UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549






FORM
10-Q


(Mark One)


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




For
the quarterly period ended March 31, 2008




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
      number)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)


Securities
registered pursuant to Section 12(b) of the Act:





Common
      Stock, par value $.001 per share
            The
      NASDAQ Stock Market LLC(Title
      of class)
            (Name
      of exchange on which registered)





Securities
registered pursuant to Section 12(g) of the Act: None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o   No x


Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.


Yes o   No x


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


Yes 
x   No o


Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x


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     x
            Non-accelerated
      filer     o
              (Do
      not check if smaller reporting company)
            Smaller
      reporting company     o





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


Yes o   No x





As of May
5, 2008, there were 21,628,202 shares of the registrant’s common stock
outstanding.














PART I - FINANCIAL
INFORMATION


Item 1. Consolidated Financial
Statements





NGP
      CAPITAL RESOURCES COMPANYCONSOLIDATED BALANCE SHEETS(unaudited)March 31, 2008
              
              
              December 31, 2007AssetsInvestments
      in portfolio securities at fair value(cost:  $277,740,755
      and $277,947,454, respectively)
              $         282,559,223
              
              $
              284,228,573Investments
      in corporate notes at fair value(cost:  $11,620,610
      and $11,631,599, respectively)
              8,661,000
              
              
              8,955,500Investments
      in U.S. Treasury Bills, at amortized costwhich
      approximates fair value
              143,978,220
              
              
              163,925,625Total
      investments
              435,198,443
              
              
              457,109,698Cash
      and cash equivalents
              8,744,574
              
              
              18,437,115Accounts
      receivable
              29,373
              
              
              17,569Interest
      receivable
              877,410
              
              
              647,839Prepaid
      assets
              1,714,153
              
              
              2,020,655Total
      assets
              $         446,563,953
              
              $
              478,232,876Liabilities
      and stockholders' equity (net assets)Current
      liabilitiesAccounts
      payable
              $                 510,915
              
              $
              928,761Management
      and incentive fees payable
              2,148,721
              
              
              2,032,107Dividends
      payable
              7,000,133
              
              
              9,012,671Total
      current liabilities
              9,659,769
              
              
              11,973,539Long-term
      debt
              191,250,000
              
              
              216,000,000Total
      liabilities
              200,909,769
              
              
              227,973,539Commitments
      and contingencies  (Note 8)Stockholders’
      equity (net assets)Common
      stock, $.001 par value, 250,000,000 shares authorized;17,500,332
      shares issued and outstanding
              17,500
              
              
              17,500Paid-in
      capital in excess of par
              245,881,078
              
              
              245,881,078Undistributed
      net investment income (loss)
              (2,962,385)
              
              
              (103,394)Undistributed
      net realized capital gain  (loss)
              859,133
              
              
              859,133Net
      unrealized appreciation (depreciation) ofportfolio
      securities and corporate notes
              1,858,858
              
              
              3,605,020Total
      stockholders’ equity (net assets)
              245,654,184
              
              
              250,259,337Total
      liabilities and stockholders' equity (net assets)
              $         446,563,953
              
              $
              478,232,876Net
      asset value per share
              $                     14.04
              
              $
              14.30(See
      accompanying notes to consolidated financial
statements)


NGP CAPITAL RESOURCES COMPANYCONSOLIDATED
      STATEMENTS OF OPERATIONS(unaudited)For the Three Months
      EndedMarch
      31, 2008
              
              
              March
      31, 2007(unaudited)
              
              
              (unaudited)Investment
      incomeInterest
      income
              
              $
              9,497,966
              
              
              $
              8,421,255Other
      income
              
              
              40,370
              
              
              
              55,507Total
      investment income
              
              
              9,538,336
              
              
              
              8,476,762Operating
      expensesManagement
      fees
              
              
              1,800,206
              
              
              
              1,564,509Professional
      fees
              
              
              208,979
              
              
              
              153,596Insurance
      expense
              
              
              198,817
              
              
              
              132,423Interest
      expense and fees
              
              
              2,441,076
              
              
              
              1,557,196State
      franchise taxes
              
              
              9,516
              
              
              
              -Other
      general and administrative expenses
              
              
              738,600
              
              
              
              651,553Total
      operating expenses
              
              
              5,397,194
              
              
              
              4,059,277Net
      investment income (loss)
              
              
              4,141,142
              
              
              
              4,417,485Net
      increase (decrease) in unrealized appreciation(depreciation)
      on portfolio securities and corporate notes
              
              
              (1,746,162
              )
              
              
              3,729,986Net
      increase (decrease) in stockholders' equity(net
      assets) resulting from operations
              
              $
              2,394,980
              
              
              $
              8,147,471Net
      increase (decrease) in stockholders' equity (net assets)resulting
      from operations per common share
              
              $
              0.14
              
              
              $
              0.47(See
      accompanying notes to consolidated financial statements)


NGP CAPITAL RESOURCES COMPANYCONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS)(unaudited)Net
      UnrealizedAppreciation
              
              
              TotalPaid-in
      Capital
              
              
              Undistributed
              
              
              Undistributed
              
              
              (Depreciation)
              
              
              Stockholders'Common Stock
              
              
              in
      Excess
              
              
              Net
      Investment
              
              
              Net
      Realized
              
              
              of
      Portfolio Securities
              
              
              EquityShares
              
              
              Amount
              
              
              of Par
              
              
              Income (Loss)
              
              
              Capital Gain (Loss)
              
              
              and Corporate Notes
              
              
              (Net Assets)Balance
      at December 31, 2007
              
              
              17,500,332
              
              
              $
              17,500
              
              
              $
              245,881,078
              
              
              $
              (103,394
              )
              
              $
              859,133
              
              
              $
              3,605,020
              
              
              $
              250,259,337Net
      increase instockholders'
      equity (net assets)resulting
      from operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,141,142
              
              
              
              -
              
              
              
              (1,746,162
              )
              
              
              2,394,980Dividends
      declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (7,000,133
              )
              
              
              -
              
              
              
              -
              
              
              
              (7,000,133
              )Balance
      at March 31, 2008
              
              
              17,500,332
              
              
              $
              17,500
              
              
              $
              245,881,078
              
              
              $
              (2,962,385
              )
              
              $
              859,133
              
              
              $
              1,858,858
              
              
              $
              245,654,184(See
      accompanying notes to consolidated financial statements)


NGP CAPITAL RESOURCES COMPANYCONSOLIDATED
      STATEMENTS OF CASH FLOWS(unaudited)For
      the Three Months
              
              
              For
      the Three Monthsended
      March 31, 2008
              
              
              ended
      March 31, 2007Cash
      flows from operating activitiesNet
      increase in stockholders' equity (net assets) resulting from
      operations
              
              $
              2,394,980
              
              
              $
              8,147,471Adjustments
      to reconcile net increase in stockholders' equity (net
    assets)resulting
      from operations to net cash used in operating activitiesPayment-in-kind
      interest
              
              
              (1,728,817
              )
              
              
              (1,115,048
              )Net
      amortization of premiums, discounts and fees
              
              
              (301,353
              )
              
              
              (381,727
              )Change
      in unrealized (appreciation) depreciation on portfolio
      securitiesand
      corporate notes
              
              
              1,746,162
              
              
              
              (3,729,986
              )Effects
      of changes in operating assets and liabilitiesAccounts
      receivable
              
              
              (11,804
              )
              
              
              420,203Interest
      receivable
              
              
              (229,571
              )
              
              
              179,779Prepaid
      assets
              
              
              306,502
              
              
              
              238,584Accounts
      payable
              
              
              (301,232
              )
              
              
              36,309Purchase
      of investments in portfolio securities
              
              
              (25,776,473
              )
              
              
              (58,354,311
              )Redemption
      of investments in portfolio securities
              
              
              28,024,331
              
              
              
              587,526Net
      sale of investments in U.S. Treasury Bills
              
              
              19,947,405
              
              
              
              38,719,021Net
      cash provided by (used in) operating activities
              
              
              24,070,130
              
              
              
              (15,252,179
              )Cash
      flows from financing activitiesBorrowings
      under revolving credit facility
              
              
              10,000,000
              
              
              
              5,285,000Repayments
      on revolving credit facility
              
              
              (34,750,000
              )
              
              
              -Dividends
      paid
              
              
              (9,012,671
              )
              
              
              -Net
      cash provided by (used in) financing activities
              
              
              (33,762,671
              )
              
              
              5,285,000Net
      increase (decrease) in cash and cash equivalents
              
              
              (9,692,541
              )
              
              
              (9,967,179
              )Cash
      and cash equivalents, beginning of period
              
              
              18,437,115
              
              
              
