---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended June 30, 2005



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



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NGP Capital Resources Company

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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)



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



Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value per share.



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Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by a check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes ̈No  x



The number of shares of the registrants Common Stock, $.001 par value, outstanding as of August 10, 2005 was 17,400,100.



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PART I - FINANCIAL INFORMATION



Item 1. Financial Statements.



NGP CAPITAL RESOURCES COMPANY

BALANCE SHEET



|                                                                                                    |  |                          |             |   |                            |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | -------------------------- | - | ----------- | -
|                                                                                                    |  | June 30, 2005(unaudited) |             |   | December 31, 2004(audited) |  
|Assets:                                                                                             |  |                          |             |   |                            |   |             |  
|Investments in portfolio securities at fair value (cost: $65,883,536 and $65,770,724, respectively) |  | $                        | 65,711,294  |   |                            | $ | 66,061,513  |  
|Investments in agency and auction rate securities, at cost which approximates fair value            |  |                          |            |   |                            |   | 41,301,002  |  
|Investments in high grade corporate notes (cost: $40,852,809 and $0, respectively)                  |  |                          | 39,929,400  |   |                            |   |            |  
|Investments in U.S. treasury bills, at cost which approximates fair value                           |  |                          | 124,927,222 |   |                            |   |            |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Total investments                                                                                   |  |                          | 230,567,916 |   |                            |   | 107,362,515 |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Cash and cash equivalents, at cost which approximates fair value                                    |  |                          | 13,914,737  |   |                            |   | 136,314,402 |  
|Accounts receivable                                                                                 |  |                          |            |   |                            |   | 80,000      |  
|Interest receivable                                                                                 |  |                          | 842,035     |   |                            |   | 303,484     |  
|Prepaid assets                                                                                      |  |                          | 403,334     |   |                            |   | 491,602     |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Total assets                                                                                        |  | $                        | 245,728,022 |   |                            | $ | 244,552,003 |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Liabilities and stockholders equity (net assets):                                                  |  |                          |             |   |                            |   |             |  
|                                                                                                    |  |                         
|Liabilities:                                                                                        |  |                          |             |   |                            |   |             |  
|Accounts payable                                                                                    |  | $                        | 241,832     |   |                            | $ | 213,173     |  
|Management fees payable                                                                             |  |                          | 300,000     |   |                            |   | 300,000     |  
|Dividends payable                                                                                   |  |                          | 2,175,013   |   |                            |   |            |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Total liabilities                                                                                   |  |                          | 2,716,845   |   |                            |   | 513,173     |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Commitments and contingencies (note 8)                                                              |  |                          |             |   |                            |   |             |  
|                                                                                                    |  |                         
|Stockholders equity (net assets)                                                                   |  |                          |             |   |                            |   |             |  
|Common stock, $.001 par value, 250,000,000 shares authorized; 17,400,100 issued and outstanding     |  |                          | 17,400      |   |                            |   | 17,400      |  
|Paid-in capital in excess of par                                                                    |  |                          | 244,313,252 |   |                            |   | 244,320,858 |  
|Undistributed net investment loss                                                                   |  |                          |            |   |                            |   | (590,217    | )
|Distributions in excess of net investment income                                                    |  |                          | (367,394    | ) |                            |   |            |  
|Undistributed realized capital gain                                                                 |  |                          | 143,570     |   |                            |   |            |  
|Net unrealized appreciation (depreciation) of portfolio securities                                  |  |                          | (1,095,651  | ) |                            |   | 290,789     |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Total stockholders equity (net assets)                                                             |  |                          | 243,011,177 |   |                            |   | 244,038,830 |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Total liabilities and stockholders equity (net assets)                                             |  | $                        | 245,728,022 |   |                            | $ | 244,552,003 |  
|                                                                                                    |  |                          |             |   |                            |   |             |  
|Net assets per share                                                                                |  | $                        | 13.96       |   |                            | $ | 14.03       |  
|                                                                                                    |  |                          |             |   |                            |   |             |  



(See accompanying
notes to financial statements)



2



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NGP CAPITAL RESOURCES COMPANY

STATEMENT OF OPERATIONS



|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|-------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | - | ------------------------------------------------ | - | ---------- | -
|                                                                                             |  | For the Three Monthsended June 30, 2005(unaudited) |           |   | For the Six Monthsended June 30, 2005(unaudited) |  
|Investment income                                                                            |  |                                                    |           |   |                                                  |   |            |  
|Interest income                                                                              |  | $                                                  | 3,666,009 |   |                                                  | $ | 7,844,765  |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Total investment income                                                                      |  |                                                    | 3,666,009 |   |                                                  |   | 7,844,765  |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Operating expenses                                                                           |  |                                                    |           |   |                                                  |   |            |  
|Management fees                                                                              |  |                                                    | 900,000   |   |                                                  |   | 1,800,000  |  
|Organization costs                                                                           |  |                                                    |          |   |                                                  |   | 1,111      |  
|General and administrative expenses                                                          |  |                                                    | 836,683   |   |                                                  |   | 1,517,053  |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Total operating expenses                                                                     |  |                                                    | 1,736,683 |   |                                                  |   | 3,318,164  |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Interest expense                                                                             |  |                                                    | 11,250    |   |                                                  |   | 12,237     |  
|Credit facility fee amortization                                                             |  |                                                    | 28,516    |   |                                                  |   | 28,516     |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Net investment income                                                                        |  |                                                    | 1,889,560 |   |                                                  |   | 4,485,848  |  
|                                                                                             |  |                                                   
|Net realized capital gain on portfolio securities                                            |  |                                                    | 140,036   |   |                                                  |   | 143,570    |  
|Net increase in unrealized (depreciation) on portfolio securities                            |  |                                                    | (87,655   | ) |                                                  |   | (1,386,440 | )
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Net increase in stockholders equity (net assets) resulting from operations                  |  | $                                                  | 1,941,941 |   |                                                  | $ | 3,242,978  |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  
|Net increase in stockholders equity (net assets) resulting from operations per common share |  | $                                                  | 0.11      |   |                                                  | $ | 0.18       |  
|                                                                                             |  |                                                    |           |   |                                                  |   |            |  



(See accompanying
notes to financial statements)



3



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NGP CAPITAL RESOURCES COMPANY

STATEMENT OF STOCKHOLDERS EQUITY (NET ASSETS)



|                                                                                       |        |              |        |                                |        |  |                                        |             |   |                                  |   |                                                              |   |  |                                       |         |  |   |            |   |  |   |             |  
|-------------------------------------------------------------------------------------- | ------ | ------------ | ------ | ------------------------------ | ------ |  | -------------------------------------- | ----------- | - | -------------------------------- | - | ------------------------------------------------------------ | - |  | ------------------------------------- | ------- |  | - | ---------- | - |  | - | ----------- | -
|                                                                                       |        | Common Stock |        | Paid-inCapital in Excess ofPar |        |  | AccumulatedNet InvestmentIncome (Loss) |             |   | Net Realized Capital Gain (Loss) |   | UnrealizedAppreciation (Depreciation)of Portfolio Securities |   |  | TotalStockholdersEquity (Net Assets) |        
|                                                                                       |        |              |        |                                |       
|                                                                                       | Shares |              | Amount |                                |        |  |                                        |            
|Balance at December 31, 2004                                                           |        | 17,400,100   |        | $                              | 17,400 |  | $                                      | 244,320,858 |   |                                  | $ | (590,217                                                     | ) |  | $                                     |        |  | $ | 290,789    |   |  | $ | 244,038,830 |  
|                                                                                       |        |              |        |                                |        |  |                                       
|Net increase (decrease) in stockholders equity (net assets) resulting from operations |        |             |        |                                |       |  |                                        |            |   |                                  |   | 4,485,848                                                    |   |  |                                       | 143,570 |  |   | (1,386,440 | ) |  |   | 3,242,978   |  
|                                                                                       |        |              |        |                                |        |  |                                       
|Offering costs                                                                         |        |             |        |                                |       |  |                                        | (7,606      | ) |                                  |   |                                                             |   |  |                                       |        |  |   |           |   |  |   | (7,606      | )
|                                                                                       |        |              |        |                                |        |  |                                       
|Dividends declared                                                                     |        |             |        |                                |       |  |                                        |            |   |                                  |   | (4,263,025                                                   | ) |  |                                       |        |  |   |           |   |  |   | (4,263,025  | )
|                                                                                       |        |              |        |                                |        |  |                                        |             |   |                                  |   |                                                              |   |  |                                       |         |  |   |            |   |  |   |             |  
|Balance at June 30, 2005                                                               |        | 17,400,100   |        | $                              | 17,400 |  | $                                      | 244,313,252 |   |                                  | $ | (367,394                                                     | ) |  | $                                     | 143,570 |  | $ | (1,095,651 | ) |  | $ | 243,011,177 |  
|                                                                                       |        |              |        |                                |        |  |                                        |             |   |                                  |   |                                                              |   |  |                                       |         |  |   |            |   |  |   |             |  



