictions as to their
sale.
 (7)
                Upon
      the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco
      Inc.'s senior notes became collateralized by second priority
      liens.
 (8)
                Portfolio
      company is controlled by the Company as defined by the Investment Company
      Act of 1940.
 (9)
                Non-accrual
      status.
 (10)
                BSR
      Loco Bayou was issued a written notice of
  default.
 (11)
                Chroma
      warrants expire on April 5, 2012 and provide the Company the right to
      purchase 2,462 shares of common stock at a purchase price of $75.00 per
      share.
 (12)
                BSR
      Loco Bayou warrants expire on August 15, 2013 and provide the Company the
      right to purchase 10,000 investor units at the exercise price of $160.00
      per investor unit.
 (13)
                Sonoran
      warrants expire on November 28, 2014 and provide the Company the right to
      purchase shares of common stock up to 2.87 million shares, on a fully
      diluted basis with anti-dilution provisions, at the exercise price of
      $0.20 per share.
 (14)
                Nighthawk
      warrants expire on May 13, 2017 and provide the Company the right to
      purchase approximately 7.1% of limited partnership units at the exercise
      price of $0.001 per unit.
 (15)
                Alden
      warrants provide the Company the right to purchase 23% of class C units at
      an exercise price of $0.739 per unit, expiring in December 2013 and the
      right to purchase 10% of class C units at an exercise price of $0.739 per
      unit, expiring in July 2014.
 (16)
                Formidable
      warrants expire on March 31, 2015 and provide the Company the right to
      purchase membership interest representing 30% of all distributions at an
      exercise price of $1,000 per percentage
point.
 (17)
                BioEnergy
      International, LLC warrants expire on August 15, 2010 and provide the
      Company the right to purchase 648,000 units, representing membership
      interests of BioEnergy International, LLC, at the purchase price of $10.00
      per unit.
 (18)
                Put
      Options are related to the limited term royalty interest purchased from
      ATP Oil & Gas Corporation.
 (19)
                Formidable
      was issued a written notice of default on February 13,
    2009.
 (20)
                Resaca
      stock is listed on the Alternative Investment Market of the London Stock
      Exchange, denominated in British pounds and its reported fair value at
      June 30, 2009 has been converted to U.S. dollars at the exchange rate
      effective on June 30, 2009.
 (21)
                Alden
      was issued a written notice of default on February 5, 2009 and entered
      into a forbearance agreement on April 16,
2009.
 (22)
                Black
      Pool warrants expire seven years after repayment of principal and interest
      and provide the Company the right to purchase approximately 25% of
      membership interest at the exercise price of $0.01 per
    unit.
 (23)
                Investments
      in U.S. Treasury instruments are level 1 securities per SFAS No. 157
      hierarchy.
 (24)
                All
      investments in portfolio securities, corporate notes and commodity
      derivative instruments are level 3 securities per SFAS No. 157
      hierarchy.
  (See
accompanying notes to consolidated financial statements)
  8
  NGP CAPITAL RESOURCES
COMPANY
 
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
  Portfolio
      Company
                              
                              Energy
      Industry
                                Segment
                              
                              Investment (2)
      (4)
                              
                              Principal
                              
                              Cost
                              
                              Fair Value(3)Targeted
      InvestmentsVenoco, Inc. (1)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              Senior Notes (7)
                                (8.75%,
      due 12/15/2011)
                              
                              $
                              12,000,000
                              
                              
                              $
                              11,932,367
                              
                              
                              $
                              5,760,000Chroma Exploration & Production, Inc. (1)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              9,711
      Shares Series A Participating
                                Convertible Preferred Stock (9)
                              
                              
                              —
                              
                              
                              
                              2,221,710
                              
                              
                              
                              —8,868
      Shares Series AA Participating
                                Convertible Preferred Stock (9)
                              
                              
                              —
                              
                              
                              
                              2,089,870
                              
                              
                              
                              1,000,0008.11 Shares Common Stock (5)
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Warrants (5)
      (11)
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Resaca Exploitation Inc. (1)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              Senior
      Secured
                                Multiple-Advance
      Term Loan
                                (The
      greater of 10.0% or LIBOR +
                                6.00%,
      due 5/01/2012)
                              
                              
                              28,000,000
                              
                              
                              
                              27,592,657
                              
                              
                              
                              27,592,657Common Stock (6,574,216 shares) (5)
      (6)
      (20)
                              
                              
                              3,235,256
                              
                              
                              
                              3,235,256
                              
                              
                              
                              1,093,688Crossroads Energy, LP (1)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              Senior
      Secured
                                Multiple-Advance
      Term Loan
                                (The
      greater of 10.0% or LIBOR + 5.50%, due 6/29/2009)
                              
                              
                              4,820,204
                              
                              
                              
                              4,781,487
                              
                              
                              
                              4,781,487Overriding Royalty Interest (6)
                              
                              
                              10,000
                              
                              
                              
                              5,120
                              
                              
                              
                              250,000Rubicon Energy Partners, LLC (8)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              LLC Units (4,000 units) (5)
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              750,000BSR Loco Bayou, LLC (1)
      (10)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              Senior
      Secured
                                Multiple-Advance
      Term Loan
                                (LIBOR
      + 5.50% cash, LIBOR + 8.50%
                                default, due 8/15/2009) (9)
                              
                              
                              2,888,986
                              
                              
                              
                              2,401,884
                              
                              
                              
                              1,539,795Overriding
      Royalty Interest
                              
                              
                              20,000
                              
                              
                              
                              19,372
                              
                              
                              
                              20,000Warrants (5)
      (12)
                              
                              
                              10,000
                              
                              
                              
                              10,000
                              
                              
                              
                              —Sonoran Energy, Inc. (1)
      (23)
                              
                              Oil
      & Natural Gas
                                Production
      and Development
                              
                              Warrants (5)
      (13)
                              
                              
                              10,000
                              
                              
                              
                              10,000
                              
                              
                              
                              —Nighthawk Transport I, LP (1)
      (23)
                              
                              Energy
      Services
                              
                              Second
      Lien
                                Term
      Loan B
                                (The
      greater of 15.0% or
                                LIBOR
      + 10.50%, due 10/03/2010)
                              
                              
                              12,895,524
                              
                              
                              
                              12,184,611
                              
                              
                              
                              8,929,131LP Units (5)
                              
                              
                              224
                              
                              
                              
                              224
                              
                              
                              
                              —Warrants (5)
      (14)
                              
                              
                              850,000
                              
                              
                              
                              850,000
                              
                              
                              
                              —Second
      Lien
                                Delayed
      Draw Term Loan B
                                (The
      greater of 15.0% or LIBOR +
                                10.50%,
      due 10/03/2010)
                              
                              
                              1,443,427
                              
                              
                              
                              1,420,362
                              
                              
                              
                              1,075,842Alden Resources, LLC (1)
      (21)
      (23)
                              
                              Coal
      Production
                              
                              Senior
      Secured
                                Multiple-Advance
      Term Loan
                                (LIBOR
      + 8.00% cash, due 1/05/2013)
                              
                              
                              36,285,168
                              
                              
                              
                              33,772,038
                              
                              
                              
                              28,283,440Royalty
      Interest
                              
                              
                              2,660,000
                              
                              
                              
                              2,565,017
                              
                              
                              
                              7,500,000Warrants (5)
      (15)
                              
                              
                              100,000
                              
                              
                              
                              100,000
                              
                              
                              
                              —
 
 (See
accompanying notes to consolidated financial statements)
  9
  NGP
CAPITAL RESOURCES COMPANY
 
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (continued)
  Portfolio
      Company
                                
                                Energy
      Industry
                                  Segment
                                
                                Investment (2)
      (4)
                                
                                Principal
                                
                                Cost
                                
                                Fair Value(3)Targeted
      Investments – ContinuedTammany Oil & Gas, LLC (1)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Senior
      Secured
                                  Multiple-Advance
      Term Loan
                                  (The
      greater of 11.0% or LIBOR + 6.00%, due 3/21/2010)
                                
                                
                                31,447,804
                                
                                
                                
                                31,197,085
                                
                                
                                
                                31,197,085Overriding Royalty Interest (5)
      (6)
                                