              12,334,329Cash
      and cash equivalents, end of period
              
              $
              8,744,574
              
              
              $
              2,367,150(See
      accompanying notes to consolidated financial statements)
 
  
  NGP
      CAPITAL RESOURCES COMPANYCONSOLIDATED
      SCHEDULE OF INVESTMENTSMarch
      31, 2008(unaudited)Portfolio Company
              Energy Industry Segment
              Investment (2) (4)
              
              Principal
              
              
              Cost
              
              
              Fair Value (3)TARGETED
      INVESTMENTSVenoco,
      Inc. (1) (11)
              Oil
      & Natural Gas
              Senior
      Notes (7)
              
              $
              8,000,000
              
              
              $
              7,969,143
              
              
              $
              7,260,000Production
      and Development
              (8.75%,
      due 12/15/2011)Venoco,
      Inc. (1) (11)
              Oil
      & Natural Gas
              Senior
      Notes (7)
              
              
              4,000,000
              
              
              
              3,948,767
              
              
              
              3,630,000Production
      and Development
              (8.75%,
      due 12/15/2011)Chroma
      Exploration &
              Oil
      & Natural Gas
              9,154
      Shares Series A Participating
              
              
              -
              
              
              
              2,221,710
              
              
              
              -Production,
      Inc. (1) (12)
              Production
      and Development
              Convertible
      Preferred Stock (10)8,359
      Shares Series AA Participating
              
              
              -
              
              
              
              2,089,870
              
              
              
              1,567,402Convertible
      Preferred Stock (10)8.11
      Shares Common Stock (5)
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
      (5)
              
              
              -
              
              
              
              -
              
              
              
              -Resaca
      Exploitation, LP (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              26,993,572
              
              
              
              26,515,386
              
              
              
              26,515,386Production
      and Development
              Multiple-Advance
      Tranche A Term Loan(LIBOR
      + 6.00%, due 5/01/2012)Overriding
      Royalty Interest (6)
              
              
              30,000
              
              
              
              29,127
              
              
              
              400,000Senior
      Secured Tranche B Term Loan
              
              
              6,000,000
              
              
              
              6,000,000
              
              
              
              6,000,000(LIBOR
      + 9.00%, due 11/30/2007) (9)Overriding
      Royalty Interest (6)
              
              
              30,000
              
              
              
              29,127
              
              
              
              400,000Senior
      Subordinated
              
              
              4,000,000
              
              
              
              4,000,000
              
              
              
              4,000,000Secured
      Convertible Term Loan(6.00%
      cash, 8.00% PIK, due 5/01/2012)Crossroads
      Energy, LP (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              4,143,476
              
              
              
              4,088,225
              
              
              
              4,088,225Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 5.50%, due 6/29/2009)Overriding
      Royalty Interest (6)
              
              
              10,000
              
              
              
              7,432
              
              
              
              250,000Rubicon
      Energy Partners,
              Oil
      & Natural Gas
              Senior
      Subordinated Secured
              
              
              5,000,000
              
              
              
              5,000,000
              
              
              
              5,000,000LLC
      (8) (12)
              Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 8.00%, due 5/01/2010)LLC
      Units (4,000 units) (5)
              
              
              -
              
              
              
              4,000,000
              
              
              
              12,000,000BSR
      Loco Bayou, LLC (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              2,978,367
              
              
              
              2,572,869
              
              
              
              1,710,781Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK - until 8/15/08,cash
      only thereafter, due 8/15/2009) (10)Overriding
      Royalty Interest  (5) (6)
              
              
              20,000
              
              
              
              20,000
              
              
              
              20,000Warrants
      (5)
              
              
              10,000
              
              
              
              10,000
              
              
              
              -Sonoran
      Energy, Inc. (1) (12)
              Oil
      & Natural Gas
              Warrants
      (5)
              
              
              10,000
              
              
              
              10,000
              
              
              
              10,000Production
      and Development
 
   
  NGP
      CAPITAL RESOURCES COMPANYCONSOLIDATED
      SCHEDULE OF INVESTMENTSMarch
      31, 2008(unaudited)(Continued)Portfolio Company
              Energy Industry Segment
              Investment (2) (4)
              
              Principal
              
              
              Cost
              
              
              Fair Value (3)TARGETED INVESTMENTS -
      ContinuedNighthawk
      Transport I, LP (1) (12)
              Energy
      Services
              Second
      Lien
              
              
              14,328,347
              
              
              
              13,427,546
              
              
              
              13,427,546Term
      Loan B(The
      greater of 12.5% or LIBOR + 8.00%,due
      10/03/2010)LP
      Units (5)
              
              
              224
              
              
              
              224
              
              
              
              150,000Warrants
      (5)
              
              
              850,000
              
              
              
              850,000
              
              
              
              850,000Second
      Lien
              
              
              1,595,043
              
              
              
              1,569,974
              
              
              
              1,569,974Delayed
      Draw Term Loan B(The
      greater of 12.5% or LIBOR + 8.00%,due
      10/03/2010)Alden
      Resources, LLC (1) (12)
              Coal
      Production
              Senior
      Secured
              
              
              36,285,168
              
              
              
              33,452,204
              
              
              
              33,452,204Multiple-Advance
      Term Loan(LIBOR
      + 8.00% cash, +10.00% PIK - until 2/29/2008)cash
      only thereafter, due 1/05/2013)Royalty
      Interest (6)
              
              
              2,660,000
              
              
              
              2,613,803
              
              
              
              2,660,000Warrants
      (5)
              
              
              100,000
              
              
              
              100,000
              
              
              
              100,000Tammany
      Oil & Gas, LLC (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              23,285,796
              
              
              
              22,940,718
              
              
              
              22,940,718Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 6.00%, due 3/21/2010)Overriding
      Royalty Interest (5) (6)
              
              
              200,000
              
              
              
              200,000
              
              
              
              300,000TierraMar
      Energy LP (8) (12)
              Oil
      & Natural Gas
              Overriding
      Royalty Interest (6)
              
              
              20,000
              
              
              
              18,185
              
              
              
              200,000Production
      and Development
              Class
      A Preferred LP Units (5)
              
              
              15,880,186
              
              
              
              15,880,186
              
              
              
              15,880,186Anadarko
      Petroleum Corporation
              Oil
      & Natural Gas
              Multiple-Advance
      Net Profits Interest
              
              
              52,575,286
              
              
              
              52,600,647
              
              
              
              52,600,6472007-III
      Drilling Fund (1) (12)
              Production
      and Development
              (Due
      4/23/2032)Formidable,
      LLC (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              37,000,000
              
              
              
              37,000,000
              
              
              
              37,000,000Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK ,due
      5/31/2008)Warrants
      (5)
              
              
              500,000
              
              
              
              500,000
              
              
              
              500,000DeanLake
      Operator, LLC (1) (12)
              Oil
      & Natural Gas
              Senior
      Secured
              
              
              13,195,080
              
              
              
              12,972,829
              
              
              
              12,972,829Production
      and Development
              Multiple-Advance
      Term Loan(LIBOR
      + 7.00%, due 6/25/2010)Overriding
      Royalty Interest (6)
              
              
              20,000
              
              
              
              19,458
              
              
              
              20,000Warrants
      (5)
              
              
              10,000
              
              
              
              10,000
              
              
              
              10,000Bionol
      Clearfield, LLC (1) (12)
              Alternative
      Fuels and
              Senior
      Secured Tranche C
              
              
              5,000,000
              
              
              
              5,049,283
              
              
              
              5,049,283Specialty
      Chemicals
              Construction
      Loan(LIBOR
      + 7.00%, due 09/06/2016)BioEnergy
      Holding, LLC (1) (12)
              Alternative
      Fuels and
              Senior
      Secured Notes
              
              
              10,000,000
              
              
              
              9,051,510
              
              
              
              9,051,510Specialty
      Chemicals
              (15.00%,
      due 03/06/2015)BioEnergy
      International Warrants (5)
              
              
              595,845
              
              
              
              595,845
              
              
              
              595,845BioEnergy
      Holding Units (5)
              
              
              376,687
              
              
              
              376,687
              
              
              
              376,687Subtotal
      Targeted Investments (63.67% of total investments)
              
              
              
              
              
              
              $
              277,740,755
              
              
              $
              282,559,223
 
   
  NGP CAPITAL RESOURCES
      COMPANYCONSOLIDATED
      SCHEDULE OF INVESTMENTSMarch
      31, 2008(unaudited)(Continued)Issuing Company
              Energy Industry Segment
              Investment (2) (4)
              
              Principal
              
              
              Cost
              
              
              Fair Value (3)CORPORATE
      NOTESPioneer
      Natural Resources Co. (11)
              Oil
      & Natural Gas
              Senior
      Notes, 7.2%, due 2028
              