(See accompanying
notes to financial statements)



4



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NGP CAPITAL RESOURCES COMPANY

STATEMENT OF CASH FLOWS



|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ------------ | - | ------------------------------------------------- | - | ------------ | -
|                                                                                                                                                          |  | For the Three Months ended June 30, 2005 (unaudited) |              |   | For the Six Months ended June 30, 2005(unaudited) |  
|Cash flows from operating activities                                                                                                                      |  |                                                      |              |   |                                                   |   |              |  
|                                                                                                                                                          |  |                                                     
|Net increase (decrease) in stockholders equity (net assets) resulting from operations                                                                    |  | $                                                    | 1,941,941    |   |                                                   | $ | 3,242,978    |  
|Adjustments to reconcile net increase (decrease) in stockholders equity (net assets) resulting from operations to net cash used in
operating activities: |  |                                                      |              |   |                                                   |   |              |  
|(Increase) decrease in accounts receivable                                                                                                                |  |                                                      |             |   |                                                   |   | 80,000       |  
|(Increase) decrease in interest receivable                                                                                                                |  |                                                      | 100,273      |   |                                                   |   | (538,551     | )
|(Increase) decrease in prepaid assets                                                                                                                     |  |                                                      | (54,431      | ) |                                                   |   | 88,269       |  
|Increase (decrease) in accounts payable                                                                                                                   |  |                                                      | 83,686       |   |                                                   |   | 28,658       |  
|Net amortization of premiums, discounts and fees                                                                                                          |  |                                                      | (24,557      | ) |                                                   |   | (265,937     | )
|Increase (decrease) in other liabilities                                                                                                                  |  |                                                      | (100,000     | ) |                                                   |   |             |  
|Increase in dividends payable                                                                                                                             |  |                                                      | 87,001       |   |                                                   |   | 2,175,013    |  
|(Increase) decrease in unrealized appreciation on portfolio securities                                                                                    |  |                                                      | 87,655       |   |                                                   |   | 1,386,440    |  
|Purchase of investments in portfolio securities                                                                                                           |  |                                                      | (10,663,631  | ) |                                                   |   | (10,663,631  | )
|Redemption of investments in portfolio securities                                                                                                         |  |                                                      | 71,805       |   |                                                   |   | 10,871,805   |  
|Sale of investments in agency and auction rate securities                                                                                                 |  |                                                      | 100,000      |   |                                                   |   | 41,301,002   |  
|Purchase of investments in high grade corporate notes                                                                                                     |  |                                                      |             |   |                                                   |   | (51,167,818  | )
|Sale of investments in high grade corporate notes                                                                                                         |  |                                                      | 10,259,960   |   |                                                   |   | 10,259,960   |  
|Purchase of investments in U.S. treasury bills                                                                                                            |  |                                                      | (124,927,222 | ) |                                                   |   | (253,492,471 | )
|Sale of investments in U.S. treasury bills                                                                                                                |  |                                                      | 128,565,249  |   |                                                   |   | 128,565,249  |  
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|Net cash provided by (used in) operating activities                                                                                                       |  |                                                      | 5,527,729    |   |                                                   |   | (118,129,034 | )
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|Cash flows from financing activities                                                                                                                      |  |                                                      |              |   |                                                   |   |              |  
|                                                                                                                                                          |  |                                                     
|Net proceeds from the issuance of common stock                                                                                                            |  |                                                      |             |   |                                                   |   |             |  
|Offering costs from the issuance of common stock                                                                                                          |  |                                                      |             |   |                                                   |   | (7,606       | )
|Dividends declared                                                                                                                                        |  |                                                      | (2,175,013   | ) |                                                   |   | (4,263,025   | )
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|Net cash provided by financing activities                                                                                                                 |  |                                                      | (2,175,013   | ) |                                                   |   | (4,270,631   | )
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|Net increase (decrease) in cash and cash equivalents                                                                                                      |  |                                                      | 3,352,716    |   |                                                   |   | (122,399,665 | )
|Cash and cash equivalents, beginning of the period                                                                                                        |  |                                                      | 10,562,021   |   |                                                   |   | 136,314,402  |  
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  
|Cash and cash equivalents, end of period                                                                                                                  |  | $                                                    | 13,914,737   |   |                                                   | $ | 13,914,737   |  
|                                                                                                                                                          |  |                                                      |              |   |                                                   |   |              |  



(See accompanying
notes to financial statements)



5



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NGP CAPITAL RESOURCES COMPANY

SCHEDULE OF INVESTMENTS

June 30, 2005



|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|----------------------------------------------------------------- |  | -------------------------- | ----------- | --------------------------------------------------------------------- | - | ----------- | ------------ | ---- | - | -------------- |  | - | ------------ | 
|Portfolio Company (1)                                             |  | Energy Industry Segment    |             | Investment (2)                                                        |   | Principal   |              | Cost |   | Fair Value (3) | 
|Crescent Resources, LLC                                           |  | Production and Development |             | Senior Subordinated- Secured Term Loan (LIBOR + 9.5%, due 12/20/2008) |   | $           | 48,250,000   |      | $ | 47,336,402     |  | $ | 47,336,402   | 
|                                                                  |  |                            |             |                                                                       |  
|Venoco Inc.                                                       |  | Production and Development |             | Senior Notes (8.75%, due 12/15/2011)                                  |   |             | 8,000,000    |      |   | 7,951,848      |  |   | 7,800,000    | 
|                                                                  |  |                            |             |                                                                       |  
|Venoco Inc.                                                       |  | Production and Development |             | Senior Notes (8.75%, due 12/15/2011)                                  |   |             | 4,000,000    |      |   | 3,920,394      |  |   | 3,900,000    | 
|                                                                  |  |                            |             |                                                                       |  
|TierraMar Energy LLC                                              |  | Production and Development |             | Senior Secured Term Loan (LIBOR + 6%, due 5/13/2008)                  |   |             | 3,377,078    |      |   | 3,348,238      |  |   | 3,348,238    | 
|                                                                  |  |                            |             | Overriding Royalty Interest (5)(6) Warrants (5)                       |   |             | 20,00010,000 |      |   | 20,00010,000   |  |   | 20,00010,000 | 
|                                                                  |  |                            |             |                                                                       |  
|C-Gas LLC                                                         |  | Production and Development |             | Senior Secured Term Loan (LIBOR + 5.5%, due 4/25/2009)                |   |             | 3,294,740    |      |   | 3,246,654      |  |   | 3,246,654    | 
|                                                                  |  |                            |             | Overriding Royalty Interest (5)(6)                                    |   |             | 50,000       |      |   | 50,000         |  |   | 50,000       | 
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Total targeted investments (26.88% of total investments)          |  | $                          | 65,883,536  |                                                                       | $ | 65,711,294  |             
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|                                                                  |  |                            |             |                                                                       |  
|Issuing Company                                                   |  | Industry Segment           |             | Investment (4)                                                        |   | Principal   |              | Cost |   | Fair Value     | 
|Anadarko Fin Co 7.5% due 2031                                     |  | Energy                     |             | Senior Notes                                                          |   |             | 8,000,000    |      | $ | 10,150,009     |  | $ | 10,100,000   | 
|Devon Fin Corp 7.875% due 2031                                    |  | Energy                     |             | Senior Notes                                                          |   |             | 7,000,000    |      |   | 8,955,092      |  |   | 9,104,900    | 
|Pioneer Nat Res 7.2% due 2028                                     |  | Energy                     |             | Senior Notes                                                          |   |             | 10,000,000   |      |   | 11,732,752     |  |   | 10,747,400   | 
|XTO Energy 5.0% due 2015                                          |  | Energy                     |             | Senior Notes                                                          |   |             | 10,000,000   |      |   | 10,014,956     |  |   | 9,977,100    | 
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Total investment grade senior notes (16.33% of total investments) |  | $                          | 40,852,809  |                                                                       | $ | 39,929,400  |             
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|                                                                  |  |                            |             |                                                                       |  
|Issuing Company                                                   |  | Industry Segment           |             | Investment                                                            |   | Principal   |              | Cost |   | Fair Value     | 
|US Treasury Bills                                                 |  | Government                 |             | US Treasury Bills                                                     |   |             | 25,000,000   |      | $ | 24,985,444     |  | $ | 24,985,444   | 
|US Treasury Bills                                                 |  | Government                 |             | US Treasury Bills                                                     |   |             | 50,000,000   |      |   | 49,970,889     |  |   | 49,970,889   | 
|US Treasury Bills                                                 |  | Government                 |             | US Treasury Bills                                                     |   |             | 50,000,000   |      |   | 49,970,889     |  |   | 49,970,889   | 
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Total government securities (51.1% of total investments)          |  | $                          | 124,927,222 |                                                                       | $ | 124,927,222 |             
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Total cash (5.69% of total investments)                           |  | $                          | 13,914,737  |                                                                       | $ | 13,914,737  |             
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Total investments, cash and cash equivalents                      |  | $                          | 245,578,304 |                                                                       | $ | 244,482,653 |             
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Other liabilities in excess of assets                             |  |                            |             |                                                                       | $ | (1,471,476  | )           
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 
|Net assets                                                        |  |                            |             |                                                                       |   |             |              |      |   |                |  | $ | 243,011,177  | 
|                                                                  |  |                            |             |                                                                       |   |             |              |      |   |                |  |   |              | 