                                
                                200,000
                                
                                
                                
                                200,000
                                
                                
                                
                                550,000TierraMar Energy LP (8)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Overriding
      Royalty Interest
                                
                                
                                20,000
                                
                                
                                
                                16,828
                                
                                
                                
                                300,000Class A Preferred LP Units (5)
                                
                                
                                16,634,830
                                
                                
                                
                                16,634,830
                                
                                
                                
                                13,500,000Anadarko
      Petroleum Corporation
                                  2007-III Drilling Fund (1)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Multiple-Advance
      Net Profits Interest
                                  (Due
      4/23/2032)
                                
                                
                                37,255,948
                                
                                
                                
                                37,352,982
                                
                                
                                
                                37,352,982Formidable, LLC (1)
      (19)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Senior
      Secured
                                  Multiple-Advance
      Term Loan
                                  (LIBOR
      + 5.50% cash, LIBOR + 8.50%
                                  default, due 5/31/2008) (9)
                                
                                
                                37,299,054
                                
                                
                                
                                37,299,054
                                
                                
                                
                                22,500,000Warrants (5)
      (16)
                                
                                
                                500,000
                                
                                
                                
                                500,000
                                
                                
                                
                                —DeanLake Operator, LLC (8)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Class A Preferred Units (5)
                                
                                
                                13,900,255
                                
                                
                                
                                13,900,255
                                
                                
                                
                                10,000,000Overriding
      Royalty Interest
                                
                                
                                20,000
                                
                                
                                
                                18,897
                                
                                
                                
                                20,000Bionol Clearfield, LLC (1)
      (23)
                                
                                Alternative
      Fuels and
                                  Specialty
      Chemicals
                                
                                Senior
      Secured Tranche C
                                  Construction
      Loan
                                  (LIBOR
      + 7.00%, due 9/06/2016)
                                
                                
                                5,000,000
                                
                                
                                
                                5,000,000
                                
                                
                                
                                5,000,000BioEnergy Holding, LLC (1)
      (23)
                                
                                Alternative
      Fuels and
                                  Specialty
      Chemicals
                                
                                Senior
      Secured Notes
                                  (15.00%,
      due 3/06/2015)
                                
                                
                                10,606,557
                                
                                
                                
                                9,757,613
                                
                                
                                
                                9,757,613BioEnergy International Warrants (5)
      (17)
                                
                                
                                595,845
                                
                                
                                
                                595,845
                                
                                
                                
                                595,845BioEnergy Holding Units (5)
                                
                                
                                376,687
                                
                                
                                
                                376,687
                                
                                
                                
                                376,687Greenleaf Investments, LLC (1)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Senior
      Secured
                                  Multiple-Advance
      Term Loan
                                  (The
      greater of 10.50% or LIBOR +
                                  6.50%,
      due 4/30/2011)
                                
                                
                                12,229,693
                                
                                
                                
                                11,951,818
                                
                                
                                
                                11,951,818Overriding Royalty Interest (6)
                                
                                
                                100,000
                                
                                
                                
                                86,263
                                
                                
                                
                                300,000ATP Oil & Gas Corporation (1)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Limited
      Term Royalty Interest
                                
                                
                                32,814,792
                                
                                
                                
                                24,319,585
                                
                                
                                
                                12,219,000Black Pool Energy Partners, LLC (1)
      (23)
                                
                                Oil
      & Natural Gas
                                  Production
      and Development
                                
                                Senior
      Secured
                                  Multiple-Advance
      Term Loan
                                  (The
      greater of 12.00% or LIBOR + 8.00% cash, 14.00% or LIBOR + 10.00%
      PIK,
                                  due
      10/24/2011)
                                
                                
                                302,497
                                
                                
                                
                                12,498
                                
                                
                                
                                12,498Overriding Royalty Interest (5)
      (6)
                                
                                
                                10,000
                                
                                
                                
                                10,000
                                
                                
                                
                                10,000Warrants (5)
      (22)
                                
                                
                                10,000
                                
                                
                                
                                10,000
                                
                                
                                
                                10,000Subtotal
      Targeted Investments (62.2% of total investments)
                                
                                
                                
                                
                                
                                $
                                294,432,215
                                
                                
                                $
                                244,229,568
 
 (See
accompanying notes to consolidated financial statements)
  10
 
 NGP
CAPITAL RESOURCES COMPANY
 
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (continued)
 
 Issuing
      Company
                            
                            Energy
                              Industry
                              Segment
                            
                            Investment (2)
      (4)
                            
                            Principal
                            
                            Cost
                            
                            Fair Value(3)Corporate
      NotesPioneer Natural Resources Co. (23)
                            
                            Oil
      & Natural Gas Production and
      Development
                            
                            Senior
      Notes, 7.2%, due 2028
                            
                            $
                            10,000,000
                            
                            
                            $
                            11,586,899
                            
                            
                            $
                            6,350,000Subtotal
      Corporate Notes ( 1.62% of total investments)
                            
                            $
                            11,586,899
                            
                            
                            $
                            6,350,000
 
 Commodity
      Derivative InstrumentsPut Options (18)
      (23)
                          Put
      Options with BP Corporation North America, Inc. to sell up to
                            615,000
      MMBtu of natural gas at a strike price of $10.00 per MMBtu.
                            12
      monthly contracts beginning on July 1, 2008 and expiring on June 30,
      2009.
                          
                          $
                          141,570
                          
                          
                          $
                          933,484Put
      Options with BP Corporation North America, Inc. to sell up to
                            237,750
      Bbls of crude oil at a strike price of $101.00 per Bbl. 15
      monthly
                            contracts
      beginning on July 1, 2008 and expiring on September 30,
    2009.
                          
                          
                          491,700
                          
                          
                          
                          6,146,906Put
      Options with BP Corporation North America, Inc. to sell up to
                            32,750
      Bbls of crude oil at a strike price of $85.00 per Bbl. 4
      monthly
                            contracts
      beginning on October 1, 2009 and expiring on January 31,
    2010.
                          
                          
                          140,825
                          
                          
                          
                          1,132,482
 Subtotal
      Commodity Derivatives (2.1% of total investments)
                      
                      $
                      774,095
                      
                      
                      $
                      8,212,872CashSubtotal
      Cash (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
                      
                      
                      
                      
                      
                      $
                      (126,775,369)Net
      assets
                      
                      
                      
                      
                      
                      $
                      265,822,646
 
 (See
accompanying notes to consolidated financial statements)
  11
 
 NGP CAPITAL RESOURCES
COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (continued)
 
 Notes
to Consolidated Schedule of Investments
 
 (1)
              Portfolio
      company is not controlled by or affiliated with the Company as defined by
      the Investment Company Act of 1940.
 
 (2)
              Percentages
      represent interest rates in effect at the end of the period and due dates
      represent the contractual maturity
dates.
 
 (3)
              Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 
 (4)
              All
      investments are in entities with primary operations in the United States
      of America.
 
 (5)
              Non-income
      producing securities.
 
 (6)
              Securities
      are subject to restrictions as to their
sale.
 
 (7)
              Upon
      the March 30, 2006 closing of Venoco, Inc.’s TexCal acquisition, Venoco
      Inc.’s senior notes became collateralized by second priority
      liens.
 
 (8)
              Portfolio
      company is controlled by the Company as defined by the Investment Company
      Act of 1940.
 
 (9)
              Non-accrual
      status.
 
 (10)
              Portfolio
      company was issued a written notice of
default.
 
 (11)
              Chroma
      warrants expire on April 5, 2012 and provide the Company the right to
      purchase 2,462 shares of common stock at a purchase price of $75.00 per
      share.
 
 (12)
              BSR
      Loco Bayou warrants expire on August 15, 2013 and provide the Company the
      right to purchase 10,000 investor units at the exercise price of $160.00
      per investor unit.
 
 (13)
              Sonoran
      warrants expire on November 28, 2014 and provide the Company the right to
      purchase shares of common stock up to 2.87 million shares, on a fully
      diluted basis with anti-dilution provisions, at the exercise price of
      $0.20 per share.
 
 (14)
              Nighthawk
      warrants expire on May 13, 2017 and provide the Company the right to
      purchase approximately 2.5% of limited partnership units at the exercise
      price of $0.001 per unit.
 