              $
              10,000,000
              
              
              $
              11,620,610
              
              
              $
              8,661,000Production
      and DevelopmentSubtotal
      Corporate Notes ( 1.95% of total investments)
              
              
              
              
              
              
              $
              11,620,610
              
              
              $
              8,661,000GOVERNMENT SECURITIES
      (13)U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              $
              8,000,000
              
              
              $
              8,998,495
              
              
              $
              8,998,495U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,994
              
              
              
              11,997,994U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,994
              
              
              
              11,997,994U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,994
              
              
              
              11,997,994U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 3.073%, due 04/03/2008
              
              
              12,000,000
              
              
              
              11,997,993
              
              
              
              11,997,993U.S.
      Treasury Bills
              Government
              U.S.
      Treasury Bills, 0.253%, due 04/03/2008
              
              
              15,000,000
              
              
              
              14,999,792
              
              
              
              14,999,792Subtotal
      Government Securities (32.41% of total investments)
              
              
              
              
              
              $
              143,978,220
              
              
              $
              143,978,220CASHSubtotal
      Cash (1.97% of total investments)
              
              
              
              
              
              
              $
              8,744,574
              
              
              $
              8,744,574TOTAL INVESTMENTS,
      CASH AND CASH EQUIVALENTS
              
              
              
              
              
              $
              442,084,159
              
              
              $
              443,943,017LIABILITIES IN EXCESS
      OF OTHER ASSETS
              
              
              
              
              
              
              
              
              
              
              $
              (198,288,833
              )NET
      ASSETS
              
              
              
              
              
              
              
              
              
              
              
              $
              245,654,184(1) 
      Portfolio company
      is not controlled by or affiliated with us as defined by the Investment
      Company Act of 1940.(2)  
      Percentages represent interest rates in effect at March 31, 2008, 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 becamecollateralized by second priority  liens.(8)  
      Portfolio company is controlled by us as defined by the Investment Company
      Act of 1940.(9)  
      Forbearance granted on maturity date until February 29, 2008. The
      Manager is in the process of renegotiating the Tranche B note with
      Resaca.(10)
      Non-accrual status.(11)
      Level 2 security per SFAS No. 157
      heirachy.(12)
      Level 3 security per SFAS No. 157
      heirachy.(13)
      Level 1 security per SFAS No. 157
      heirachy.(See
      accompanying notes to consolidated financial statements)
 
  NGP CAPITAL RESOURCES COMPANYCONSOLIDATED
      FINANCIAL HIGHLIGHTS(unaudited)For
      the Three Months
              
              
              For
      the Three Monthsended March 31, 2008
              
              
              ended March 31, 2007Per
      Share Data  (1)Net
      asset value, beginning of period
              
              $
              14.30
              
              
              $
              13.96Net
      investment income (loss)
              
              
              0.24
              
              
              
              0.25Net
      realized and unrealized gain (loss) on portfolio
securitiesand
      corporate notes
              
              
              (0.10
              )
              
              
              0.22Net
      increase (decrease) in stockholders' equity (net assets)resulting
      from operations
              
              
              0.14
              
              
              
              0.47Dividends
      declared
              
              
              (0.40
              )
              
              
              (0.27
              )Net
      asset value, end of period
              
              $
              14.04
              
              
              $
              14.16Market
      value, beginning of period
              
              $
              15.63
              
              
              $
              16.75Market
      value, end of period
              
              $
              16.42
              
              
              $
              15.81Market
      value return  (2)
              
              
              7.68
              %
              
              
              -4.03
              %Net
      asset value return (2)
              
              
              0.64
              %
              
              
              3.13
              %Ratios
      and Supplemental Data($
      and shares in thousands)Net
      assets, end of period
              
              $
              245,654
              
              
              $
              246,789Average
      net assets
              
              $
              247,957
              
              
              $
              245,024Common
      shares outstanding at end of period
              
              
              17,500
              
              
              
              17,422Total
      operating expenses less management andincentive
      fees and interest expense/average net assets (3)
              
              
              1.87
              %
              
              
              1.55
              %Total
      operating expenses less managementand
      incentive fees/average net assets (3)
              
              
              5.83
              %
              
              
              4.13
              %Total
      operating expenses/average net assets (3)
              
              
              8.75
              %
              
              
              6.72
              %Net
      investment income (loss)/average net assets (3)
              
              
              6.72
              %
              
              
              7.31
              %Net
      increase (decrease) in net assets resulting fromoperations/average
      net assets (3)
              
              
              3.88
              %
              
              
              13.49
              %Portfolio
      turnover rate
              
              
              11.30
              %
              
              
              0.24
              %(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)








NGP
CAPITAL RESOURCES COMPANY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2008


(Unaudited)




Note
1:                      Organization





NGP
Capital Resources Company (the “Company”) was organized as a Maryland
corporation in July 2004. The Company has elected to be 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
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 Asset Holdings III, LP, a
Texas limited partnership and NGPC Asset Holdings IV, LP, a Texas limited
partnership.  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 was created to invest primarily in small and mid-size private energy
companies, which are generally defined as companies that have net asset values
or annual revenues of less than $500 million and are not issuers of publicly
traded securities.  The Company’s investment objective is to generate
both current income and capital appreciation through debt investments with
certain equity components.




The
Company is managed and advised, subject to the overall supervision of the
Company’s Board of Directors, by NGP Investment Advisor, LP (the “Manager”), a
Delaware limited partnership owned by NGP Energy Capital Management, LLC, 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, 2007. Interim results are not
necessarily indicative of results for a full year.





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.











Cash
and Cash Equivalents




Cash and
cash equivalents consist of demand deposits and highly liquid investments with
original maturities of three months or less when purchased. Cash and cash
equivalents are carried at cost, which approximates fair value.





Prepaid
Assets




Prepaid
assets consist of premiums paid for directors’ and officers’ insurance and
fidelity bonds with a policy term of one year, fees associated with the
establishment of the policy or credit facility, and registration expenses
related to the Company’s shelf filing. Such premiums and fees are amortized
monthly on a straight-line basis over the term of the policy or credit
facility.  Registration expenses are deferred and will be charged as a
reduction of capital upon the sale of shares.




Concentration
of Credit Risk




The
Company places its cash and cash equivalents with financial institutions and, at
times, cash held in checking accounts may exceed the Federal Deposit Insurance
Corporation insured limit.




Valuation
of Investments




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 our portfolio companies and
presents the valuations to the Company’s 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
adjusted for appropriate liquidity discounts, if applicable. For investments in
securities for which market quotations are unavailable, or which have various
degrees of trading restrictions, the investment team 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 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 one or all
of the above valuation methods to determine the estimated enterprise value of a
portfolio company.





Debt Securities: The Company
records its investments in non-convertible debt securities at fair value which
generally approximates cost  plus amortized original issue discount,
or OID, to the extent that the estimated asset or enterprise value of the
portfolio company exceeds the outstanding debt of the portfolio company. 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. 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 its debt investment beginning with its
junior-most debt investment such that the asset or enterprise value less the
value of the outstanding pari
passu or senior debt is zero.













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.





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 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.




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement on Financial Accounting Standards No. 157, Fair Value Measurements
(“SFAS No. 157”). This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The changes to current generally accepted accounting
principles from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value and the expanded disclosures about
fair value measurements.





As of
January 1, 2008, the Company adopted SFAS No. 157. The Company has
performed an analysis of all existing investments to determine the significance
and character of all inputs to their fair value determination. Based on this
assessment, the adoption of this standard did not have a material effect on the
Company’s net asset value.




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
depletion using the unit of production depletion method. The portion of the loan
origination fees paid that represent additional yield or discount on a loan are
deferred and accreted into interest income over the life of the loan using the
effective interest method. Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest income and any
unamortized premium or discount is recorded as a realized gain or loss. Market
premiums or discounts on acquired loans or fixed income investments are accreted
into interest income using the effective interest method. Dividend income is
recognized on the ex-dividend date. Accruing interest or dividends on
investments is deferred when it is determined that the interest or dividend is
not collectible. 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.





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.  If the portfolio company’s
asset valuation is not sufficient to cover the contractual interest, the Company
will not accrue interest or dividend income on the investment.  To
maintain the Company’s RIC status, this non-cash source of income must be paid
out to stockholders in the form of dividends, even though the Company has not
yet collected the cash.  For the quarter ended March 31, 2008, PIK
interest income totaled $1,728,817, and there was no PIK dividend
income.  For the quarter ended March 31, 2007, PIK interest income
totaled $1,115,048, and there was no PIK dividend income.










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.





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 March 31,
2008, the Company accreted approximately $0.3 million of fee income into
interest income, compared to approximately $0.4 million of fee income for the
quarter ended March 31, 2007.




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.