---

|(1) | None of our portfolio companies are controlled by or affiliated with us as defined by the Investment Company Act of 1940.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(2) | Percentage represents interest rates in effect at June 30, 2005, and due date represents the contractual maturity date.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(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) | These are currently non-income producing securities.
|--- | ----------------------------------------------------

|(6) | These securities are subject to restrictions as to their sale.
|--- | --------------------------------------------------------------



(See accompanying notes to financial statements)



6



---

NGP CAPITAL RESOURCES COMPANY

FINANCIAL HIGHLIGHTS



|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|----------------------------------------------------------------------- |  | -------------------------------------------------- | ------- | -- | ------------------------------------------------ | - | ------- | --
|                                                                        |  | For the Three Monthsended June 30, 2005(unaudited) |         |    | For the Six Monthsended June 30, 2005(unaudited) |  
|Per Share Data                                                          |  |                                                    |         |    |                                                  |   |         |   
|                                                                        |  |                                                   
|Net asset value, beginning of period                                    |  | $                                                  | 13.98   |    |                                                  | $ | 14.03   |   
|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|Net investment income                                                   |  |                                                    | 0.11    |    |                                                  |   | 0.26    |   
|Net realized and unrealized gain (loss) on portfolio securities         |  |                                                    |        |    |                                                  |   | (0.08   | ) 
|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|Net increase in net assets resulting from operations                    |  |                                                    | 0.11    |    |                                                  |   | 0.18    |   
|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|Dividends declared                                                      |  |                                                    | (0.13   | )  |                                                  |   | (0.25   | ) 
|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|Net asset value, end of period                                          |  | $                                                  | 13.96   |    |                                                  | $ | 13.96   |   
|                                                                        |  |                                                    |         |    |                                                  |   |         |   
|Market value, beginning of period                                       |  | $                                                  | 16.08   |    |                                                  | $ | 15.37   |   
|Market value, end of period                                             |  | $                                                  | 14.93   |    |                                                  | $ | 14.93   |   
|Total return (1)                                                        |  |                                                    | (6.40   | %) |                                                  |   | (1.28   | %)
|                                                                        |  |                                                   
|Ratios and Supplemental Data ($ and shares in thousands)                |  |                                                    |         |    |                                                  |   |         |   
|                                                                        |  |                                                   
|Net assets, end of period                                               |  | $                                                  | 243,011 |    |                                                  | $ | 243,011 |   
|Average net assets                                                      |  |                                                    | 243,128 |    |                                                  |   | 243,525 |   
|Common shares outstanding at end of period                              |  |                                                    | 17,400  |    |                                                  |   | 17,400  |   
|General and administrative expenses/average net assets                  |  |                                                    | 0.34    | %  |                                                  |   | 0.62    | % 
|Total operating expenses/average net assets                             |  |                                                    | 0.71    | %  |                                                  |   | 1.36    | % 
|Net investment income/average net assets                                |  |                                                    | 0.78    | %  |                                                  |   | 1.84    | % 
|Net increase in net assets resulting from operations/average net assets |  |                                                    | 0.80    | %  |                                                  |   | 1.33    | % 
|Portfolio turnover rate                                                 |  |                                                    | 0.03    | %  |                                                  |   | 4.46    | % 

---

|(1) | Total return calculation assumes reinvestment of dividends.
|--- | -----------------------------------------------------------



(See accompanying notes to financial statements)



7



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NGP CAPITAL RESOURCES COMPANY

NOTES TO FINANCIAL STATEMENTS

June 30, 2005

(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 treated as a business development company under the Investment Company Act of
1940, as amended (the 1940 Act). In addition, the Company intends to qualify for tax purposes as a regulated investment company, (RIC), under the Internal Revenue Code of 1986, as amended (the Code) for 2005 and
later years. The Company was created to invest primarily in small and mid-size energy companies, which are generally defined as companies that have net asset values or annual revenues of less than $500 million. 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, L.P. (the Manager), a Delaware limited partnership owned by Natural Gas Partners, LLC and NGP Administration LLC (the Administrator), the Companys administrator.



Note 2: Significant Accounting Policies



The financial statements have been prepared in accordance
with U.S. Generally Accepted Accounting Principles (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with GAAP have been omitted from the unaudited interim financial statements herein. The unaudited financial statements in this quarterly report have been prepared consistent with the accounting policies
reflected in the Companys annual financial statements included in the Companys Form 10-K for the year ended December 31, 2004 filed with the SEC and should be read in conjunction therewith. In managements opinion, the unaudited
financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such financial statements. Interim results are not necessarily indicative of results for a full year. The
following is a summary of the significant accounting policies followed by the Company in the preparation of its financial statements:



Use of Estimates



The financial statements have been prepared in accordance with GAAP that require management to make estimates and assumptions that affect
the amounts reported in the financial statements and the accompanying notes. 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 as of June 30, 2005.



Prepaid Assets



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



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



Each quarter the Manager prepares and presents to the valuation committee of the board of directors the portfolio investment valuations using the most recent portfolio company financial statements and forecasts. The valuation committee
consults with the officers or employees of the Manager who are managing the portfolio to obtain further updates on the performance of specific investments as well as the underlying assets and operations of portfolio companies, including information
such as industry trends, new product development, and other operational issues. The valuations are reviewed by the valuation committee of the board of directors and presented to the overall board of directors, which reviews and approves the
portfolio investment valuations in accordance with the following valuation policy.