 (15)
              Alden
      warrants provide the Company the right to purchase 23% of class C units at
      an exercise price of $0.739 per unit, expiring in December 2013 and the
      right to purchase 10% of class C units at an exercise price of $0.739 per
      unit, expiring in July 2014.
 
 (16)
              Formidable
      warrants expire on March 31, 2015 and provide the Company the right to
      purchase membership interest representing 30% of all distributions at an
      exercise price of $1,000 per percentage
point.
 
 (17)
              BioEnergy
      International, LLC warrants expire on August 15, 2010 and provide the
      Company the right to purchase 648,000 units, representing membership
      interests of BioEnergy International, LLC, at the purchase price of $10.00
      per unit.
 
 (18)
              Put
      Options are related to the limited term royalty interest purchased from
      ATP Oil & Gas Corporation.
 
 (19)
              Portfolio
      company was issued a written notice of default on February 13,
      2009.
 
 (20)
              Resaca
      stock is listed on the Alternative Investment Market of the London Stock
      Exchange, denominated in British pounds and its reported fair value at
      December 31, 2008 has been converted to U.S. dollars at the exchange rate
      effective on December 31, 2008.
 
 (21)
              Portfolio
      company was issued a written notice of default on February 5,
      2009.
 
 (22)
              Black
      Pool warrants expire seven years after repayment of principal and interest
      and provide the Company the right to purchase approximately 25% of
      membership interest at the exercise price of $0.01 per
    unit.
 
 (23)
              Level
      3 security per SFAS No.
      157 hierarchy.
 
 (See
accompanying notes to consolidated financial statements)
 
 12
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
FINANCIAL HIGHLIGHTS
 (Unaudited)
  For the Six Months EndedJune 30, 2009
                                        
                                        
                                        June 30, 2008Per
      Share Data  (1)Net
      asset value, beginning of period
                                        
                                        $
                                        12.29
                                        
                                        
                                        $
                                        14.30Increase
      in net assets as a result ofsecondary
      public stock offering
                                        
                                        
                                        -
                                        
                                        
                                        
                                        0.40Underwriting
      discounts and commissions relatedto
      secondary public stock offerings
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (0.15
                                        )Other
      costs related to secondary public stock offerings
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (0.03
                                        )Net
      increase in net assets from secondary public offerings
                                        
                                        
                                        -
                                        
                                        
                                        
                                        0.22Net
      asset value after public stock offerings
                                        
                                        
                                        12.29
                                        
                                        
                                        
                                        14.52Net
      investment income (loss)
                                        
                                        
                                        0.36
                                        
                                        
                                        
                                        0.37Net
      realized and unrealized gain (loss) on portfolio
    securities,corporate
      notes and commodity derivative instruments
                                        
                                        
                                        (1.34
                                        )
                                        
                                        
                                        (0.01
                                        )Net
      increase (decrease) in stockholders' equity (net assets)resulting
      from operations
                                        
                                        
                                        (0.98
                                        )
                                        
                                        
                                        0.36Dividends
      declared
                                        
                                        
                                        (0.32
                                        )
                                        
                                        
                                        (0.80
                                        )Net
      asset value, end of period
                                        
                                        $
                                        10.99
                                        
                                        
                                        $
                                        14.08Market
      value, beginning of period
                                        
                                        $
                                        8.37
                                        
                                        
                                        $
                                        15.63Market
      value, end of period
                                        
                                        $
                                        5.87
                                        
                                        
                                        $
                                        15.41Market
      value return  (2)
                                        
                                        
                                        (26.16
                                        )%
                                        
                                        
                                        3.64
                                        %Net
      asset value return (2)
                                        
                                        
                                        (5.85
                                        )%
                                        
                                        
                                        3.50
                                        %Ratios
      and Supplemental Data($
      and shares in thousands)Net
      assets, end of period
                                        
                                        $
                                        237,629
                                        
                                        
                                        $
                                        304,425Average
      net assets
                                        
                                        $
                                        251,726
                                        
                                        
                                        $
                                        277,342Common
      shares outstanding at end of period
                                        
                                        
                                        21,628
                                        
                                        
                                        
                                        21,628Total
      operating expenses less management andincentive
      fees and interest expense/average net assets (3)
                                        
                                        
                                        1.96
                                        %
                                        
                                        
                                        1.68
                                        %Total
      operating expenses less managementand
      incentive fees/average net assets (3)
                                        
                                        
                                        3.63
                                        %
                                        
                                        
                                        4.49
                                        %Total
      operating expenses/average net assets (3)
                                        
                                        
                                        6.42
                                        %
                                        
                                        
                                        7.13
                                        %Net
      investment income (loss)/average net assets (3)
                                        
                                        
                                        6.23
                                        %
                                        
                                        
                                        5.73
                                        %Net
      increase (decrease) in net assets resulting fromoperations/average
      net assets (3)
                                        
                                        
                                        (17.04
                                        )%
                                        
                                        
                                        5.63
                                        %Portfolio
      turnover rate
                                        
                                        
                                        15.70
                                        %
                                        
                                        
                                        10.29
                                        %
 
 (1) Per
Share Data is based on common shares outstanding at end of period.
 (2)
Return calculations assume reinvestment of dividends and are not
annualized.
 (3)
Annualized.
 
 (See
accompanying notes to consolidated financial statements)
  13
 
 NGP
CAPITAL RESOURCES COMPANY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 June
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 and NGPC Asset Holdings V, LP, a Texas
limited partnership.  Effective May 28, 2008, NGPC Asset Holdings IV,
LP merged with and into NGPC II.  The Company consolidates the results
of its subsidiaries for financial reporting purposes.  The Company
does not consolidate the financial results of its portfolio
companies.
 
 The
Company’s investment objective is to generate both current income and capital
appreciation through debt investments with certain equity
components.
 
 The
Company is managed and advised, subject to the overall supervision of the
Company’s board of directors (the “Board of Directors”), by NGP Investment
Advisor, LP (the “Manager”), a Delaware limited partnership owned by NGP Energy
Capital Management, L.L.C., and NGP Administration, LLC (the “Administrator”),
the Company’s administrator.
  Note
      2:
              Significant
      Accounting Policies
 
 The
interim unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The interim consolidated
financial statements have been prepared by management of the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”).  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) have been
omitted pursuant to such rules and regulations, although the Company believes
the disclosures included herein are adequate to make the information presented
not misleading.  In the opinion of management, all adjustments which
are of a normal recurring nature considered necessary for presentation of the
information have been included.  These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008.  Interim results
are not necessarily indicative of results for a full year. Management has
evaluated subsequent events for recognition or disclosure through August 7,
2009, which was the date we filed this Form 10-Q with the SEC. See Subsequent
Events in Note 12.
 
 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.
 
 14
 
 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 June 30, 2009, the Company’s Barclays money market account
balance was $585,263 and the fair market value of our senior notes and corporate
notes were $10.86 million and $7.82 million, respectively. The Company currently
believes that the transfer of its Lehman Brothers account to Barclays will not
have a material adverse effect on its financial position, results of operations
or cash flows.
 
 Valuation
of Investments
 
 Investments
are carried at fair value, as determined in good faith by the Company’s Board of
Directors.  On a quarterly basis, the investment team of the Manager
prepares valuations for all of the assets in the Company’s portfolio and
presents the valuations to the Company’s valuation committee (the “Valuation
Committee”) and Board of Directors.  The valuations are determined and
recommended by the Valuation Committee to the Board of Directors, which reviews
and ratifies the final portfolio valuations.
 
 Investments
in securities for which market quotations are readily available are recorded in
the financial statements at such market quotations as of the valuation date. 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. These valuation analyses are prepared 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 also on 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, tenor and liquidity. 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.
 
 15
  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.  Investments in debt securities for which market
quotations are readily available are recorded in the financial statements 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 discounted value of future
net cash flows is derived, 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
 
 Current
accounting rules require that all derivative instruments, other than those that
meet specific exclusions, be recorded at fair value. Quoted market prices are
the best evidence of fair value. If quotations are not available, management’s
best estimate of fair value is based 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. Option fair values for the natural gas option
transactions are based on the Black-Scholes pricing model and the crude oil
transactions are based on the Turnbull-Wakeman pricing model and 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.
 