Prior to
2005, the Company was treated as a “C” corporation and had no taxable income and
therefore did not declare a dividend for that period.  The following
table summarizes the Company’s dividend history:




Dividend
      HistoryDeclaration
      Date
              
              Amount
              
              Record
      Date
              Payment
      DateMarch
      18, 2005
              
              $
              0.120
              
              March
      31, 2005
              April
      15, 2005June
      17, 2005
              
              $
              0.125
              
              June
      30, 2005
              July
      15, 2005September
      19, 2005
              
              $
              0.140
              
              September
      30, 2005
              October
      14, 2005December
      15, 2005
              
              $
              0.275
              
              December
      27, 2005
              January
      4, 2006March
      10, 2006
              
              $
              0.160
              
              March
      31, 2006
              April
      17, 2006June
      14, 2006
              
              $
              0.180
              
              June
      30, 2006
              July
      14, 2006September
      14, 2006
              
              $
              0.250
              
              September
      29, 2006
              October
      13, 2006December
      7, 2006
              
              $
              0.330
              
              December
      19, 2006
              December
      29, 2006March
      19, 2007
              
              $
              0.265
              
              March
      30, 2007
              April
      13, 2007June
      13, 2007
              
              $
              0.310
              
              June
      29, 2007
              July
      13, 2007September
      12, 2007
              
              $
              0.350
              
              September
      28, 2007
              October
      12, 2007December
      12, 2007
              
              $
              0.515
              
              December
      28, 2007
              January
      4, 2008March
      6, 2008
              
              $
              0.400
              
              March
      31, 2008
              April
      11, 2008


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 April 11, 2008, holders of 1,693,284 shares, or
approximately 9.7% of outstanding shares, were participants in the Company’s
dividend reinvestment plan.





The
Company’s 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:




Dividend
      Reinvestment Plan ParticipationPercentage
      of
              
              
              
              
              
              
              
              
              Common Stock DividendsParticipating
              
              
              Outstanding
              
              
              Total
              
              
              
              
              
              Purchased
      in
              
              
              Newly Issued SharesDividend
              
              Shares
              
              
              Shares
              
              
              Distribution
              
              
              Cash Dividends
              
              
              Open Market
              
              
              Amount
              
              
              SharesMarch
      2005
              
              
              -
              
              
              
              0.0
              %
              
              $
              2,088,012
              
              
              $
              2,088,012
              
              
              $
              -
              
              
              $
              -
              
              
              
              -June
      2005
              
              
              1,215,870
              
              
              
              7.0
              %
              
              $
              2,175,013
              
              
              $
              2,023,029
              
              
              $
              151,984
              
              
              $
              -
              
              
              
              -September
      2005
              
              
              1,488,904
              
              
              
              8.6
              %
              
              $
              2,436,014
              
              
              $
              2,227,567
              
              
              $
              208,447
              
              
              $
              -
              
              
              
              -December
      2005
              
              
              1,660,140
              
              
              
              9.5
              %
              
              $
              4,785,028
              
              
              $
              4,328,488
              
              
              $
              456,540
              
              
              $
              -
              
              
              
              -March
      2006
              
              
              1,618,940
              
              
              
              9.3
              %
              
              $
              2,784,016
              
              
              $
              2,524,986
              
              
              $
              259,030
              
              
              $
              -
              
              
              
              -June
      2006
              
              
              1,410,227
              
              
              
              8.1
              %
              
              $
              3,132,018
              
              
              $
              2,878,177
              
              
              $
              253,841
              
              
              $
              -
              
              
              
              -September
      2006
              
              
              1,270,634
              
              
              
              7.3
              %
              
              $
              4,350,025
              
              
              $
              4,032,366
              
              
              $
              317,659
              
              
              $
              -
              
              
              
              -December
      2006
              
              
              1,111,045
              
              
              
              6.4
              %
              
              $
              5,742,033
              
              
              $
              5,375,388
              
              
              $
              -
              
              
              $
              366,645
              
              
              
              22,168March
      2007
              
              
              1,355,671
              
              
              
              7.8
              %
              
              $
              4,616,901
              
              
              $
              4,257,648
              
              
              $
              -
              
              
              $
              359,253
              
              
              
              22,692June
      2007
              
              
              1,363,066
              
              
              
              7.8
              %
              
              $
              5,407,938
              
              
              $
              4,985,387
              
              
              $
              -
              
              
              $
              422,550
              
              
              
              24,694September
      2007
              
              
              1,438,143
              
              
              
              8.2
              %
              
              $
              6,114,379
              
              
              $
              5,611,029
              
              
              $
              -
              
              
              $
              503,350
              
              
              
              30,678December
      2007
              
              
              1,605,164
              
              
              
              9.2
              %
              
              $
              9,012,670
              
              
              $
              8,186,010
              
              
              $
              826,659
              
              
              $
              -
              
              
              
              -
              
              
              
              (1
              )March
      2008
              
              
              1,693,284
              
              
              
              9.7
              %
              
              $
              7,000,133
              
              
              $
              6,322,815
              
              
              $
              -
              
              
              $
              677,318
              
              
              
              41,482
              
              
              
              (1
              )(1) Shares
      were issued on April 11, 2008 for the March 2008 dividend. See above
      and Note 4 for futher detail.









Note
3:                      Credit
Facilities and Borrowings




Under the
terms of the Company’s Second Amendment to Treasury Secured Revolving Credit
Agreement (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 March
31, 2008 was $126.25 million, which was unchanged compared to the committed and
outstanding amounts as of December 31, 2007.  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 and bears interest, at the Company’s
option, at either (i) LIBOR plus 25 basis points or (ii) the base rate. As of
March 31, 2008, the interest rate on the Company’s outstanding borrowings under
the Treasury Facility was 2.84875% (LIBOR rate of 2.59875% plus 25 basis points)
on $126.25 million. 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 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 (the
“Investment Facility”), the lenders have agreed to extend revolving credit to
the Company in an amount not to exceed $100 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 $100 million and $65 million
was outstanding under the Investment Facility as of March 31,
2008.  By comparison, the total amount committed as of December 31,
2007 was $100 million and $89.75 million was outstanding under the Investment
Facility.  The Investment Facility has a three-year term and bears
interest, at the Company’s option, at either (i) LIBOR plus 125 to 225 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 March 31, 2008, the interest rates were 5.75%
(Prime rate of 5.25% plus 50 basis points) on $10 million, and 4.6775% (LIBOR
rate of 2.6775% plus 200 basis points) on $55 million.





The
obligations under the Investment Credit Agreement 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 net income (excluding revenue from collateral under the Treasury
Facility) plus interest, taxes, depreciation and amortization expenses
(“EBITDA”) 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.











The
Manager has agreed to waive permanently, subsequent to September 30, 2007, that
portion of the management fee attributable to U.S. Treasury securities acquired
with borrowings under the Company’s credit facilities to the extent the amount
of such securities exceeds $100 million.




In
addition to the Company’s credit 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 Natural Gas Partners, LLC for $15.00 per share. On November
9, 2004, the Company’s Registration Statement (Registration No. 333-118279) was
declared effective by the SEC in connection with the public offering of
16,000,000 shares of common stock (plus up to 2,400,000 additional shares of
common stock upon the exercise of the underwriters’ over-allotment option),
which commenced on November 10, 2004. The number of securities registered,
including the shares of common stock subject to the underwriters’ over-allotment
option, was 18,400,000, of which 17,400,000 were sold to the public at a price
of $15.00 per share.





The net
proceeds from the initial public offering of the shares of common stock, after
deducting expenses of approximately $2,308,000 and underwriting discounts and
commissions of $0.825 per share, were approximately $244,337,000.





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
stockholdersf 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 issued 22,168 and 78,064
shares of common stock, respectively, in 2006 and 2007 to participants in the
dividend reinvestment plan. The Company issued 41,482 shares of common stock on
April 11, 2008 to participants in the dividend reinvestment plan with respect to
the $0.40 per share dividend declared on March 6, 2008.  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 acquired with
borrowings under the Company’s credit facilities to the extent the amount of
such securities exceeds $100 million.











Of the
$2,148,721 management and incentive fees payable to the Manager as of March 31,
2008, $1,800,206 is the base management fee for the quarter ended March 31,
2008.  The base management fee for the quarter ended December 31, 2007
was $1,683,592.




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, realized capital 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 first quarters of 2008
and 2007.




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.  There were no Capital Gains Fees
earned for the first quarters of 2008 and 2007.





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. 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
members of the Company’s Board of Directors who are not interested persons. On
November 1, 2007, the Company’s Board of Directors, including all of the
independent directors, approved an extension of the investment advisory
agreement through November 9, 2008.










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.





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
$510,915 in accounts payable as of March 31, 2008, $206,265 was due to the
Administrator for expenses incurred on the Company’s behalf for the month of
March 2008.  By comparison, $225,148 was due to the Administrator for
expenses incurred on the Company’s behalf for the month of December
2007.