Investments are carried at fair value, as determined in good faith under the direction of the board of directors. Securities that are publicly traded are valued at the closing price on the
valuation date. For debt and equity securities of



8



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companies that are not publicly traded, or for which there are various degrees of trading restrictions,
the Manager prepares a valuation analysis, which for equity securities, uses traditional valuation methodologies to estimate the enterprise value of the portfolio company issuing the securities and, in the case of debt securities, consists of
traditional valuation methodologies to estimate the value of the assets of the portfolio company. The methodologies for determining asset valuations include estimates based on: the liquidation or collateral value of the 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 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 the portfolio company and the asset valuation
methodologies described above. The Manager weighs some or all of the above valuation methods to determine the estimated enterprise value of the company. In valuing convertible debt or equity securities, the Manager values the Companys equity
investments based on the Companys pro rata share of the residual equity value available after deducting all outstanding debt from the estimated enterprise value. The Manager values non-convertible debt securities at amortized cost (historical
cost adjusted for original issue discount, or OID, and market premium or discount) to the extent that the estimated value of the assets of the portfolio company exceeds the outstanding debt of the portfolio company. If the estimated asset value is
less than the outstanding debt of the company, the Manager reduces the value of the Companys debt investment beginning with the junior most debt such that the asset value less the value of the outstanding debt is zero. If there is sufficient
asset value to cover the face amount of a debt security that has been discounted due to the detachable equity warrants received with that security, that detachable equity warrant will be initially valued such that the sum of the discounted debt
security and the detachable equity warrant equal the face value of the debt security. Thereafter, the Manager will value such assets at fair value using a number of the valuation methodologies described above. It is possible that market interest
rates could fall to a degree that the estimated fair value of fixed rate loans could increase to an amount greater than amortized cost. In such instances where the Manager determines that the effect of such changes in market interest rates results
in a measurable change in the market for private, structured loans, the fair value of such loans in the Companys portfolio will be increased accordingly.



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.



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. Premium and discount 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. 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. Collectibility 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
companys assets. For investments with payment-in-kind, or PIK, interest, the Manager bases income accruals on the valuation of the PIK notes or securities received from the borrower. If the portfolio companys asset valuation indicates a
value that is not sufficient to cover the contractual interest due on the PIK notes, management will not accrue interest income on the notes.



A change in a portfolio companys operating performance and cash flows can impact a portfolio companys ability to service our
debt and therefore could impact our interest income recognition.



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 cost basis of the
investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the year, net of recoveries. Net change in unrealized appreciation or depreciation reflects the change in
portfolio investment values during the reporting period.



9



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Fee Income Recognition



Fees primarily include financial advisory, transaction structuring, loan financing, commitment and
prepayment fees. Financial advisory fees represent amounts received for providing advice and analysis to companies and are recognized as earned when performed provided collection is probable. Transaction structuring and loan financing 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 fees are recognized as they are received.



Dividends



Dividends to stockholders are recorded on the ex-dividend
date. The Company intends to qualify for tax purposes as a regulated investment company, (RIC), under the Internal Revenue Code of 1986, as amended (the Code) for 2005 and later years. In order to maintain the Companys
status as a RIC, the Company is required to distribute at least 90% of its investment company taxable income. In addition, the Company must distribute at least 98% of its taxable income (both ordinary income and net capital gains) to avoid excise
tax. The Company intends to make distributions to stockholders on a quarterly basis of substantially all net operating taxable income. The Company also intends to make distributions of net realized capital gains, if any, at least annually. The
amount to be paid out as a dividend is determined by the 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.



For the period ending December 31, 2004, the
Company was treated as a C corporation and had no taxable income and therefore did not declare a dividend for that period. On March 18, 2005, the Company declared a dividend of $0.12 per common share, which was paid in cash on April 15,
2005 to stockholders of record on March 31, 2005. On June 15, 2005, the Company declared a dividend of $0.125 per common share, which was paid on July 15, 2005 to stockholders of record on June 30, 2005. The Company has established an opt
out dividend reinvestment plan for its common stockholders. As a result, if the Company declares a cash dividend in future periods, a stockholders cash dividend will be automatically reinvested in additional shares of the Companys
common stock unless the stockholder specifically opts out of the dividend reinvestment plan and elects to receive cash dividends. For the June 2005 dividend, holders of 1,215,870 shares participated in the dividend reinvestment plan. As
a result, of the $2,175,013 total amount distributed, $151,984 was used by the dividend reinvestment plan agent to acquire shares in the open market for credit to the accounts of the plan participants who so elected.



The Company may not be able to achieve operating results that
will allow it to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, the Company may be limited in its ability to make distributions due to the asset coverage test for borrowings,
when applicable to it as a business development company under the 1940 Act and due to provisions in the Companys credit facilities. If the Company does not distribute a certain percentage of its taxable income annually, it will suffer adverse
tax consequences, including possible loss of its status as a regulated investment company. The Company cannot assure stockholders that they will receive any distributions or distributions at a particular level.



Note 3: Credit Facility



On May 17, 2005, the Company entered into a Revolving Credit Agreement (the Credit Agreement),
among the Company, the lenders party thereto and SunTrust Bank, as administrative agent for the lenders.



Under the Credit Agreement, the lenders agreed to extend credit to the Company in an initial aggregate principal or face amount not
exceeding $60,000,000 at any one time outstanding. The Credit Agreement is a 364-day revolving credit facility (with a stated maturity date of May 15, 2006) and is secured by substantially all of the Companys assets. The credit facility is
guaranteed by certain of the Companys subsidiaries. Initially, the credit facility is collateralized by and limited by the amount of cash and cash equivalent collateral. However, at such time as the Companys consolidated ratio of net
asset value to total indebtedness is at least 3.50:1.00, such cash collateral requirement may be released at the discretion of the administrative agent. During the time the credit facility is secured by cash collateral, pricing will be set at 25
basis points over LIBOR, and, after release of the cash collateral, pricing will be set at a spread of 125 to 250 basis points over LIBOR based on the ratio of total indebtedness to net asset value. The Credit Agreement contains affirmative and
reporting covenants. The Credit Agreement also contains certain financial ratio and restrictive covenants, including: (a) maintaining a ratio of net asset value to total indebtedness (excluding hedging liabilities) of not less than 2.25:1.0, (b)
maintaining a ratio of



10



---

net asset value to total indebtedness (including hedging liabilities) of not less than 2.0:1.0, (c)
maintaining a ratio of net income plus interest, taxes, depreciation and amortization expenses (EBITDA) to interest expense of not less than 3.0:1.0, (d) if the maturity of the credit facility is extended, maintaining a ratio of total
indebtedness to EBITDA to be determined, (e) limitations on additional indebtedness, (f) limitations on liens, (g) limitations on mergers and other fundamental changes, (h) limitations on dividends during events of default and material events of
default, (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 and (m) limitations on speculative hedging transactions.



The Company has not yet borrowed any amounts under the Credit Agreement. The Credit Agreement will be used to supplement the
Companys equity capital to make additional portfolio investments.



Note 4: Issuance of Common Stock



On August 6, 2004, the Company, in its initial capitalization transaction, sold 100 shares 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.



Note 5: Investment Management



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, beginning on December 1, 2005 and thereafter, the base management fee will be calculated
quarterly as 0.45% of total assets of the Company. Prior to December 1, 2005, the quarterly base management fee is equal to the lesser of $900,000 or 0.375% of the Companys total assets. For services provided under the investment advisory
agreement from November 9, 2004 through and including November 30, 2005, the base management fee is payable monthly in arrears. For services provided under the investment advisory agreement after that time, the base management fee will be payable
quarterly in arrears. Until June 30, 2005 (completion of two full fiscal quarters after the closing of the offering), the total assets upon which the quarterly base management fee will be calculated will be equal to the net proceeds of the offering.
Thereafter, the base management fee will be calculated based on the average value of the Companys total assets at the end of the two most recently completed fiscal quarters. The base management fee for the partial month of November 2004 was
pro rated.



The $300,000 management fee payable
as of June 30, 2005, is due to the Manager as the base management fee for the month of June 2005.



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).
Net investment income includes, in the case of investments with a deferred interest feature (such as premium and 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.



11



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The Manager has agreed that payment of the investment income related portion of the
incentive fee will not commence until December 1, 2005. The incentive fees due in any fiscal quarter thereafter will be calculated as follows:



| |  |  | no incentive fee in any fiscal quarter in which our 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



These calculations will be appropriately pro rated for any
period of less than three months.



The second
part of the incentive fee (the Capital Gains Fee) will be 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 will equal (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 this 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.