 16
 
 Payment-in-Kind
Interest and Dividends
 
 The
Company may have investments in its portfolio that contain payment-in-kind
(“PIK”) provisions. PIK interest or dividends, computed at the contractual rate
specified in each investment agreement, are added to the principal balance of
the investment and recorded 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 quarters ended June 30, 2009 and 2008, PIK interest
income was $465,766 and $77,088, respectively.  For the quarter ended
June 30, 2008, PIK dividend income was $131,505.  There was no PIK
income for the quarter ended June 30, 2009. A reserve was recorded for the PIK
interest income and PIK dividend income reported for the quarter ended June 30,
2008, effectively reversing the accruals. If the portfolio company’s asset
valuation is not sufficient to cover the contractual interest, the Company will
not accrue interest income or 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 June 30, 2009
the Company accreted approximately $0.5 million of fee income into interest
income, compared to approximately $0.3 million of fee income for the quarter
ended June 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 amount to be paid out as a dividend, if any, is
determined by the Company’s Board of Directors each quarter and is based on the
annual taxable earnings estimated by the Manager.  Based on that
estimate, a dividend is declared each quarter and paid shortly
thereafter.
 
 17
  The
following table summarizes the Company’s dividends for the year 2008 and for the
first and second quarters of 2009:
 
 Dividend HistoryDeclaration Date
                        
                        Amount
                        
                        Record Date
                        
                        Payment DateMarch
      19, 2008
                        
                        $
                        0.40
                        
                        March
      31, 2008
                        
                        April
      11, 2008June
      9, 2008
                        
                        $
                        0.40
                        
                        June
      30, 2008
                        
                        July
      11, 2008September
      10, 2008
                        
                        $
                        0.40
                        
                        September
      30, 2008
                        
                        October
      10, 2008December
      19, 2008
                        
                        $
                        0.41
                        
                        December
      29, 2008
                        
                        January
      5, 2009March
      10, 2009
                        
                        $
                        0.20
                        
                        March
      31, 2009
                        
                        April
      10, 2009June
      11, 2009
                        
                        $
                        0.12
                        
                        June
      30, 2009
                        
                        July
      10,
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 July 10, 2009, the date of the most recent dividend
payment, holders of 1,889,207 shares, or approximately 8.7% of outstanding
shares, were participants 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 and second quarters of 2009:
 
 Dividend
      Reinvestment Plan ParticipationPercentage
      of
                      
                      
                      
                      
                      
                      
                      
                      
                      Common
      Stock DividendsParticipating
                      
                      
                      Outstanding
                      
                      
                      Total
                      
                      
                      
                      
                      
                      Purchased
      in
                      
                      
                      Newly
      Issued SharesDividend
                      
                      Shares
                      
                      
                      Shares
                      
                      
                      Distribution
                      
                      
                      Cash
      Dividends
                      
                      
                      Open
      Market
                      
                      
                      Amount
                      
                      
                      SharesMarch
      2008
                      
                      
                      1,693,284
                      
                      
                      
                      9.7
                      %
                      
                      $
                      7,000,133
                      
                      
                      $
                      6,322,815
                      
                      
                      $
                      -
                      
                      
                      $
                      677,318
                      
                      
                      
                      41,482June
      2008
                      
                      
                      1,655,552
                      
                      
                      
                      9.4
                      %
                      
                      $
                      8,651,281
                      
                      
                      $
                      7,989,060
                      
                      
                      $
                      662,221
                      
                      
                      $
                      -
                      
                      
                      
                      -September
      2008
                      
                      
                      1,739,829
                      
                      
                      
                      8.0
                      %
                      
                      $
                      8,651,281
                      
                      
                      $
                      7,955,350
                      
                      
                      $
                      695,931
                      
                      
                      $
                      -
                      
                      
                      
                      -December
      2008
                      
                      
                      1,749,954
                      
                      
                      
                      8.1
                      %
                      
                      $
                      8,867,563
                      
                      
                      $
                      8,150,082
                      
                      
                      $
                      717,481
                      
                      
                      $
                      -
                      
                      
                      
                      -March
      2009
                      
                      
                      2,179,204
                      
                      
                      
                      10.1
                      %
                      
                      $
                      4,325,640
                      
                      
                      $
                      3,889,799
                      
                      
                      $
                      435,841
                      
                      
                      $
                      -
                      
                      
                      
                      -June
      2009
                      
                      
                      1,889,207
                      
                      
                      
                      8.7
                      %
                      
                      $
                      2,595,384
                      
                      
                      $
                      2,368,679
                      
                      
                      $
                      226,705
                      (1)
                      
                      $
                      -
                      
                      
                      
                      -
 
 (1)
Shares were purchased on July 10, 2009 for the June 2009 dividend. See above and
Note 4 for further detail.
 
 Note 3:
              Credit
      Facilities and Borrowings
 
 Under the
terms of the Company’s Treasury Secured Revolving Credit Agreement (as amended,
the “Treasury Facility”), the lenders party thereto and SunTrust Bank, as
administrative agent for the lenders, have extended credit available under the
Treasury Facility to an amount not to exceed $175 million by obtaining
additional commitments from existing lenders or new lenders. The total amount
committed and outstanding under the Treasury Agreement as of June 30, 2009 and
as of December 31, 2008 was $75.0 million. Proceeds from the Treasury Facility
are used to facilitate the growth of the Company’s investment portfolio and
provide flexibility in the sizing of its portfolio investments. The Treasury
Facility has a three-year term, maturing August 31, 2009, and bears interest, at
the Company’s option, at either (i) LIBOR plus 25 basis points or (ii) the base
rate. On September 29, 2008, the required lenders exercised their option to
convert pricing of the Treasury Facility from LIBOR-based to prime-based. The
prime rate as of December 31, 2008 and as of June 30, 2009 was
3.25%.
  18
 
 The
obligations under the Treasury Facility are collateralized by certain securities
and are guaranteed by the Company’s existing and future subsidiaries, other than
special purpose subsidiaries and certain other subsidiaries. The Treasury
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 net income plus interest, taxes,
depreciation and amortization expenses (“EBITDA”) (excluding revenue from cash
collateral) 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)
maintaining a ratio of collateral to the aggregate principal amount of loans
under the Treasury Facility of not less than 1.01:1.0,  (e)
limitations on additional indebtedness, (f) limitations on liens, (g)
limitations on mergers and other fundamental changes, (h) limitations on
dividends, (i) limitations on disposition of assets other than in the normal
course of business, (j) limitations on transactions with affiliates, (k)
limitations on agreements that prohibit liens on properties of the Company and
its subsidiary guarantors, (l) limitations on sale and leaseback transactions,
(m) limitations on speculative hedging transactions, and (n) limitations on the
aggregate amount of unfunded commitments.
  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 $15.0 million was outstanding under the
Investment Facility as of June 30, 2009. By comparison, the total amount
committed as of December 31, 2008 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 will be used to supplement the Company’s equity capital to
make portfolio investments. As of June 30, 2009, the interest rate was 3.5% on
$15.0 million (prime rate plus 25 basis points).
 
 The
obligations under the Investment Facility are collateralized by substantially
all of the Company’s assets, except certain assets that collateralize the
Treasury Facility 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.
 
 As of
June 30, 2009, the Company was in compliance with all financial ratios required
by the credit facility covenants discussed above.
 
 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 4:
              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.
  19
  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 a total of 141,714 shares of common stock to participants in
the dividend reinvestment plan since the inception of the plan.  See
Dividends in Note 2.
 
 Note 5:
              Investment
      Management
 
 Investment
Advisory Agreement
 
 The
Company has entered into an investment advisory agreement with the Manager under
which the Manager, subject to the overall supervision of the Company’s Board of
Directors, manages the day-to-day operations of, and provides investment
advisory services to, the Company.
 
 For
providing these services, the Manager receives a fee from the Company,
consisting of two components — a base management fee and an incentive
fee.
 
 Under the
investment advisory agreement, 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 $1,647,178 management and incentive fees payable to the Manager as of
June 30, 2009 is attributable to the base management fee for the quarter ended
June 30, 2009.  The base management fee for the quarter ended June 30,
2008 was $1,838,009.
 