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
November 1, 2007, the Company’s Board of Directors, including all of the
independent directors, approved the continuation of the administration agreement
through November 9, 2008.




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 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.  At December 31, 2004, the Company’s temporary investments
included commercial paper of certain issuers that exceeded 5% of the value of
its total assets. These investments were classified as cash equivalents for
financial statement purposes. The Company was advised, however, that for
purposes of the federal income tax rules governing RIC status, these commercial
paper investments could not be classified as cash items, in which case the
Company did not meet the RIC asset diversification requirements at December 31,
2004 and was instead treated as a “C” corporation for tax purposes for
2004.




For the
years ended December 31, 2005, 2006 and 2007, the Company met all RIC
requirements. The Company distributed substantially all of its investment
company taxable income for 2005, 2006 and 2007. Thus, the Company did not incur
any federal income tax liability for any of these periods.





Differences
between the effective income tax rate and the statutory federal tax rate for the
periods ended March 31, 2008 and March 31, 2007 were as follows:


For
      the Three Months
              
              
              For
      the Three Monthsended
      March 31, 2008
              
              
              ended
      March 31, 2007(unaudited)
              
              
              (unaudited)Statutory
      federal rate on loss from continuing operations
              
              
              34
              %
              
              
              34
              %Effect
      of net deferred tax assets
              
              
              (34
              %)
              
              
              (34
              %)Effective
      tax rate on earnings from  continuing operations
              
              
              0
              %
              
              
              0
              %
 The tax
effects of temporary differences that give rise to the deferred tax assets and
liabilities are as follows:


For
      the Three Months
              
              
              For
      the Three Monthsended
      March 31, 2008
              
              
              ended
      March 31, 2007(unaudited)
              
              
              (unaudited)Deferred
      tax assetsNet
      operating loss carry forwards
              
              $
              33,866
              
              
              $
              156,674Net
      organization costs
              
              
              63,902
              
              
              
              111,830Total
      gross deferred tax assets
              
              
              97,768
              
              
              
              268,504Less
      valuation allowance
              
              
              (97,768
              )
              
              
              (268,504
              )Net
      deferred tax assets
              
              
              -
              
              
              
              -Deferred
      tax liabilitiesUnrealized
      gains, net
              
              
              -
              
              
              
              -Prepaid
      expenses
              
              
              -
              
              
              
              -Total
      gross deferred tax liabilities
              
              
              -
              
              
              
              -Net
      deferred tax assets
              
              $
              -
              
              
              $
              -


When a
“C” corporation qualifies to be taxed as a RIC, it is subject to corporate-level
tax on appreciation inherent in its assets on the date it becomes a RIC (i.e.,
built-in gain) that it recognizes within the first 10 years of its RIC status. A
RIC generally may use loss carryforwards arising in taxable years while it was a
“C” corporation to reduce its net recognized built-in gain, although a RIC is
not otherwise allowed to utilize such loss carryforwards. Because the Company
intends to qualify as a RIC under Subchapter M of the Code for 2005 and later
years, it is uncertain whether the Company will fully utilize the tax benefit of
its loss carryforward of approximately $142,000 at December 31, 2004. The
valuation allowance for deferred tax assets for the period August 6, 2004
(commencement of operations) through December 31, 2004 was primarily included to
reflect this uncertainty. After reducing the deferred tax asset by this
allowance, the amount of the remaining deferred tax asset of $266,013 would
entirely offset the deferred tax liability of $266,013 estimated as of December
31, 2004 should the Company recognize its built-in gain in future years. Because
the loss carryforward is expected to offset the built-in gain, no provision for
federal income taxes has been recorded for the period August 6, 2004
(commencement of operations) through December 31, 2004. The loss carryforward
will expire in the year 2024.





The
Company’s consolidated subsidiaries, NGPC Asset Holdings, LP, NGPC Asset
Holdings II, LP, NGPC Asset Holdings III, LP, and NGPC Asset Holdings IV, LP,
collectively (“NGPCAH”), are subject to federal income taxes. For the year ended
December 31, 2005 (its first year of operations), NGPCAH operated at a loss and
thus, at December 31, 2005, NGPCAH had a deferred tax asset of approximately
$15,000, composed of net operating loss carryforwards. For the year ended
December 31, 2006, NGPCAH operated at a small profit, resulting in a reduction
of the deferred tax asset composed of net operating loss carryforwards of
approximately $1,000. For the year ended December 31, 2007, NGPCAH had net
operating income of approximately $315,000 resulting in a reduction of the
deferred tax asset composed of net operating loss carryforwards of approximately
$122,808.  Management believes that the realization of the net
deferred tax asset is not likely based on expectations as to future taxable
income and, accordingly, NGPCAH recorded a valuation allowance of approximately
$15,000 at December 31, 2005, approximately $14,000 at December 31, 2006, and of
approximately $109,000 at December 31, 2007.  For the period ended
March 31, 2008, NGPCAH operated at a small loss and, accordingly, NGPCAH
recorded no provision for income taxes for the period ended March 31,
2008.





Note
7:                      Reclassifications




GAAP
requires that certain components of net assets be 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. For the years ended
December 31, 2007, 2006 and 2005, $64,170, $15,710 and $586,225, respectively,
were reclassified to undistributed net investment income (loss) from
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.





Note
8:                      Commitments
and Contingencies




As of
March 31, 2008, the Company had investments in or commitments to fund loan
facilities to 15 portfolio companies totaling $306 million, on which $279
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





In
September 2006, FASB issued SFAS No. 157, which establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements.
SFAS No. 157 applies to fair value measurements already required or
permitted by existing standards. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. The changes to current
generally accepted accounting principles from the application of this Statement
relate to the definition of fair value, the methods used to measure fair value,
and the expanded disclosures about fair value measurements.





As of
January 1, 2008, the Company adopted SFAS No. 157. The Company
has performed an analysis of all existing investments and derivative instruments
to determine the significance and character of all inputs to their fair value
determination. Based on this assessment, the adoption of this standard did not
have a material effect on the Company’s net asset value. However, the adoption
of the standard does require the Company to provide additional disclosures about
the inputs used to develop the measurements and the effect of certain
measurements on changes in net assets for the reportable periods as contained in
the Company’s periodic filings.





SFAS No. 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 presents the Company’s assets measured at fair value on a
recurring basis at March 31, 2008:




Prices
      withQuoted
      Prices
              
              
              Observablein
      Active
              
              
              Market
              
              
              UnobservableMarkets
              
              
              Inputs
              
              
              InputsAssets at Fair Value
              
              Total
              
              
              (Level 1)
              
              
              (Level 2)
              
              
              (Level 3)Long
      Term Investments
              
              $
              291,220,223
              
              
              $
              -
              
              
              $
              19,551,000
              
              
              $
              271,669,223Short
      Term Investments
              
              
              143,978,220
              
              
              
              143,978,220
              
              
              
              -
              
              
              
              -Total
      Assets at Fair Value
              
              $
              435,198,443
              
              
              $
              143,978,220
              
              
              $
              19,551,000
              
              
              $
              271,669,223
 The
Company did not have any liabilities that were measured at fair value on a
recurring basis at March 31, 2008
  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, 2007 and at March 31, 2008.
 Long
      TermAssets at Fair Value Using Unobservable Inputs
      (Level 3)
                  
                  InvestmentsBalance
      as of December 31, 2007
                  
                  $
                  272,348,573Transfers
      in (out) of Level 3
                  
                  
                  -Net
      investment income (loss)
                  
                  
                  307,688Net
      realized gains (losses)
                  
                  
                  -Net
      unrealized gains (losses)
                  
                  
                  (467,996
                  )Purchases,
      sales and  redemptions
                  
                  
                  (519,042
                  )Balance
      as of March 31, 2008
                  
                  $
                  271,669,223


The
$467,996 of net unrealized losses presented in the table above relates to
investments that are still held at March 31, 2008, and the Company presents
these unrealized losses on the Consolidated Statement of Operations as net
increase (decrease) in unrealized appreciation (depreciation) on portfolio
securities and corporate notes.








Note
10:                      Subsequent
Events





On April
15, 2008 the Company completed an underwritten public offering of 3,700,000
shares of the Company’s common stock at a price per share of $16.00, raising
approximately $55.8 million in net proceeds after deducting underwriting
discounts and commissions and estimated offering expenses.  A shelf
registration statement relating to the sale of shares in this offering has been
filed with the SEC and has become effective.  The underwriters for the
offering were Raymond James & Associates, Inc., Stifel, Nicolaus &
Company, Incorporated and BB&T Capital Markets, a division of Scott &
Stringfellow, Inc.  The Company has granted the underwriters a 30-day
option to purchase up to an additional 555,000 shares of common stock to cover
over-allotments, if any.  On April 16, 2008, the Company used the
$56.2 million net proceeds of this offering plus an additional $8.8 million of
cash on hand to repay the outstanding balance on its $65 million investment
credit facility.