Realized capital gains on a security will be calculated as the excess of the net amount realized from the sale or other disposition of
such security over the original cost for the security. Realized capital losses on a security will be calculated as the amount by which the net amount realized from the sale or other disposition of such security is less than the original cost of such
security. Unrealized capital depreciation on a security will be 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 will be determined by
the Company in accordance with GAAP and the 1940 Act.



The Manager has agreed that, beginning on November 9, 2006, and 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 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 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 and performs, or oversees the performance of, 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 Manager 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. Payments under the administration agreement are equal to amounts based upon the allocable portion of the Administrators costs and expenses in performing its obligations under the administration agreement. The
Administrator bills the Company for charges under the administration agreement monthly in arrears.



Of the $241,832 in accounts payable as of June 30, 2005, $98,560 is due to the Administrator for expenses incurred on the Companys behalf for the month of June 2005.



Note 6: Organizational Expenses and Offering Costs



A portion of the net proceeds of the offering were used for
organizational expenses and offering costs of approximately $705,000 and $2,308,000, respectively, recognized in fiscal year 2004. There were no organizational expenses or offering costs incurred for the quarter ended June 30, 2005. For the six
months ended June 30, 2005, the Company recognized organizational expenses and offering costs of approximately $1,100 and $7,600, respectively. Organizational expenses were expensed as incurred. Offering costs were charged to paid-in capital in
excess of par.



Note 7: Federal Income Taxes



The Company intends to qualify for tax purposes as a
regulated investment company, (RIC), under the Internal Revenue Code of 1986, as amended (the Code) for 2005 and later years. As a RIC, the Company generally will not be subject to federal income tax on the portion of its
taxable income and gains distributed to stockholders. To qualify as a RIC, the Company is required, among other things, to distribute to its stockholders at least 90% of taxable income, as defined by



12



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the Code, and to meet certain asset diversification requirements. In 2004, the Company did not meet the
RIC asset diversification requirements and was treated as a C corporation for tax purposes. For the three and six months ending June 30, 2005, the Company met all RIC asset diversification requirements and thus did not incur any federal
income tax liability for the period.



Differences between the effective income tax rate and the statutory Federal tax rate were as follows:



|                                                          |  |                                                   |  |                                                                            |   
|--------------------------------------------------------- |  | ------------------------------------------------- |  | -------------------------------------------------------------------------- | --
|                                                          |  | For the Six Monthsended June 30, 2005 (unaudited) |  | Period August 6, 2004(commencement of operations)through December 31, 2004 |   
|Statutory federal rate on loss from continuing operations |  |                                                  |  | 34                                                                         | % 
|Effect of net deferred tax assets                         |  |                                                  |  | (34                                                                        | )%
|                                                          |  |                                                   |  |                                                                            |   
|Effective tax rate on earnings from continuing operations |  |                                                  |  | 0                                                                          | % 
|                                                          |  |                                                   |  |                                                                            |   



The
tax effects of temporary differences that give rise to the deferred tax assets and liabilities are as follows:



|                                     |  |                                                    |  |                                                                              |          |  
|------------------------------------ |  | -------------------------------------------------- |  | ---------------------------------------------------------------------------- | -------- | -
|                                     |  | For the Six Months ended June 30, 2005 (unaudited) |  | Period August 6, 2004 (commencement of operations) through December 31, 2004 |         
|Deferred tax assets:                 |  |                                                    |  |                                                                              |          |  
|Net operating loss carryforwards     |  |                                                   |  | $                                                                            | 142,471  |  
|Net organization costs               |  |                                                   |  |                                                                              | 225,347  |  
|                                     |  |                                                    |  |                                                                              |          |  
|Total gross deferred tax assets      |  |                                                   |  |                                                                              | 367,818  |  
|Less valuation allowance             |  |                                                   |  |                                                                              | (101,805 | )
|                                     |  |                                                    |  |                                                                              |          |  
|Net deferred tax assets              |  |                                                   |  |                                                                              | 266,013  |  
|                                     |  |                                                    |  |                                                                              |          |  
|Deferred tax liabilities:            |  |                                                    |  |                                                                              |          |  
|Unrealized gains, net                |  |                                                   |  |                                                                              | (98,868  | )
|Prepaid expenses                     |  |                                                   |  |                                                                              | (167,145 | )
|                                     |  |                                                    |  |                                                                              |          |  
|Total gross deferred tax liabilities |  |                                                   |  |                                                                              | (266,013 | )
|                                     |  |                                                    |  |                                                                              |          |  
|Net deferred tax assets              |  |                                                   |  | $                                                                            | 0        |  
|                                     |  |                                                    |  |                                                                              |          |  



Note 8: Commitments and
Contingencies



As of June 30, 2005, the
Company had commitments to fund loan facilities to 4 portfolio companies totaling $71 million, on which $55 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 investment advisory agreement provides 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 and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it 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 services under the investment advisory agreement or otherwise as the Companys investment adviser.
The investment advisory agreement also provides that the Manager and its affiliates (including the Administrator) 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 in connection with the performance of any of its duties or obligations under the investment advisory agreement or otherwise as an investment adviser 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. The administration agreement provides that, absent willful
misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Administrator and its officers, managers, agents, employees, controlling persons, members and any other
person or entity affiliated with it 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 Administrators services under the administration agreement or otherwise as the Companys administrator. The administration agreement also provides that the Administrator and its affiliates (including the Manager) 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



13



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Administrator in connection with the performance of any of its duties or obligations under the
administration agreement or otherwise as the Companys administrator. In the normal course of business, the Company enters into a variety of undertakings containing a variety of representations that may expose the Company to some risk of loss.
The amount of future loss, if any arising from such undertakings, while not quantifiable, is not expected to be significant.



Note 9: Reclassifications



Certain reclassifications have been made to the 2004 financial statements in order for them to conform with the 2005 presentation.



Note 10: Subsequent Events



On August 5, 2005, the Company closed a $25 million senior
secured bridge loan facility with Millenium Offshore Group, Inc., a Texas based developer and producer of offshore Gulf of Mexico oil and gas properties. The facility is structured as a partially amortizing bridge loan with a 180 day term and an
interest rate of 12%. The Company also received an overriding royalty interest in the borrowers properties, conditioned on the timing of repayment of the facility. The facility is secured by substantially all of the borrowers properties.



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



Forward-Looking Statements



Certain statements in this report that relate to
estimates or expectations of our future performance or financial condition may constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and
uncertainties, including, but not limited to, statements as to:



| |  |  | our future operating results;
| | - |  | -----------------------------



| |  |  | our business prospects and the prospects of our portfolio companies;
| | - |  | --------------------------------------------------------------------



| |  |  | the impact of investments that we expect to make;
| | - |  | -------------------------------------------------



| |  |  | the dependence of our future success on the general economy and its impact on the industries in which we invest;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the ability of our portfolio companies to achieve their objectives;
| | - |  | -------------------------------------------------------------------



| |  |  | our expected financings and investments;
| | - |  | ----------------------------------------



| |  |  | future changes in laws and regulations;
| | - |  | ---------------------------------------



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



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



| |  |  | the ability of our manager to locate suitable investments for us and to monitor and administer our investments.
| | - |  | ---------------------------------------------------------------------------------------------------------------



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



Overview



We are a financial services company, which commenced operations on August 6, 2004, created to invest
primarily in debt securities of small and mid-size energy companies. On November 9, 2004, we completed our initial public offering and became an externally managed, non-diversified, closed-end investment company and elected to be treated as a
business development company under the 1940 Act. As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in qualifying assets, including
securities of private 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 tax purposes we intend to operate so as to be
treated as a RIC under the Code for 2005 and later years. 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.



14



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Our investment objective is to generate both current income and capital appreciation
primarily through debt investments with certain equity components. A key focus area for our targeted investments in the energy industry is domestic exploration and production, or E&P, businesses and midstream businesses that gather, process and
transport oil and gas. We also evaluate investment opportunities outside of the oil and gas business, such as coal businesses, and businesses engaged in the downstream sector, including power and electricity investment opportunities. Our investments
will generally range in size from $10 million to $50 million, although a few investments may be substantially in excess of this range. Our targeted investments primarily consist of debt instruments, including senior and subordinated loans combined
in one facility with an equity component, subordinated loans and subordinated loans with equity components and redeemable preferred stock or similar securities.