 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 second quarters of 2009
and 2008.
  20
  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), and 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.  No Capital Gains Fees were earned for the second quarters of
2009 and 2008.
 
 Realized
capital gains on a security are calculated as the 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 calculated as
the amount 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 calculated as the amount by which the
original cost of such security exceeds the fair value of such security at the
end of a fiscal year. All period-end valuations are determined by the Company in
accordance with GAAP and the 1940 Act.
 
 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
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).  The agreement may be terminated by either party 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 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, will be paid for by the
Manager.  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.
 
 21
  Administration  Agreement
 
 The
Company has entered into an administration agreement with the Administrator,
under which the Administrator furnishes the Company with office facilities,
equipment and clerical, bookkeeping and record keeping services at such
facilities.  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.  The agreement
may be terminated by either party without penalty upon 60 days’ written notice
to the other party and will automatically terminate in the event of its
“assignment” (as defined in the 1940 Act).
 
 Of the
$507,387 in accounts payable as of June 30, 2009, $194,273 was due to the
Administrator for expenses incurred on the Company’s behalf for the month of
June 2009.  By comparison, $206,121 was due to the Administrator for
expenses incurred on the Company’s behalf for the month of June
2008.
 
 The
administration agreement was originally approved by the Company’s Board of
Directors 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 6:
              Federal Income
    Taxes
 
 The
Company intends to qualify for tax purposes as a RIC under Subchapter M of
Chapter 1 of the Code, 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
Company’s consolidated subsidiaries, NGPC Asset Holdings, LP, NGPC Asset
Holdings II, LP, NGPC Asset Holdings III, LP, NGPC Asset Holdings V, LP and NGPC
Nevada, LLC, collectively (“NGPCAH”), are subject to federal income taxes for
the period ended June 30, 2009.  The difference between the effective
income tax rate of 7.63% and the statutory federal tax rate of 34% for the
period ended June 30, 2009 is attributable to RIC investment company taxable
income and net capital gains that generally will not be subject to federal
income tax.
  Note 7:
              Reclassifications
 
 Certain
components of net assets are adjusted to reflect permanent differences between
financial and tax reporting. These reclassifications have no effect on total net
assets or net asset value per share. During the years ended December 31, 2008
and 2007, $135,563 and $64,170, respectively, have been reclassified from
undistributed net investment income (loss) to paid-in capital in excess of
par.  These reclassifications were primarily due to non-deductible
meal expenses, non-deductible excise taxes and income and expenses from a wholly
owned subsidiary.  For the year ended December 31, 2008, $7,433,016
was reclassified from undistributed net realized capital gain (loss) to paid-in
capital in excess of par. During the year ended December 31, 2007 there were no
reclassifications from undistributed net realized capital gain (loss) to paid-in
capital in excess of par.
 
 22
  Note 8:
              Commitments
      and Contingencies
 
 As of
June 30, 2009, the Company had investments in or commitments to fund investments
to eighteen portfolio companies totaling $280.5 million, on which $274.3 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:
              Fair
      Value
 
 Statement on
Financial Accounting Statement 157 , Fair Value Measurements
(“Statement 157”) establishes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value into the following three
broad categories:
  ·
                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 June 30, 2009.  As required by Statement 157,
financial assets and liabilities are classified 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 fair value of the crude oil options
are estimated using a combined income and market-based valuation methodology
based upon forward commodity price and volatility curves.  The curves
are obtained from independent pricing services reflecting broker market
quotes.
 
 The
following table presents the Company’s assets measured at fair value on a
recurring basis at June 30, 2009:
 
 Prices
      withQuoted
      Prices
                    
                    
                    Observablein
      Active
                    
                    
                    Market
                    
                    
                    UnobservableMarkets
                    
                    
                    Inputs
                    
                    
                    InputsAssets at Fair Value
                    
                    Total
                    
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)Long
      Term Investments
                    
                    $
                    207,193,428
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    207,193,428Short
      Term Investments
                    
                    
                    76,151,096
                    
                    
                    
                    76,151,096
                    
                    
                    
                    -
                    
                    
                    
                    -Crude
      Oil Put Options
                    
                    
                    1,400,375
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,400,375Total
      Assets at Fair Value
                    
                    $
                    284,744,899
                    
                    
                    $
                    76,151,096
                    
                    
                    $
                    -
                    
                    
                    $
                    208,593,803
 
 23
 
 The
Company did not have any liabilities that were measured at fair value on a
recurring basis at June 30, 2009.
 
 The
following table presents the Company’s assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) at
December 31, 2008 and at June 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
                    
                    
                    (6,267,170
                    )Net
      realized gains (losses)
                    
                    
                    (53,963
                    )Net
      unrealized gains (losses)
                    
                    
                    (28,989,372
                    )Purchases,
      sales and  redemptions
                    
                    
                    (14,888,132
                    )Balance
      as of June 30, 2009
                    
                    $
                    208,593,803
 
 Of the
$28,989,372 in net unrealized losses presented in the table above, $5,203,187
relates to reversals of unrealized gains on commodity derivative instruments
recognized in 2008 and offset by realized gains during the second quarter of
2009.  The remaining balance of $23,786,185 relates to unrealized
losses on investments that are still held at June 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 10:
              Commodity
      Derivative Instruments
 
 The
Company may periodically enter into commodity derivative instruments to manage
our exposure to commodity price fluctuations.  All of our derivatives
are used for risk management purposes and are not held for speculative or
trading purposes.  These contracts generally consists 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 derivative instruments and hedging activities in accordance
with SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities.  The Company
has decided not to designate these instruments as hedging instruments for
financial accounting purposes, and as a result, we recognize the change in the
instruments’ fair value currently on the Consolidated Statement of Operations as
net increase (decrease) in unrealized appreciation (depreciation) on 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 Six Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Unrealized
      gains (losses) on commodity derivatives
                    
                    $
                    (6,307,927
                    )
                    
                    $
                    -Realized
      gains (losses) on commodity derivatives
                    
                    
                    5,054,081
                    
                    
                    
                    -Net
      gains (losses) on commodity derivative instruments
                    
                    $
                    (1,253,846
                    )
                    
                    $
                    -
 
 The
unrealized gains (losses) on commodity derivatives are included in net increase
(decrease) in unrealized appreciation (depreciation) on portfolio securities,
corporate notes and commodity derivatives instruments.
 
 24
 
 The
realized gains (losses) on commodity derivatives are composed 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 June 30,
2009.
 
 WeightedVolumes
      (Bbls) at
                      
                      
                      average
      strike
                      
                      
                      Fair
      Value atJune 30, 2009
                      
                      
                      price per Bbl
                      
                      
                      June 30, 2009Oil:Put
      Options:2009
                      
                      
                      55,000
                      
                      
                      $
                      92.55
                      
                      
                      
                      1,286,9842010
                      
                      
                      7,000
                      
                      
                      $
                      85.00
                      
                      
                      
                      113,391Total
      Oil Put Options
                      
                      
                      62,000
                      
                      
                      
                      
                      
                      
                      $
                      1,400,375
 
 Note 11:
              Recent
      Accounting Pronouncements
 
 In
September 2006, FASB issued Statement 157, Fair Value Measurements,
which establishes a framework for measuring fair value and requires additional
disclosures about fair value measurements.  Beginning January 1,
2008, the Company partially applied Statement 157 as allowed by FASB Staff
Position (FSP) 157-2, which delayed the effective date of Statement 157 for
nonrecurring fair value measurements associated with the Company’s nonfinancial
assets and liabilities.  As of January 1, 2008, the Company has
applied the provisions of Statement 157 to its recurring fair value measurements
and the impact was not material.  See Note 9 for disclosure of fair
value measurements for the Company’s financial instruments.  Under FSP
157-2, the Company is required to apply Statement 157 to its nonrecurring fair
value measurements associated with its non-financial assets and liabilities
beginning January 1, 2009.  As of January 1, 2009, the Company
has considered the provisions of FSP 157-2 and there is no impact to our
consolidated financial statements, as we do not have non-financial assets or
liabilities.
 