On April
25, 2008, the Company announced that the underwriters had exercised a portion of
the over-allotment granted in connection with the Company’s recent public
offering of common stock and had purchased an additional 386,388 shares of
common stock at a price per share of $16.00, bringing total net proceeds of the
offering to approximately $61.7 million after deducting underwriting discounts
and commissions and estimated offering expenses. A total of 168,612 shares
remain available for purchase under the underwriters’ over-allotment option
during the remainder of its 30-day term.  The Company will use
proceeds from the exercise of the over-allotment to fund additional
investments.





On April
30, 2008, the Company closed a $30 million Senior Secured Credit Facility (the
“Facility”) with Greenleaf Investments LLC, a private company based in Victoria,
Texas (“Greenleaf”).  The Company acted as agent and sole lender for
the Facility.  Initial availability under the Facility is $12.5
million with approximately $10.5 million funded at closing.  The
Facility is secured by first liens on substantially all of Greenleaf’s
assets.  As partial consideration for providing the Facility, the
Company received an overriding royalty interest in Greenleaf’s
properties.  Proceeds from the Facility will be used by Greenleaf to
acquire certain properties in Victoria County, Texas, to develop additional oil
and gas properties and to fund capital expenditures.  Greenleaf is an
oil and gas producer with interests in production located along the Texas Gulf
Coast.





Also on
April 30, 2008, the Company made a follow-on investment in Tammany Oil &
Gas, LLC, an existing portfolio company.  Availability under this
facility was increased from $30.0 million to $34.0 million.  The
Company funded an additional $6.2 million, which was used to acquire certain
producing properties in the federal waters of the Gulf of
Mexico.  Following the investment, there is approximately $29.5
million outstanding under this facility.











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





The
following analysis of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the notes
thereto contained elsewhere in this report.




Forward-Looking
Statements




The safe
harbor for forward-looking statements under the Private Securities Litigation
Reform Act of 1995 does not apply to business development companies and
statements made in this report.  Nonetheless, certain statements in
this report that relate to estimates or expectations of our future performance
or financial condition may be forward-looking. These forward-looking statements
are not historical facts, but rather are based on current expectations,
estimates and projections in our industry, our beliefs and our
assumptions.  These statements are not guarantees of future
performance and 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;


·
            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 external manager, NGP Investment Advisor, LP, which we
      refer to as our Manager, to locate suitable investments for us and to
      monitor and administer the investments;
and


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





We may
use words such as “anticipates,” “believes,” “estimates,” “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. Although we believe that the
assumptions on which these forward-looking statements are based are reasonable,
any of those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be
inaccurate.  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, which we generally define as
companies that have net asset values or annual revenues of less than $500
million and are not issuers of publicly traded securities. We have elected to be
regulated as a business development company, or a BDC, under the Investment
Company Act of 1940, as amended, or the 1940 Act, and, as such, we are required
to comply with certain regulatory requirements. For instance, we generally have
to invest at least 70% of our total assets in “qualifying assets,” which are
securities of private or thinly traded public U.S. companies, cash, cash
equivalents, U.S. government securities and high-quality debt investments that
mature in one year or less. In addition, for federal income tax purposes we
operate so as to be treated as a regulated investment company, or RIC, under the
Internal Revenue Code of 1986, as amended, or the Code. Pursuant to these
elections, we generally will not have to pay corporate-level taxes on any income
and capital gains we distribute to our stockholders.





Our
investment objective is to generate both current income and capital appreciation
primarily through debt and equity investments with certain equity
components.  A key focus area for our targeted investments in the
energy industry is domestic exploration and production businesses and midstream
businesses that gather, process and transport oil and natural gas. We also
evaluate investment opportunities in such businesses as coal, power,
electricity,





energy
services and alternative energy. Our investments will 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 with equity
components.  We may also invest in preferred stock and other equity
securities on a stand-alone basis.





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 environment and the competitive environment for the types of
investments we make. We believe that, for energy companies, the availability of
debt capital from banks, mezzanine providers and alternative investment vehicles
such as hedge funds has remained strong over the last 12 months and has
continued to put downward pressure on spreads. However, we do not expect this
availability of capital to impair our ability to make attractive long-term
investment decisions with our capital.   We remain committed to
our underwriting and investment disciplines in selectively investing in
appropriate risk-reward opportunities within the energy sector.




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.





Portfolio
and Investment Activity




During
the quarter ended March 31, 2008, we added one new company to our portfolio and
one company repaid its facility. In January 2008, BSR Alto’s Term Loan was fully
repaid at par from proceeds from the sale of its assets to a third party. As of
September 30, 2007, we had written down the value of our investment in the BSR
Alto Term Loan by $0.5 million. Upon repayment, this impairment was recovered in
full.





In March 2008, we closed a $15 million
investment in BioEnergy International, LLC, or BioEnergy, a private, alternative
fuels and specialty chemicals company based in Quincy, Massachusetts. The
investment consists of a $5 million participation in a $30 million Senior
Secured Tranche Construction Loan and a $10 million participation in a $62
million Senior Secured Notes issue. As partial consideration for providing the
investment, we received limited liability company units in a subsidiary of
BioEnergy and warrants in BioEnergy. Proceeds from the investment will be used
by BioEnergy to construct a fully contracted 108 million gallons per year
ethanol plant in Clearfield County, Pennsylvania and to fund development of
bio-refinery technologies.





Also
during the quarter, we sold a $20 million senior NPI participation in the
Anadarko Petroleum Company 2007-III Drilling Fund to another financial
institution.





Following
these transactions, as of March 31, 2008, our investment portfolio consisted of
15 portfolio companies invested as follows: 38.1% in senior secured term loans,
6.9% in senior subordinated secured notes, 0.4% in participating convertible
preferred stock, 1.9% in corporate notes, 6.5% in member and partnership units
and 11.8% in net profits interests.  The balance of our investment
portfolio (as a percentage of the whole portfolio) was comprised 32.4% of U.S.
Treasury Bills, and 2.0% of cash and cash equivalents.





At March
31, 2008, the weighted average yield on targeted portfolio investments,
exclusive of capital gains, was 10.7%.  The weighted average yield of
our corporate notes was 5.8%. The weighted average yield of our U.S. Treasury
Bills and cash equivalents was 2.72%.  The weighted average yield on
our total capital invested at March 31, 2008 was 7.82%.





By
comparison, at March 31, 2007, the weighted average yield on targeted portfolio
investments, exclusive of capital gains, was 12.5%.  The weighted
average yield of our corporate notes was 5.5%. The weighted average yield of our
U.S. Treasury Bills and cash equivalents was 5.0%.  The weighted
average yield on our total capital invested at March 31, 2007 was
9.9%.










Yields
are computed 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.





Critical
Accounting Policies




The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as critical accounting policies.




Basis
of Presentation




The
accompanying consolidated financial statements have been prepared on the accrual
basis of accounting in conformity with accounting principles generally accepted
in the United States, and include the accounts of the company and its wholly
owned subsidiaries. The consolidated financial statements reflect all
adjustments and reclassifications which, in the opinion of management, are
necessary for the fair presentation of the results of the operations and
financial condition for the periods presented. All significant intercompany
balances and transactions have been eliminated.




Cash and Cash
Equivalents




Cash and
cash equivalents include short-term, liquid investments in a money market fund.
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 policy terms of one year, fees associated with the
establishment of the credit facility, and registration expenses related to our
shelf filing. Such premiums and fees are amortized monthly on a straight line
basis over the term of the policy or credit facility. Registration expenses are
deferred and will be charged as a reduction of capital upon the sale of
shares.




Concentration of Credit
Risk




We place
our cash and cash equivalents with financial institutions and, at times, cash
held in checking accounts may exceed the Federal Deposit Insurance Corporation
insured limit.




Valuation of
Investments




Investments
are carried at fair value, as determined in good faith by our Board of
Directors. On a quarterly basis, the investment team of our Manager prepares
valuations for all of the assets in our portfolio and presents the valuations to
our valuation committee and Board of Directors. The valuations are determined
and recommended by the valuation committee to our 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
adjusted for appropriate liquidity discounts, if applicable. For investments in
securities for which market quotations are unavailable, or which have various
degrees of trading restrictions, the investment team of our Manager prepares
valuation analyses, as generally described below.