To maintain our status as a business development company, we must not acquire any assets other than qualifying assets
specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). If we invest in an issuer that, at the time of the investment, has outstanding
securities as to which a broker or dealer may extend or maintain margin credit or marginable securities, these acquired assets cannot normally be treated as qualifying assets. This results from the definition of eligible portfolio
company under the 1940 Act, which in part looks to whether a company has outstanding securities that are eligible for margin credit. Amendments promulgated in 1998 by the board of Governors of the Federal Reserve System to Regulation T under
the Securities Exchange Act of 1934, as amended (the Exchange Act), expanded the definition of marginable security to include any non-equity security. These amendments have raised questions as to whether a private company that has
outstanding debt securities would qualify as an eligible portfolio company. We have noted that under applicable self-regulatory organization rules that govern the ability of brokers and dealers to extend margin credit, many non-equity securities
issued by private companies may not be effectively marginable. In November 2004, the SEC issued a proposed rule to eliminate the marginable security concept and to define eligible portfolio companies generally as issuers that do not have a class of
securities listed on an exchange or quoted on the Nasdaq Stock Market. If adopted, this rule would eliminate the current uncertainty as to the definition of eligible portfolio company. While the SEC has proposed the foregoing rule, which will
correct the current uncertainty, there is no assurance that the rule will be adopted as proposed or at all. Legislation has also been filed in Congress that would correct this uncertainty. There is no assurance that such legislation will be passed.



We continue to monitor this issue closely and
intend to adjust our investment focus as needed to comply with and/or take advantage of any future administrative position, judicial decision or legislative action.



Portfolio and Investment Activity



During the three months ended June 30, 2005, we added three companies to our portfolio, creating senior secured multiple advance term loan
facilities totaling $65 million, with currently committed and available amounts totaling $23 million. As of the end of the quarter, there was a total of $6.7 million advanced under the facilities. We extended a $20 million senior secured term loan
to TierraMar Energy, LLC for the development of oil and gas properties in south Texas, with an initial committed funding limit of $4 million. On June 30, 2005, $3.4 million was drawn on the facility. We extended a $30 million senior secured term
loan to C-Gas, LLC for the development of oil and gas properties in the Rocky Mountain region, with an initial committed funding limit of $17.6 million. On June 30, 2005, $3.3 million was drawn on the facility. We also extended a $15 million senior
secured term loan to Atchee CBM, LLC for the development of oil and gas properties in the Rocky Mountain region, with an initial committed funding limit of $1.4 million. There were no borrowings on this facility as of June 30, 2005. We expect these
companies to continue to draw on the facilities as their development of oil and gas properties progresses. Further, we acquired an additional $4 million of the senior notes of Venoco, Inc.



Since commencement of operations in the fall of 2004, we have
extended credit facilities to or made investments in debt securities of portfolio companies totaling $136 million, and have committed and made available for funding a total of $94 million under these facilities. Of the $94 million, $83 million
remained committed and available and $66 million was outstanding as of June 30, 2005, following the March 2005 repayment of Crescent Resources $10.8 million Senior Subordinated Secured Bridge loan. During the second quarter, we sold $10
million of our portfolio of investment grade senior notes issued by independent exploration and production companies, realizing a positive return.



As of June 30, 2005 our portfolio was invested as follows: 19.4% in senior subordinated secured notes, 2.7% in senior secured
multiple-advance term loans, 4.8% in corporate senior notes, 16.3% in investment grade senior notes, 51.1% in U.S. Treasury Bills, and 5.7% in cash and cash equivalents. At June 30, 2005, the weighted average yield of our targeted investments was
10.2%. The weighted average yield of our investment grade senior notes was 5.5%. The weighted average



15



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yield of our U.S. Treasury Bills and cash equivalents was 2.7%. Computed yields use interest rates as of
the balance sheet date and include amortization of loan origination fees, original issue discount and market premium or discount, weighted by their respective costs when averaged.



Results of Operations



We were incorporated on July 15, 2004 and commenced operations in August 2004. Therefore, there is no comparable period from the prior
year with which to compare the results of operations for the three and six month periods ended June 30, 2005.



Investment Income



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 targeted 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 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.



Interest income for the quarter ended June 30, 2005 was $3.7 million with $2.0 million attributable to targeted investments in portfolio
companies and $1.7 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes. This compares to interest income for the quarter ended March 31, 2005 of $4.2 million with $2.8
million attributable to targeted investments in portfolio companies and $1.4 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes.



Interest income for the six months ended June 30, 2005 was
$7.8 million with $4.8 million attributable to targeted investments in portfolio companies and $3.0 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes.



Operating Expenses



For the quarter ended June 30, 2005, operating expenses were
$1.7 million compared to $1.6 million for the quarter ended March 31, 2005. This amount consisted of investment advisory and management fees of $0.9 million and insurance expenses, administrative services fees, professional fees, directors
fees, organization costs and other general and administrative expenses of $0.8 million. In comparison, those amounts were $0.9 million and $0.7 million, respectively, for the quarter ended March 31, 2005.



For the six months ended June 30, 2005, operating expenses
were $3.3 million. This amount consisted of investment advisory and management fees of $1,800,000 and insurance expenses, administrative services fees, professional fees, directors fees, organization costs and other general and administrative
expenses of $1.5 million.



The operating
expenses for the three and six month periods represented our allocable portion of the total organizational and operating expenses incurred by us, our manager, and our administrator, as determined by our board of directors and representatives of our
manager and our administrator taking into account our start-up nature. As our operations continue to mature, the amount of operating expenses allocated to us under the terms of our investment advisory and administration agreements with our manager
and our administrator could likely increase. Although we would anticipate any increased expenses to be mitigated by increased operating revenues, our net income and dividends in future periods could be reduced by increases in operating expenses.



Net Investment Income



For the quarter ended June 30, 2005, net investment income
was $1.9 million compared to $2.6 million for the quarter ended March 31, 2005. The primary difference was the $0.7 million prepayment premium on Crescent Resources Senior Subordinated Secured Bridge Loan in the first quarter of 2005. For the
six months ended June 30, 2005, net investment income was $4.5 million.



16



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Unrealized Depreciation on Investments



For the quarter ended June 30, 2005, net unrealized
depreciation was ($0.1) million, compared to ($1.3) million for the quarter ended March 31, 2005. The increase was attributable to unrealized depreciation on our portfolio securities of ($0.5) million and unrealized appreciation on our investment
grade senior notes of $0.4 million. For the six months ended June 30, 2005, net unrealized depreciation was ($1.4) million, attributable to unrealized depreciation on our portfolio securities of ($0.5) million and on our investment grade senior
notes of ($0.9) million.



Net Realized Gains



For the quarter ended June 30, 2005,
we realized a capital gain of $140,000 on the sale of $10 million in investment grade senior notes. For the six months ended June 30, 2005, net realized capital gains were $144,000.



Net Increase in Stockholders Equity from Operations



For the quarter ended June 30, 2005,
we had a net increase in stockholders equity (net assets) resulting from operations of $1.9 million, or $0.11 per share, compared to $1.3 million, or $0.07 per share for the quarter ended March 31, 2005. For the six months ended June 30, 2005,
we had a net increase in stockholders equity (net assets) resulting from operations of $3.2 million, or $0.18 per share.



Financial Condition, Liquidity and Capital Resources



During the first six months of this fiscal year, we generated cash from operations, including interest earned on our portfolio securities,
as well as our investments in investment grade senior notes, U.S. government securities and other high-quality debt securities that mature in one year or less. During the six months ended June 30, 2005 we received repayment from Crescent Resources
of its $10.8 million Senior Subordinated Secured Bridge Loan. At June 30, 2005, we had cash and cash equivalents of $13.9 million, investments in U.S. Treasury Bills of $124.9 million and investments in investment grade senior notes of $39.9
million.