 In
March 2008, FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, (“SFAS No. 161”).  SFAS
No. 161 requires enhanced disclosure about the fair value of derivative
instruments and their gains or losses in tabular format and information about
credit risk related contingent features in derivative agreements,
counterparty credit risk, and the company’s strategies and objectives for using
derivative instruments.  SFAS No. 161 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
as such, was adopted by the Company on January 1, 2009.  The
principal impact was to require the expansion of our disclosure regarding our
derivative instruments.  See Note 10 for additional disclosures
required by SFAS No. 161.
 
 In May
2008, FASB issued Statement 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”), which identifies a consistent
framework for selecting accounting principles to be used in preparing financial
statements for nongovernmental entities that are presented in conformity with
United States GAAP.  The current GAAP hierarchy was criticized due to
its complexity, ranking position of FASB Statements of Financial Accounting
Concepts, and the fact that it is directed at auditors rather than
entities.  SFAS 162 is effective November 15, 2008.  The
FASB does not expect that SFAS 162 will cause a change in current practice, and
the Company does not believe that SFAS 162 will have an impact on its
consolidated financial statements.
 
 In April
2009, FASB issued three new FASB Staff Positions (“FSP”) relating to fair value
accounting; FAS 157-4, Determining Fair Value When Market
Activity Has Decreased, FSP FAS 115-2 and FAS 124-2, Other-Than-Temporary
Impairment and FSP FAS 107-1/APB 28-1, Interim Fair Value Disclosures for
Financial Instruments. These FSPs impact certain aspects of fair value
measurement and related disclosures. The provisions of these FSPs were effective
beginning in the second quarter of 2009. The impact of adopting these FSPs did
not have a material effect on our consolidated financial statements or
disclosures.
 
 In April
2009, the SEC issued Staff Accounting Bulletin (“SAB”) No. 111, Miscellaneous Accounting-Other Than
Temporary Impairment of Certain Investments in Equity Securities (“SAB
111”). SAB 111 addresses the guidance provided in FSP FAS 115-2 and FAS 124-2
and states the SEC staff’s views as to whether an impairment of an equity
security is other-than-temporary. As the related FSPs, SAB 111 was effective for
interim and annual reporting periods ending after June 15, 2009. The impact of
adopting SAB 111 did not have a material effect on our consolidated financial
statements or disclosures.
 25
 In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value when the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (“FAS
157-4”). FAS 157-4 provides additional guidance for estimating fair value in
accordance with Statement 157 and for identifying circumstances that indicate a
transaction is not orderly and requires additional disclosures. FAS 157-4 was
effective prospectively for interim and annual reporting periods ending after
June 15, 2009. The impact of adopting FAS 157-4 did not have a material effect
on our consolidated financial statements or disclosures.
 
 In May
2009, the FASB issued SFAS 165, Subsequent Events, which
establishes reporting and disclosure requirements based on the existence of
conditions at the date of the balance sheet for events or transactions that
occurred after the balance sheet date but before the financial statements are
issued or are available to be issued. Companies are required to disclose the
date through which subsequent events have been evaluated and whether that date
is the date the financial statements were issued or were available to be issued.
SFAS 165 is effective for financial statements issued for fiscal and interim
periods ending after June 15, 2009 and is applied prospectively. The Company
adopted SFAS 165 as of June 30, 2009. See Significant Accounting Policies in
Note 2.
 
 In June
2009, the FASB issued SFAS 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 identifies
the FASB Accounting Standards Codification as the source of authoritative U.S.
GAAP recognized by the FASB to be applied by nongovernmental entities. SFAS 168
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The implementation of this standard will not
have a material impact on our consolidated financial statements or results of
operations.
  Note 12:
              Subsequent
      Events
  In May of
this year, 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 July 21, 2009, the outstanding balance due to the Company under
this facility was $14.5 million and   as of June 30, 2009, NGPC recorded
its investment in Nighthawk at a fair value of zero. Although NGPC is pursuing
its claims, it does not expect a material recovery.
 
 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, LP, a wholly-owned subsidiary of the
Company, purchased $5.8 million of preferred units representing substantially
all of the equity interest in Alden. The proceeds of the preferred equity
issuance will be used for capital expenditures, working capital, and general
corporate purposes. In addition to acquiring a majority ownership position, NGPC
will hold a majority of the seats on the board of directors of Alden. NGPC also
restructured its 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%.
 
 On July
16, 2009, NGPC repaid the entire $75 million balance on its Treasury Facility
with proceeds from the sale of its treasury securities. There are no plans to
renew or extend the Treasury Facility at its maturity on August 31, 2009. In
addition, on July 9, 2009, the Company repaid the outstanding balance of its
Investment Facility, leaving the Company with no outstanding indebtedness. The
Company is currently in discussions with its bank group to extend the Investment
Facility beyond its current maturity of August 31, 2010.
 
 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.
NGPC continues to hold its overriding royalty interest and warrants in
BSR.
 
 26
 
 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 management’s discussion and analysis contained in
our 2008 Annual Report on Form 10-K, as well as our consolidated financial
statements and the notes thereto included in this Quarterly Report on Form
10-Q.
 
 Forward-Looking
Statements
 
 Certain
statements in this report that relate to estimates or expectations of our future
performance or financial condition may constitute “forward-looking statements”
as defined under the Private Securities Litigation Reform Act of 1995. 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.
 
 Overview
 
 We are a
financial services company created to invest primarily in debt securities of
small and mid-size private energy companies.  On July 21, 2008, the
Securities and Exchange Commission expanded the definition of eligible portfolio
companies to include domestic operating companies with securities listed on a
national securities exchange so long as the company has a market capitalization
of less than $250 million. 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,” including securities of private U.S.
companies, cash, cash equivalents, U.S. government securities and high-quality
debt investments that mature in one year or less. In addition, for 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. These subsidiaries
are: NGPC Funding GP, LLC, a Texas limited liability company; NGPC Nevada, LLC,
a Nevada limited liability company; NGPC Funding, LP, a Texas limited
partnership; NGPC Asset Holdings GP, LLC, a Texas limited liability company;
NGPC Asset Holdings, LP, a Texas limited partnership; NGPC Asset Holdings II,
LP, a Texas limited partnership (“NGPC II”); NGPC Asset Holdings III, LP, a
Texas limited partnership and NGPC Asset Holdings V, LP, a Texas limited
partnership. Effective May 28, 2008, NGPC Asset Holdings IV, LP merged with and
into NGPC II. The Company consolidates the results of its subsidiaries for
financial reporting purposes. The Company does not consolidate the financial
results of its portfolio companies.
 
 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.
  27
  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.  Any such fees generated in connection with our investments are
recognized as earned.
 
 Our level
of investment activity can and does vary substantially from period to period
depending on many factors, including 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.  Though
the same macro economic factors also make our access to new debt and equity
capital less certain, we have recently extended the maturity of our Investment
Facility to August 2010.  While we currently have capital available to
invest, it is not unlimited.  We remain committed to our underwriting
and investment disciplines in selectively investing in appropriate risk-reward
opportunities within the energy sector.
 
 Portfolio
and Investment Activity
 
 On June
18, 2009, Crossroads Energy, LP (“Crossroads”) repaid in its entirety its $5.24
million Senior Secured Credit Facility with the proceeds from a new senior bank
facility.  On June 25, 2009, Crossroads repurchased NGPC’s overriding
royalty interest, resulting in a $0.29 million realized capital gain for
NGPC.
 
 On June
26, 2009, Resaca Exploitation, Inc.(“Resaca”) repaid in full the $31.1 million
balance on its Multiple Advance Senior Secured Term Loan.  Concurrently,
NGPC provided a $10 million commitment as part of Resaca’s new $35 million
Senior Secured Revolving Credit Facility, agented by another financial
institution, and funded $9.1 million at closing.  The Revolving Credit
Facility matures on July 1, 2012, and bears interest at LIBOR plus 5.50%, with a
LIBOR floor of 2.50%.
 