Using the
most recently available financial statements, forecasts and, when applicable,
comparable transaction data, the investment team of our Manager prepares
valuation analyses for the various securities in our 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
a portfolio company’s assets, such as engineering reserve reports of oil and
natural gas properties. Our 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
our Manager considers some or all of the above valuation methods to determine
the estimated enterprise value of a portfolio company.




Debt Securities:We record
our investments in non-convertible debt securities at fair value which generally
approximates cost plus amortized original issue discount, or OID, to the extent
that the estimated asset or enterprise value of the portfolio company exceeds
the outstanding debt of the portfolio company. We record our 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) our 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. If the estimated asset or
enterprise value is less than the sum of the value of our debt investment and
all other debt securities of the portfolio company pari passuor senior to our
debt investment, we reduce the value of our debt investment beginning with our
junior-most debt investment such that the asset or enterprise value less the
value of the outstanding pari
passuor senior debt is zero.




Equity Securities:We record
our investments in preferred and common equity securities (including warrants or
options to acquire equity securities) at fair value based on our pro rata share
of the residual equity value available after deducting all outstanding debt from
the estimated enterprise value.




Property-Based Equity Participation
Rights:We record our 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 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.




In
September 2006, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 157, Fair Value Measurements
(“SFAS No. 157”). This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The changes to current generally accepted accounting
principles from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value and the expanded disclosures about
fair value measurements.





As of
January 1, 2008, we adopted SFAS No. 157. We performed an analysis of
all existing investments to determine the significance and character of all
inputs to their fair value determination. Based on this assessment, the adoption
of this standard did not have a material effect on our net asset
value.







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 depletion using the unit of production depletion
method. The portion of the loan origination fees paid that represent additional
yield or discount on a loan are deferred and accreted into interest income over
the life of the loan using the effective interest method. Upon the prepayment of
a loan or debt security, any unamortized loan origination fees are recorded as
interest income and any unamortized premium or discount is recorded as a
realized gain or loss. Market premiums or discounts on acquired loans or fixed
income investments are accreted into interest income using the effective
interest method. Dividend income is recognized on the ex-dividend date. Accruing
interest or dividends on investments is deferred when it is determined that the
interest or dividend is not collectible. 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.




Payment-in-Kind
Interest




We may
have investments in our portfolio that contain payment-in-kind, or 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, we base income accruals on the principal balance
including any PIK. If the portfolio company’s asset valuation is not sufficient
to cover the contractual interest, we will not accrue interest or dividend
income on the investment. To maintain our RIC status, this non-cash source of
income must be paid out to stockholders in the form of dividends, even though we
have not yet collected the cash.




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 time period the commitment is outstanding. Prepayment and
loan administration fees are recognized as they are received.




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




Realized
capital gains or losses on portfolio securities and corporate notes 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.




Dividends




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













Results
of Operations




Investment
Income




Investment
income for the quarter ended March 31, 2008 was $9.5 million with $8.2 million
attributable to targeted investments in 13 portfolio companies, $0.2 million
from corporate notes and $1.1 million attributable to investments in cash
equivalents. This compares to investment income for the quarter ended March 31,
2007 of $8.5 million with $6.7 million attributable to targeted investments in
16 portfolio companies, $0.2 million from corporate notes, $0.1 million in fee
income from third parties and affiliates, and $1.5 million attributable to
investments in cash equivalents, agency notes and auction rate
securities.





Operating
Expenses




For the
quarter ended March 31, 2008, operating expenses were $5.4 million compared to
$4.1 million for the quarter ended March 31, 2007. The 2008 amount consisted of
investment advisory and management fees of $1.8 million, insurance expenses,
administrative services fees, professional fees, directors’ fees and other
general and administrative expenses of $1.2 million and credit facility interest
and fees of $2.4 million.  In comparison, for the quarter ended March
31, 2007, investment advisory and management fees were $1.6 million, insurance
expenses, administrative services fees, professional fees, directors’ fees and
other general and administrative expenses were $0.9 million and credit facility
interest and fees were $1.6 million.





Operating
expenses for the three month periods include our allocable portion of the total
organizational and operating expenses incurred by us, our Manager, and NGP
Administration, LLC, which we refer to as our administrator, as determined by
our Board of Directors and representatives of our Manager and our
Administrator.  According to the terms of the investment advisory
agreement, 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.





Net
Investment Income




For the
quarter ended March 31, 2008, net investment income was $4.1 million compared to
$4.4 million for the quarter ended March 31, 2007, primarily due to increased
interest income on the higher portfolio balances offset by higher management
fees, general and administrative expenses and interest and credit facility
fees.




Unrealized
Appreciation or Depreciation on Investments




For the
quarter ended March 31, 2008, the increase in net unrealized depreciation was
$1.7 million, comprised of a $1.4 million decrease in portfolio fair value and a
$0.3 million decrease in the fair value of corporate notes.  This
compares to an increase of $3.7 million net unrealized appreciation for the
quarter ended March 31, 2007, consisting of a $3.6 million increase in portfolio
fair value and a $0.1 million increase in the fair value of corporate
notes.





Net
Realized Gains





There
were no realized capital gains or losses for the quarters ended March 31, 2008
or 2007.





Net
Increase in Stockholders’ Equity from Operations





For the
quarter ended March 31, 2008, we had a net increase in stockholders’ equity (net
assets) resulting from operations of $2.4 million, or $0.14 per share, compared
to $8.1 million, or $0.47 per share for the quarter ended March 31,
2007.  The $5.8 million, or $0.33 per share net decrease is
attributable to the $5.4 million decrease in unrealized appreciation
(depreciation) on our investments during the first quarter of 2008.




Financial
Condition, Liquidity and Capital Resources




During
the quarter ended March 31, 2008, we generated cash from operations, including
interest earned on our portfolio securities, as well as our investments in
corporate notes, U.S. government securities and other high quality debt
securities that mature in one year or less.  At March 31, 2008, we had
cash and cash equivalents of $8.7 million, investments in U.S. Treasury Bills of
$144.0 million and investments in corporate notes of $8.7 million.











As of March 31, 2008, we
had investments in or commitments to fund loan facilities to 15 portfolio
companies totaling $306 million, of which $279 million was drawn.  We
expect to fund our investments in 2008 from income earned on our portfolio and
temporary investments and from borrowings under our Credit
Facilities.  (See description under “Note 3: Credit Facility”
above.)  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.  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.





Contractual
Obligations




A summary
of our contractual payment obligations at March 31, 2008 is as
follows:


Less
      than
              
              
              
              
              
              
              
              
              More
      thanContractual
      Obligations
              
              Total
              
              
              1
      Year
              
              
              1-3
      Years
              
              
              3-5
      Years
              
              
              5
      YearsMarch
      31, 2008:Long-term
      debt obligations--revolving
      credit facilities (1)
              
              $
              191,250,000
              
              
              $
              -
              
              
              $
              191,250,000
              
              
              $
              -
              
              
              $
              -Total
              
              $
              191,250,000
              
              
              $
              -
              
              
              $
              191,250,000
              
              
              $
              -
              
              
              $
              -(1)  Excludes
      accrued interest amounts.




Off-Balance
Sheet Arrangements




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





Dividends




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




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




Portfolio
Credit Quality




We
maintain a system to evaluate the credit quality of our investments. While
incorporating quantitative analysis, this system is a qualitative
assessment.  This system is intended to reflect the overall
performance of a portfolio company’s business, the collateral coverage of an
investment, and other relevant factors. Based on this system, the overall credit
quality of our targeted investment portfolio remained satisfactory in the
quarter ended March 31, 2008.  Of the 20 rated investments as of March
31, 2008, 2 investments declined in rating, 16 retained the same rating, and 2
new investments were previously unrated, when compared to the investments as of
December 31, 2007.  Investments approximating $36 million, or
approximately 13% of the $277.7 million cost basis of targeted investments, are
carried on our watch list due to slower than expected development of the assets
supporting the investments or deterioration in asset coverage.




During
the quarter ended March 31, 2008, we recorded additional unrealized depreciation
of $1.5 million in the fair value of targeted investments to reflect the
potential for loss of capital inherent in those investments.  We
placed one of these investments on non-accrual status effective January 1,
2008.










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, 2007.





Item
4.  Controls and
Procedures




Disclosure
Controls and Procedures




We
maintain controls and procedures designed to ensure that information required to
be disclosed in our reports under the Securities Exchange Act of 1934, as
amended, or 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 Chief Financial Officer, to allow timely decisions
regarding required disclosures. Based on an evaluation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this
report conducted by our management, with the participation of our Chief
Executive and Chief Financial Officers, our Chief Executive and Chief Financial
Officers believe that as of March 31, 2008, these controls and procedures are
effective to ensure that we are able to collect, process and disclose the
information we are required to disclose in the reports we file with the SEC
within the required time periods.