Our investments in portfolio
securities at June 30, 2005 totaled $65.7 million. Four of our investments are in the form of credit facilities under which we have commitments to fund a total of $71 million. As of June 30, 2005, the outstanding balances on these facilities totaled
$55 million. We expect to fund our investments in 2005 from the balance of the net proceeds from our IPO and income earned on our portfolio and temporary investments. We also plan to generate additional cash from borrowings under our senior secured
revolving credit facility. In May 2005, we entered into a senior credit facility having an initial term of one year providing for borrowings of up to $60 million. The credit facility is secured by substantially all of our assets. Initially, the
credit facility is collateralized by cash and cash equivalent investments and the interest rate applicable to borrowings is LIBOR plus 25 basis points. Once we are more fully invested, as long as the ratio of net asset value to total indebtedness is
at least 3.5 to 1, the interest rate applicable to borrowings will be LIBOR plus a range of 125 to 250 basis points, depending on the ratio of total debt to net asset value. The credit facility contains covenants and events of default customary for
financings of this type. We have not yet borrowed any amounts under the Credit Agreement. In the future, we may also fund a portion of our investments with issuances of equity or senior debt securities. We may also securitize a portion of our
investments in mezzanine or senior secured loans or other assets. We expect our primary use of funds to be investments in portfolio companies, cash distributions to holders of our common stock and payment of fees and other operating expenses.



Dividends



We intend to be taxed as a regulated investment company
under Subchapter M of the Code for 2005 and beyond. As a RIC, we will be required to distribute annually at least 90% of our investment company taxable income and at least 98% of our capital gain net income to avoid excise tax. We intend to make
distributions to our stockholders on a quarterly basis of substantially all of our net operating income. We also currently 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.



On June 17, 2005, we declared a dividend of $0.125 per common share, which was paid on July 15, 2005 to stockholders of record on June 30, 2005. We have established an opt out
dividend reinvestment plan for our common stockholders. As a result, if we declare a cash dividend in future periods, a stockholders cash dividend will be automatically reinvested in additional shares of our common stock unless the stockholder
specifically opts out of the dividend reinvestment plan and elects to receive cash dividends. For the June 2005 dividend, holders of 1,215,870 shares participated



17



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in the dividend reinvestment plan. As a result, of the $2,175,013 total amount distributed, $151,984 was
used by the dividend reinvestment plan agent to acquire 10,002 shares in the open market for credit to the accounts of the plan participants. On March 18, 2005, we declared a quarterly dividend in the amount of $0.12 per common share for
shareholders of record on March 31, 2005. The dividend was paid in cash on April 15, 2005.



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 business development company 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 regulated investment company. 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
loans. This system is intended to reflect the performance of a portfolio companys business, the collateral coverage of a loan, and other factors considered relevant. As of June 30, 2005, all of our investments in portfolio companies were
performing satisfactorily.



Item 3. Quantitative and Qualitative Disclosures
About Market Risk.



Our business
activities contain elements of risk. We consider the principal market risks to be fluctuations in interest rates and the valuation of our investment portfolio. To date we have not used derivative financial instruments to mitigate either of these
risks, though we may do so in the future. The return on our investments is generally not directly affected by foreign currency fluctuations.



We primarily invest in illiquid debt securities of energy companies. In some cases these investments include additional equity components.
Our investments are generally subject to restrictions on resale and generally have no established trading market. We value substantially all of our investments at fair value as determined in good faith by the board of directors in accordance with
our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a
consistently applied valuation process for the types of investments we make.



Investments are carried at fair value, as determined in good faith by our board of directors. Securities that are publicly traded are valued at the closing price on the valuation date. For debt and equity securities
of companies that are not publicly traded, or for which we have various degrees of trading restrictions, we prepare a valuation analysis, which for equity securities, uses traditional valuation methodologies to estimate the enterprise value of the
portfolio company issuing the securities and, in the case of debt securities, consists of traditional valuation methodologies to estimate the value of the assets of the portfolio company. The methodologies for determining asset valuations include
estimates based on: the liquidation or collateral value of the 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 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 the portfolio company and the asset valuation methodologies described above. We weight some or all of the above valuation methods to determine the estimated enterprise value of the company. In valuing
convertible debt or equity securities, we value our equity investment based on our pro rata share of the residual equity value available after deducting all outstanding debt from the estimated enterprise value. We value non-convertible debt
securities at cost plus amortized original issue discount, or OID, to the extent that the estimated value of the assets of the portfolio company exceeds the outstanding debt of the portfolio company. If the estimated asset value is less than the
outstanding debt of the company, we reduce the value of our debt investment beginning with the junior most debt such that the asset value less the value of the outstanding debt is zero. If there is sufficient asset value to cover the face amount of
a debt security that has been discounted due to the detachable equity warrants received with that security, that detachable equity warrant will be valued such that the sum of the discounted debt security and the detachable equity warrant equal the
face value of the debt security.



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 addition, the illiquidity of our investments may adversely
affect our ability to dispose of debt and equity securities at times when it may be otherwise advantageous for us to liquidate such investments. Alternatively, if we were forced to immediately liquidate some or all of the investments in the
portfolio, the proceeds of such liquidation could be significantly less than the current value of such investments.



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Once we have fully invested the net proceeds from our initial public offering, we intend
to borrow money to make investments. Once we borrow money to make investments, our net investment income will be dependent upon the difference or spread 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. In periods of rising interest rates, our cost of funds would increase, which could reduce our
net investment income.



We anticipate that we
will use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. We have obtained a revolving line of credit as a means to bridge to long-term financing. We expect that our long-term fixed-rate
investments will be financed primarily with long-term fixed-rate debt and equity. Our variable rate investments will generally be financed with variable rate debt and equity. In addition, we may use interest rate risk management techniques in an
effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.



Item 4. Controls and Procedures.



(a) Evaluation of disclosure controls and procedures. Based upon an evaluation undertaken at the end of the second quarter, our
Chief Executive Officer and our Chief Financial Officer determined that our disclosure controls and procedures were not effective as of June 30, 2005, due to the material weakness discussed below relating to our internal control over financial
reporting. Managements determination that our disclosure controls and procedures were not effective as of the end of the second quarter resulted from the fact that, as of the end of the second quarter, the remedial measures discussed below had
not been in place long enough to definitively determine their effectiveness.



Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the Companys Exchange Act reports are recorded, processed, summarized, and
reported within the time periods specified by the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required financial disclosure. Our disclosure controls and procedures include components of our internal control over financial reporting. Managements assessment of the effectiveness
of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control
systems objectives will be met.



The
certifications of our principal executive officer and principal financial officer required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Quarterly Report on Form 10-Q. The disclosures set forth in
this Item 4 contain information concerning the evaluation of our disclosure controls and procedures, internal control over financial reporting and changes in internal control over financial reporting referred to in those certifications. Those
certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.



(b)Changes in internal control over financial reporting. Under The Public Company Accounting Oversight Boards
Auditing Standard No. 2 (Standard No. 2), a material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or detected. During the quarter ended March 31, 2005, management determined that the Company had incorrectly recorded (i) the market price for our common stock at December 31, 2004 as $15.07 as
opposed to $15.37 and (ii) the total return on our common stock for the period then ended as 0.47% as opposed to 2.47%. The incorrect information resulted from a clerical error in inputting the information in our Annual Report on Form 10-K. Such
incorrect information was not timely identified and corrected by other review procedures.



As previously reported in Amendment No. 1 to our Annual Report on Form 10-K/A, we determined that (as of December 31, 2004), under Standard No. 2 and the prior relevant professional auditing
standards, this deficiency constitutes a material weakness in our internal controls over financial reporting. We advised our current independent auditors, who concurred with our determination, and our audit committee of this deficiency
in our internal controls over financial reporting, and the fact that the deficiency constituted a material weakness.



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In the second quarter of 2005, we took the following steps to address this material
weakness and to improve our internal controls over financial reporting:



| |  |  | Added additional personnel to the document and financial statement review process and added additional internal review procedures to be performed by our
personnel to verify the accuracy of the information in our financial statements;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changed the final, pre-filing review process to focus on the printer proof of the final document prepared for electronic filing by EDGAR with the Securities and
Exchange Commission;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changed the procedure for electronic insertion of the financial statements into the final document.
| | - |  | ---------------------------------------------------------------------------------------------------



While we established additional controls to address the material weakness,
there was no change in our internal control over financial reporting that occurred during the second quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our 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 2. Unregistered Sales of Equity Securities and Use of Proceeds.