 In total
for the quarter ended June 30, 2009, we funded $12.8 million to existing
portfolio companies and received $33.5 million in cash repayments.  We
did not add any new companies to our portfolio during the second 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 June 30,
2009: 38.9% in senior secured term loans, 3.4% in senior subordinated secured
notes, 0.2% in participating convertible preferred stock, 0.5% in common stock,
2.4% in corporate notes, 6.8% in membership and partnership units, 9.4% in net
profits interests, 2.6% 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 23.6% of U.S. Treasury Bills and 11.7% of
cash and cash equivalents.
 
 Results
of Operations
 
 Investment
Income
 
 Investment
income for the quarter ended June 30, 2009 was $5.5 million, with $6.2 million
attributable to interest from targeted investments in eleven portfolio
companies, $1.9 million attributable to income from commodity derivative
instruments, a $2.8 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 June 30, 2008 of $8.2 million, with
$6.9 million attributable to targeted investments in 18 portfolio companies,
$0.6 million 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.
  For the
six months ended June 30, 2009, investment income decreased by $3.7 million, or
20.7%, to $14.1 million from $17.7 million for the same period in 2008. For the
six months ended June 30, 2009, we recorded $12.1 million attributable to
targeted investments in portfolio companies, $5.1 million attributable to income
from commodity derivative instruments, a $3.7 million net loss attributable to
royalty income net of amortization, $0.6 million from corporate notes,
investments in cash and cash equivalents and fee income from third parties and
affiliates. This compares to $14.6 million attributable to targeted investments
in portfolio companies, $1.1 million attributable to royalty income net of
amortization, $2.0 million from corporate notes, investments in cash and cash
equivalents and fee income from third parties and affiliates, for the same
period in 2008.
 
 28
  Our total
targeted portfolio balance decreased on a cost basis by approximately $57.8
million from $331.6 million on June 30, 2008 to $273.8 million on June 30, 2009.
The balance of non-accruing and non-income producing investments increased from
approximately $59.3 million at June 30, 2008 to approximately $97.2 million at
June 30, 2009. Although LIBOR rates dropped significantly from the second
quarter of 2008 compared to the second 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 the first and second quarters of 2009
reduced interest from cash and cash equivalents.
 
 At June
30, 2009, the weighted average yield on targeted portfolio investments,
exclusive of capital gains, was 4.09%.  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 0.06% and 0.05%, respectively.  The
weighted average yield on our total capital invested at June 30, 2009 was
3.34%.  The primary cause of the decline in the weighted average yield
on targeted portfolio investments as of June 30, 2009 is that the calculation
includes a negative yield on our investment in the ATP Limited Term Royalty,
which had a cost basis of $17.3 million as of quarter end.  The
negative yield is the result of amortization on the investment being
substantially higher than the income earned for the first six months of 2009 due
to lower oil and natural gas prices.  In addition, though the
investment is substantially hedged and such hedges produced substantial income
for the first six months of 2009, such income is not included in the yield
calculation for targeted portfolio investments as the investment in commodity
hedges is not included in the targeted investment portfolio.  Further,
investments totaling $59.0 million on a cost basis (Nighthawk, $13.9 million,
Formidable, LLC (“Formidable”), $38.6 million, BSR Loco Bayou, LLC $2.2 million,
Chroma Exploration & Production, Inc.(“Chroma”), $4.3 million) are currently
on non-accrual status. Investments totaling $38.2 million on a cost basis are
non-income producing.
  At June
30, 2008, the weighted average yield on targeted portfolio investments,
exclusive of capital gains, was 8.94%. 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 1.01%. The weighted average yield on our total capital
invested at June 30, 2008 was 6.04%. The yield on targeted portfolio investments
and the yield on our total capital invested did not include income amounts on
our $32.8 million limited term royalty interest. This investment was acquired
during the month of June 2008 and no income was received from it during the
quarter ended June 30, 2008. These yields did not include income from our 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.
 
 Operating
Expenses
 
 For the
quarter ended June 30, 2009, operating expenses were $4.0 million compared to
$4.4 million for the quarter ended June 30, 2008. The 2009 amount consisted of
investment advisory and management fees of $1.6 million, insurance expenses,
administrative services fees, professional fees, directors’ fees and other
general and administrative expenses of $1.3 million and credit facility interest
and fees of $1.1 million.  In comparison, for the quarter ended June
30, 2008, investment advisory and management fees were $1.8 million, insurance
expenses, administrative services fees, professional fees, directors’ fees and
other general and administrative expenses were $1.2 million and credit facility
interest and fees were $1.4 million.
 
 For the
six months ended June 30, 2009, operating expenses were $8.0 million compared to
$9.8 million for the same period of 2008. The 2009 amount consisted of
investment advisory and management and incentive fees of $3.5 million, insurance
expenses, administrative services fees, professional fees, directors’ fees,
organization costs and other general and administrative expenses of $2.4 million
and credit facility interest and fees of $2.1 million. This compares to
investment advisory and management fees of $3.6 million, insurance expenses,
administrative services fees, professional fees, directors’ fees, organization
costs and other general and administrative expenses of $2.3 million and credit
facility interest and fees of $3.9 million for the six months ended June 30,
2008.
  Operating
expenses for the three and six 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, the base management fee is calculated 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.
  29
  Net
Investment Income before Income Taxes
 
 For the
quarter ended June 30, 2009, net investment income before income taxes was $1.5
million compared to $3.8 million for the quarter ended June 30,
2008.  The 59.6% decrease was 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.
  For the
six months ended June 30, 2009, net investment income before income taxes was
$6.1 million compared to $7.9 million for the six months ended June 30,
2008.  The 23.4% 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 credit
facility interest expense and fees on our reduced debt balance.
  Net
Realized Gains
 
 A net
capital loss of $0.05 million was realized for the quarter ended June 30, 2009,
a result of a $0.30 million capital gain on the sale of our Crossroads
overriding royalty interest, less a $0.35 million reduction to our Rubicon
Energy Partners, LLC capital gain recorded in 2008. There were no realized
capital gains or losses for the quarter ended June 30, 2008.
 
 Unrealized
Appreciation or Depreciation on Investments
 
 For the
quarter ended June 30, 2009, the increase in net unrealized depreciation was
$4.4 million, comprised of a $3.0 million decrease in targeted portfolio fair
value and a decrease of $3.1 million in commodity derivative instruments
fair value, offset by an increase of $1.7 million in the fair value of our
corporate notes.  The decrease 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 2008 unrealized appreciation due to
realizations in the second quarter of 2009.
 
 For the
quarter ended June 30, 2008, the increase in net unrealized appreciation was
$1.6 million, comprised of a $1.6 million increase in targeted portfolio fair
value, a $0.2 million increase in the fair value of corporate notes and a $0.2
million decrease in the fair value of commodity derivative
instruments.
  For the
six months ended June 30, 2009, the increase in net unrealized depreciation was
$29.0 million, comprised of a decrease in targeted portfolio fair value of $24.2
million and a $6.3 million decrease in the fair value of commodity derivative
instruments, offset by a $1.5 million increase in the fair value of our
corporate notes. This compares to an increase in net unrealized depreciation of
$0.1 million for the six months ended June 30, 2008, comprised of an increase in
targeted portfolio fair value of $0.2 million, a $0.1 million decrease in the
fair value of our corporate notes and a $0.2 million decrease in the fair value
of commodity derivative instruments.
  In light
of the recent disruption in the credit and equity capital markets and the
downward volatility of energy commodity prices, it has become more difficult to
predict the timing and amount of future realized capital gains.  In
addition, recent capital markets volatility has impacted our unrealized capital
appreciation and unrealized depreciation.  For example, since
September 30, 2008, the price of Resaca common stock as traded on the London AIM
has fallen by approximately 71% from £1.24 to £0.365 as of July 22, 2009 while
the U.S. dollar has strengthened against the British pound.  Also,
corporate bond prices have generally declined since September 30,
2008.
 
 Net
Increase or Decrease in Stockholders’ Equity from Operations
 
 For the
quarter ended June 30, 2009, we had a net decrease in stockholders’ equity (net
assets) resulting from operations of $2.6 million, or $0.12 per share, compared
to a net increase of $5.4 million, or $0.25 per share for the quarter ended June
30, 2008.  The $8.0 million, or $0.37 per share net decrease is
attributable to the $1.9 million decrease in net investment income after
income taxes and the $6.1 million increase in unrealized depreciation on our
investments during the second quarter of 2009, compared to the second quarter of
2008.
 