In
evaluating changes in internal control over financial reporting during the
quarter ended March 31, 2008, management identified no changes in its internal
control over financial reporting that occurred during the quarter ended March
31, 2008 that have materially affected, or are reasonably likely to materially
affect, its internal control over financial reporting.




PART II – OTHER
INFORMATION




Item
1. Legal
Proceedings




We are
not currently a defendant in any material legal proceeding, nor to our
knowledge, is any material legal proceeding threatened against us.





Item
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, 2007 other than the addition of the risk described below under the
heading “Additional Risk Factor” and the revisions to the following risk factors
(the complete text of which are set forth below under the heading “Revised Risk
Factors”).




Additional
Risk Factor




We may be subject to the risks
associated with the ethanol industry.




The
ethanol industry is subject to many risks which may adversely affect the market
price of ethanol. For example, overcapacity in the ethanol industry may result
in a decrease in the market price of ethanol if the demand for ethanol does not
grow at the same pace as increases in supply. In addition, the ethanol industry
is highly competitive, and other companies presently in the market, or that are
about to enter the market, could adversely affect the market price of ethanol.
Moreover, because corn is the principal raw material used to produce ethanol,
ethanol companies in general are directly affected by the cost and supply of
corn. Changes in the price and supply of corn are subject to and determined by
market forces over which we have no or little control, including overall supply
and demand, government programs and policies, weather, and other factors.
Furthermore, because growth and demand for













ethanol
may be driven primarily by federal and state government policies, a change in
government policies favorable to ethanol may cause demand for ethanol to
decline. These favorable government policies include the national renewable
fuels standard, and various federal ethanol tax incentives that assist the
ethanol industry. The continuation of these policies is uncertain, which means
that demand for ethanol may decline if these policies change or are
discontinued. A decline in the demand of ethanol is likely to cause lower
ethanol prices. In addition, tariffs on imported ethanol, which currently
effectively limit imported ethanol into the United States, could be reduced or
eliminated, which may in turn negatively affect the demand for domestic ethanol
and the price at which domestic ethanol is sold.




Revised
Risk Factors




We
may be exposed to risks associated with changes in interest rates.




General
interest rate fluctuations may have a negative impact on our investments and
investment opportunities and, accordingly, may have a material adverse effect on
investment objectives and our rate of return on invested capital. Because we may
borrow money to make investments, our net investment income is dependent upon
the difference between the rate at which we borrow funds and the rate at which
we invest these funds. As a result, there can be no assurance that a significant
change in market interest rates will not have a material adverse effect on our
net investment income. As of March 31, 2008, approximately 19% of the
investments at fair value in our portfolio were at fixed rates, while
approximately 81% were at variable rates.  Trading prices for debt
that pays a fixed rate of return tend to fall as interest rates rise. Trading
prices tend to fluctuate more for fixed-rate securities that have longer
maturities. Although we have no policy governing the maturities of our
investments, under current market conditions we expect that we will invest in a
portfolio of debt generally having maturities of three to seven years, but may
have longer maturities. This means that, to the extent we fund longer term fixed
rate investments with shorter term floating rate borrowings, we will be subject
to greater risk (other things being equal) than a fund invested solely in
shorter term securities. A decline in the prices of the debt we own could
adversely affect the trading price of our shares.




If
we issue senior securities, such as debt or preferred stock, we will be exposed
to additional risks.




We may
issue debt securities or preferred stock, and/or borrow money from banks or
other financial institutions, which we refer to collectively as senior
securities, up to the maximum amount permitted by the 1940 Act. We may issue
senior securities to make new or follow-on investments, to maintain our RIC
status or to pay contingencies and expenses. We will be permitted under the 1940
Act to issue senior securities if, immediately after the borrowing or issuance,
we will have an asset coverage of at least 200%. That is, we may borrow funds in
an amount up to 50% of the value of our assets (including investments made with
borrowed funds).  As of March 31, 2008, our asset coverage for senior
securities was 233%.




The
amount and nature of any borrowings will depend on a number of factors over
which we have no control, including general economic conditions and conditions
in the financial markets. We may also need to borrow funds to make qualifying
investments to maintain our RIC status. Therefore, we may need to raise
additional capital, which we may elect to finance in part through a credit
facility. We may not be able to obtain a credit facility on terms that we find
acceptable, if at all. The unavailability of funds from commercial banks or
other sources on favorable terms could inhibit the growth of our business and
have a material adverse effect on our performance.




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




Not
applicable.




Item
3.                      Defaults
Upon Senior Securities




Not
applicable.





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




Not
applicable.





Item
5.                      Other
Information




Not
applicable.











Item
6.     Exhibits





No.           Exhibit


3.1
            -
            Articles
      of Incorporation of NGP Capital Resources Company dated as of July 15,
      2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on
      Form N-2 dated November 9, 2004 (Registration No. 333-118279) and
      incorporated herein by reference)3.2
            -
            Articles
      of Amendment and Restatement of NGP Capital Resources Company dated as of
      October 29, 2004 (filed as Exhibit 3.2 to the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2004, and incorporated herein by
      reference)3.3
            -
            Bylaws
      of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s
      Registration Statement on Form N-2 dated August 16, 2004 (Registration No.
      333-118279) and incorporated herein by reference)10.1
            -
            Investment
      Advisory Agreement dated as of November 9, 2004, between NGP Capital
      Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.2
            -
            Administration
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.3
            -
            License
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and Natural Gas Partners, LLC (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
            -
            Joint
      Code of Ethics (filed as Exhibit (r) to the Company’s Registration
      Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279)
      and incorporated herein by reference)10.5
            -
            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)10.6
            -
            Amended
      and Restated Revolving Credit Agreement dated as of August 31, 2006, by
      and between NGP Capital Resources Company, the lenders from time to time
      party thereto and SunTrust Bank (filed as Exhibit 10.6 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.7
            -
            First
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of August 31, 2006, by and between NGP Capital Resources 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
      quarterly period ended September 30, 2006, and incorporated herein by
      reference)10.8
            -
            Treasury
      Secured Revolving Credit Agreement dated as of August 31, 2006, by and
      between NGP Capital Resources 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 quarterly period ended September 30,
      2006, and incorporated herein by reference)10.9
            -
            First
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      August 31, 2006, by and between NGP Capital Resources 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 quarterly period
      ended September 30, 2006, and incorporated herein by
      reference)10.10
            -
            Second
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      September 28, 2007, by and between NGP Capital Resources 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)10.11
            -
            Second
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of March 13, 2008, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank10.12
            -
            Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank31.1
            -
            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











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 COMPANY











By:
            /s/ John H. HomierJohn
      H. HomierPresident
      and Chief Executive Officer








NGP
CAPITAL RESOURCES COMPANY








By:
            /s/ Stephen K. GardnerStephen
      K. GardnerChief
      Financial Officer, Treasurer and
Secretary








Date: May
7, 2008














Index
to Exhibits


No.           Exhibit


3.1
            -
            Articles
      of Incorporation of NGP Capital Resources Company dated as of July 15,
      2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on
      Form N-2 dated November 9, 2004 (Registration No. 333-118279) and
      incorporated herein by reference)3.2
            -
            Articles
      of Amendment and Restatement of NGP Capital Resources Company dated as of
      October 29, 2004 (filed as Exhibit 3.2 to the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2004, and incorporated herein by
      reference)3.3
            -
            Bylaws
      of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s
      Registration Statement on Form N-2 dated August 16, 2004 (Registration No.
      333-118279) and incorporated herein by reference)10.1
            -
            Investment
      Advisory Agreement dated as of November 9, 2004, between NGP Capital
      Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.2
            -
            Administration
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.3
            -
            License
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and Natural Gas Partners, LLC (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
            -
            Joint
      Code of Ethics (filed as Exhibit (r) to the Company’s Registration
      Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279)
      and incorporated herein by reference)10.5
            -
            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)10.6
            -
            Amended
      and Restated Revolving Credit Agreement dated as of August 31, 2006, by
      and between NGP Capital Resources Company, the lenders from time to time
      party thereto and SunTrust Bank (filed as Exhibit 10.6 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.7
            -
            First
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of August 31, 2006, by and between NGP Capital Resources 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
      quarterly period ended September 30, 2006, and incorporated herein by
      reference)10.8
            -
            Treasury
      Secured Revolving Credit Agreement dated as of August 31, 2006, by and
      between NGP Capital Resources 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 quarterly period ended September 30,
      2006, and incorporated herein by reference)10.9
            -
            First
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      August 31, 2006, by and between NGP Capital Resources 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 quarterly period
      ended September 30, 2006, and incorporated herein by
      reference)10.10
            -
            Second
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      September 28, 2007, by and between NGP Capital Resources 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)10.11
            -
            Second
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of March 13, 2008, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank10.12
            -
            Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank31.1
            -
            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