On November 9, 2004, our Registration Statement (Registration No. 333-118279) was declared effective by the SEC in connection with our
initial 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 trading on November 10, 2004. The initial public
offering did not terminate prior to the sale of all the securities registered. The initial public offering consisted solely of one class of common stock. 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. The aggregate price of the offering amount registered was $276,000,000 and the aggregate offering price of the shares sold was $261,000,000.



From November 9, 2004, the effective date of
the Registration Statement, to December 31, 2004, we incurred total expenses in connection with the issuance and distribution of our common stock registered in the amount of $16,663,000, including underwriting discounts and commissions in the amount
of $14,355,000, expenses paid to or for underwriters in the amount of $750,000, and other expenses in the amount of $1,558,000. All expense payments were made directly or indirectly to persons other than directors, officers, or their associates;
persons owning ten percent of more of any class of our securities; and our affiliates. The net offering proceeds received by us from the initial public offering of the shares of common stock, after deducting expenses and underwriting discounts and
commissions, were approximately $244,337,000.



We plan to use the net proceeds received from the initial public offering for investing in portfolio companies in accordance with our investment objectives and strategies as described in our Registration and incorporated herein by
reference. From November 15, 2004, the day we received the net proceeds from the initial public offering, to December 31, 2004, we invested $66 million in the debt securities of portfolio companies and paid a management fee to our manager in the
amount of $452,676, organization costs in the amount $704,808, and general and administrative expenses (including payments to the administrator) in the amount of $285,771. In the six months ended June 30, 2005, we funded investments in portfolio
companies in the amount of $10.7 million, paid management fees to our advisor in the amount of $1,800,000, general and administrative expenses of $1,517,053, and recognized organization costs and offering expenses of $1,111 and $7,606, respectively.
At June 30, 2005, we had cash and cash equivalents of $13.9 million, investments in U.S. Treasury Bills of $124.9 million, investments in high grade corporate senior notes of $39.9 million, and targeted investments in portfolio companies of $65.7
million.



We did not repurchase any shares
during the period covered by this report.



Item 3. Defaults Upon Senior
Securities.



Not applicable.



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



(a) The annual meeting of the shareholders of the Company was held on
Wednesday, May 18, 2005.



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(b) Proxies were solicited by the Board of Directors of the Company pursuant to
Regulation 14A under the Securities and Exchange Act of 1934; there was no solicitation in opposition to the Board of Directors nominee for director as listed in the proxy statement; and such nominee was duly elected as reported below.



(c) Out of a total of 17,400,100 shares of the
Companys common stock outstanding and entitled to vote, 17,160,673 shares were present in person or by proxy, representing approximately 98.6% of the outstanding shares.



The Board is divided into three classes, which we refer to as Class I, Class II and Class III directors. The
matter voted on by the shareholders at the 2005 annual meeting, as fully described in the proxy statement for the annual meeting, was the election of a Class I director. The following table presents the number of shares voted for and withheld for
each nominee for director.



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|NOMINEE FOR DIRECTOR |  | NUMBER OF VOTES FOR |  | NUMBER OF VOTES WITHHELD
|Edward W. Blessing   |  | 17,016,936          |  | 143,737                 



The initial terms of
the Class II directors, Mr. David R. Albin and Mr. C. Kent Conine, expire at the Funds 2006 annual meeting of stockholders, and the initial terms of the Class III directors, Mr. Kenneth A. Hersh and Mr. James R. Latimer, III, expire at the
Funds 2007 annual meeting of stockholders.



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 Form 10-K dated April 8, 2005 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 November 9, 2004 (Registration No. 333-118279) and incorporated
herein by reference)                                                                                         
|     |  |  
|4.1  |  |  |  | Specimen certificate of NGP Capital Resources Companys common stock, par value $0.001 per share (filed as Exhibit (d) to the Companys Pre-Effective Amendment No. 2 to Registration
Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference)
|     |  |  
|4.2  |  |  |  | Dividend Reinvestment Plan (filed as Exhibit (e) to the Companys Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 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 Form 10-K dated
April 8, 2005 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 Form 10-K dated
April 8, 2005 and incorporated herein by reference)                                                          
|     |  |  
|10.3 |  |  |  | Form of Indemnification Agreement between NGP Capital Resources Company and each member of the Board of Directors and each executive officer of the Company dated March 30, 2005 (filed as
Exhibit 10.1 to the Companys Form 8-K dated April 5, 2005 and incorporated herein by reference)          
|     |  |  
|10.4 |  |  |  | Revolving Credit Agreement dated May 17, 2005 by and between NGP Capital Resources Company, the lenders party thereto and SunTrust Bank, as administrative agent for the
lenders                                                                                                                     



21



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|     |  |   |  |                                                                                                                                    
|---- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------
|     |  |  
|31.1 |  |  |  | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Executive Officer                                                  
|     |  |  
|31.2 |  |  |  | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Financial Officer                                                  
|     |  |  
|32.1 |  |  |  | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer
|     |  |  
|32.2 |  |  |  | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer



22



---

SIGNATURES



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



NGP CAPITAL RESOURCES COMPANYBy:

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




Date: August 11,
2005



Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in their capacities on August 11, 2005. This document may be executed by the signatories hereto on any number of
counterparts, all of which constitute one and the same instrument.



|                          |  |                                                                                              
|------------------------- |  | ---------------------------------------------------------------------------------------------
|Signature                 |  | Title                                                                                        
|                          | 
|/s/ John H. Homier        |  | President and Chief Executive Officer (Principal Executive Officer)                          
|John H. Homier            | 
|                          | 
|/s/ Richard A. Bernardy   |  | Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)
|Richard A. Bernardy       | 
|                          | 
|/s/ Stephen K. Gardner    |  | Director of Finance                                                                          
|Stephen K. Gardner        |  |                                                                                              
|                          | 
|/s/ Kenneth A. Hersh      |  | Director and Chairman of the Board                                                           
|Kenneth A. Hersh          |  |                                                                                              
|                          | 
|/s/ David R. Albin        |  | Director                                                                                     
|David R. Albin            |  |                                                                                              
|                          | 
|/s/ Edward W. Blessing    |  | Director                                                                                     
|Edward W. Blessing        |  |                                                                                              
|                          | 
|/s/ C. Kent Conine        |  | Director                                                                                     
|C. Kent Conine            |  |                                                                                              
|                          | 
|/s/ James R. Latimer, III |  | Director                                                                                     
|James R. Latimer, III     |  |                                                                                              



23



---

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 Form 10-K dated April 8, 2005 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 November 9, 2004 (Registration No. 333-118279) and incorporated
herein by reference)                                                                                         
|     |  |  
|4.1  |  |  |  | Specimen certificate of NGP Capital Resources Companys common stock, par value $0.001 per share (filed as Exhibit (d) to the Companys Pre-Effective Amendment No. 2 to Registration
Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference)
|     |  |  
|4.2  |  |  |  | Dividend Reinvestment Plan (filed as Exhibit (e) to the Companys Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 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 Form 10-K dated
April 8, 2005 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 Form 10-K dated
April 8, 2005 and incorporated herein by reference)                                                          
|     |  |  
|10.3 |  |  |  | Form of Indemnification Agreement between NGP Capital Resources Company and each member of the Board of Directors and each executive officer of the Company dated March 30, 2005 (filed as
Exhibit 10.1 to the Companys Form 8-K dated April 5, 2005 and incorporated herein by reference)          
|     |  |  
|10.4 |  |  |  | Revolving Credit Agreement dated May 17, 2005 by and between NGP Capital Resources Company, the lenders party thereto and SunTrust Bank, as administrative agent for the
lenders                                                                                                                     
|     |  |  
|31.1 |  |  |  | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Executive Officer                                                                                                                                                                                                                    
|     |  |  
|31.2 |  |  |  | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Financial Officer                                                                                                                                                                                                                    
|     |  |  
|32.1 |  |  |  | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer                                                                                                                                                                  
|     |  |  
|32.2 |  |  |  | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer                                                                                                                                                                  



24