 For the
six months ended June 30, 2009 the net decrease in stockholders’ equity (net
assets) resulting from operations was $21.3 million, or $0.98 per share,
compared to an increase of $7.8 million, or $0.36 per share for the six months
ended June 30, 2008.
  30
  Financial
Condition, Liquidity and Capital Resources
 
 During
the quarter ended June 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 $39.5 million.  At June 30, 2009, we had cash and cash
equivalents of $37.7 million, investments in U.S. Treasury Bills of $76.2
million and investments in corporate notes of $7.8 million. Our Investment
Facility, with an outstanding balance of $15 million at June 30, 2009, will
mature on August 31, 2010. Our Treasury Facility, with an outstanding balance of
$75 million at June 30, 2009, will mature on August 31, 2009.  As of
June 30, 2009, we had investments in or commitments to fund loan facilities to
eighteen portfolio companies totaling $280.5 million, of which $274.3 million
was drawn.  We expect to fund our investments in 2009 from 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, and, as a result, we recognize the change in
the instruments’ fair value currently on the Consolidated Statement of
Operations as net increase (decrease) in unrealized appreciation (depreciation)
on 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 10: Commodity Derivative Instruments” in the
accompanying notes to the consolidated financial statements for further
description of our put options.
 
 Contractual
Obligations
 
 A summary
of our contractual payment obligations at June 30, 2009 is as
follows:
 
 Less
      than
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    More
      thanContractual
      Obligations
                                                    
                                                    Total
                                                    
                                                    
                                                    1
      Year
                                                    
                                                    
                                                    1-3
      Years
                                                    
                                                    
                                                    3-5
      Years
                                                    
                                                    
                                                    5
      YearsJune
      30, 2009:Long-term
      debt obligations—revolving
      credit facilities (1)
                                                    
                                                    $
                                                    90,000,000
                                                    
                                                    
                                                    $
                                                    75,000,000
                                                    
                                                    
                                                    $
                                                    15,000,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -Total
                                                    
                                                    $
                                                    90,000,000
                                                    
                                                    
                                                    $
                                                    75,000,000
                                                    
                                                    
                                                    $
                                                    15,000,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -(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.
  31
 
 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-one rated investments in
eighteen portfolio companies, compared to the prior quarter end, one improved in
rating, three declined in rating and seventeen retained the same
rating.  Eleven investments totaling approximately $139.7 million, or
approximately 51% of the $274.0 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.
 
 For the
second quarter of 2009, the combined decrease in the fair value of our portfolio
securities, corporate notes and commodity derivative instrument of $4.4 million
is due to changes in the estimated current market values of underlying assets
totaling $1.3 million, and $3.1 million in reversals of prior year unrealized
appreciation of commodity derivative instruments due to second quarter 2009
realizations.  The $1.3 million net decrease in fair value was
comprised of increases of unrealized depreciation totaling $12.3 million offset
by increases in unrealized appreciation of $11.0 million. The $12.3 million
increase in unrealized depreciation consisted primarily of Nighthawk, $10.2
million; Rubicon Energy Partners, LLC, $0.7 million; Formidable, $0.6 million;
and Chroma, $0.5 million. We also recorded a $0.3 million reversal of prior year
unrealized appreciation due to our second quarter realization on our Crossroads
overriding royalty interest. The $11.0 million increase in unrealized
appreciation consisted primarily of Venoco, Inc. senior notes, $4.3 million;
ATP, $3.5 million; corporate notes, $1.7 million; Anadarko Petroleum
Corporation, $0.3 million; and increases to various stock and overriding royalty
interests, $1.2 million.
 
 Recently
Issued Accounting Pronouncements
 
 See
“Note 11: 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 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.  Based on an evaluation of our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report on Form
10-Q 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 not effective as of June 30, 2009 because they are not yet able to conclude
that we have remediated the material weakness in internal control over financial
reporting identified in Item 9A of our Annual Report on Form 10-K for the year
ended December 31, 2008.
 
 32
  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 Quarterly Report on Form 10-Q. 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.
 
 Changes
in Internal Control Over Financial Reporting
 
 As of
December 31, 2008, our assessment of the effectiveness of our internal control
over financial reporting identified a material weakness in our internal control
over financial reporting.  Our management determined that as of
December 31, 2008, the Company did not maintain effective controls over the
determination and reporting of the provision for income taxes. Specifically,
management did not perform a sufficiently precise review 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 errors in the annual tax provision and deferred income tax assets
and liabilities for the fiscal year ended December 31, 2008 (which resulted in
audit adjustments to our consolidated financial statements).
 
 Beginning
in the first quarter of 2009, and into the second quarter, 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;
  ·
              enhanced
      quarterly management review of the calculation of the deferred income tax
      assets and liabilities and underlying supporting data;
      and
  ·
              engaged
      external tax experts to support the Company’s financial closing and
      reporting process.
  We
believe that these remediation steps represent ongoing improvement measures.
While we have taken steps to begin remediation of the material weakness,
additional measures may be required. We will assess the effectiveness of our
remediation efforts in connection with our management's tests of internal
control over financial reporting in conjunction with our December 31,
2009 financial statements.  Except as discussed above, we have
not identified any changes in our internal controls over financial reporting
during the second quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  33
  PART II – OTHER
INFORMATION
  Item 1.
              Legal
      Proceedings
 
 We are
not currently a defendant in any material legal proceeding, nor to our
knowledge, is any material legal proceeding threatened against us.
 
 Item 1A.
              Risk
      Factors
 
 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.
  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
 
 On
Wednesday, May 13, 2009, we held our 2009 annual meeting of stockholders to
elect two Class II directors to our Board of Directors and to consider and vote
upon a proposal to authorize the Company to offer and issue warrants exercisable
for, rights to subscribe for, and preferred stock and debt convertible into,
shares of our common stock subject to certain limitations set forth in the proxy
statement for the 2009 annual meeting of stockholders. At the meeting, David R.
Albin and Lon C. Kile were re-elected as directors.
  The
following is a summary of the votes cast at the 2009 annual meeting of
stockholders:
 
 Results
      of Voting1.
      Election of Directors:
                            
                            Voted For
                            
                            
                            WithheldDavid
      R. Albin
                            
                            18,340,328
                            
                            
                            920,590Lon
      C. Kile
                            
                            18,326,289
                            
                            
                            934,629
 
 BrokerVoted For
                                
                                
                                Against
                                
                                
                                Abstentions
                                
                                
                                Non-Votes2.
      To authorize the Company to offer and issue warrants exercisable for,
      rights to subscribe for, and preferred stock and debt convertible into,
      shares of our common stock subject to certain limitations set forth in the
      proxy statement for the 2009 annual meeting of
stockholders
                                
                                9,116,423
                                
                                
                                1,787,604
                                
                                
                                124,116
                                
                                
                                8,232,775
 
 Item 5.
              Other
      Information
 
 Not
applicable.
 
 34
  Item 6.
              Exhibits
 
 No.
                Exhibit
 
 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
      as
                    Exhibit
      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
                  
                  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,
      between 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, between
      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 Pre-Effective Amendment No. 1 to Registration
      Statement on Form N-2 filed September 24, 2004 (Registration No.
      333-118279) 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, between 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, between 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
      September 28, 2007, between 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, between 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)
 
 35
 
 Exhibits
      No.
                  
                  Exhibit10.14
                  
                  Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, between 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, between 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, between 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
 
 36
  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 COMPANYBy:
                /s/
      John H. HomierJohn
      H. HomierPresident
      and Chief Executive Officer
 
 NGP
      CAPITAL RESOURCES COMPANYBy:
                /s/
      Stephen K. GardnerStephen
      K. GardnerChief
      Financial Officer, Treasurer and
Secretary
 
 Date:
August 7, 2009
 
 
  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
      as
                    Exhibit
      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
                  
                  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,
      between 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, between
      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 Pre-Effective Amendment No. 1 to Registration
      Statement on Form N-2 filed September 24, 2004 (Registration No.
      333-118279) 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, between 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, between 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
      September 28, 2007, between 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, between 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, between 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, between 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, between 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