SOURCE: Prospect Energy Corporation

November 10, 2006 09:15 ET

Prospect Energy Corporation Announces Financial Results for First Fiscal Quarter Ended September 30, 2006

NEW YORK, NY -- (MARKET WIRE) -- November 10, 2006 -- Prospect Energy Corporation (NASDAQ: PSEC) today announced financial results for our first fiscal quarter ended September 30, 2006.

Our net investment income for the first fiscal quarter was $3.27 million, or 33 cents per weighted average number of shares. Our net increase in net assets resulting from operations was $3.96 million, or 40 cents per weighted average number of shares. At September 30, 2006, our net asset value per share was $14.86.

We estimate that our net investment income for the current second fiscal quarter ending December 31, 2006, will be $0.33 to $0.39 per share. We will announce our second fiscal quarter dividend in the next few weeks.



Equity Values:
  Stockholders' equity as of September 30, 2006: $191.17 million
  Net asset value per share: $14.86

First Fiscal Quarter Operating Results:
  Net investment income: $3.27 million
  Net investment income per share: $0.33
  Net realized and unrealized appreciation: $0.69 million
  Net increase in net assets resulting from operations:  $3.96 million
  Dividends to shareholders per share: $0.38

  Number of new portfolio companies invested: 2
  Number of portfolio companies at end of period: 17

September 30, 2006, marked our first fiscal quarter and ninth full quarter since our initial public offering. Our portfolio on September 30, 2006, was invested approximately $156.96 million in 17 long-term investments, and the remainder in cash and short-term instruments.

As of September 30, 2006, our portfolio generated a current yield of 16.9% across all our long-term debt and equity investments. This current yield includes interest from all our long-term investments as well as dividends from Gas Solutions Holdings, Inc. ("Gas Solutions"). Excluding such dividends, our weighted average long-term debt yield as of September 30, 2006, was 14.6%.

We completed two new investments, as well as follow-on investments in the existing portfolio, totaling approximately $24.57 million in the prior quarter. Both of these new investments were structured as senior secured debt with equity-like participation rights.

On September 1, 2006, we provided $11.0 million in senior secured debt financing and acquired a controlling interest in NRG ("NRG"), a leading fabricator of structures and vessels for oil and gas drilling applications based in Tomball, Texas.

On September 1, 2006, we provided $4.3 million in senior secured debt financing to Cypress Consulting Services, Inc. ("Cypress"), a seismic surveying company based in Houston, Texas.

On August 2, 2006, we completed the sale of all Evolution Petroleum Corporation ("EPM") registered common shares. The capital gain from these sales is approximately $2.27 million.

Since September 30, 2006, we have provided further follow-on capital to existing portfolio companies, including a $5.0 million follow-on investment in Conquest Cherokee, LLC ("Conquest"), and we have also completed two new investments totaling $22.0 million in TLOGH, L.P. ("TLOGH"), and Jettco Marine Services LLC ("Jettco"). TLOGH is a Barnett Shale gas development company based in Dallas, Texas. Jettco is an offshore supply vessel company based in Morgan City, Louisiana.


On August 10, 2006, we priced a public offering of 4.97 million shares of common stock at $15.30 per share, raising $76.06 million in gross proceeds. On August 28, 2006, the underwriters exercised their over-allotment option to purchase 0.75 million shares, raising an additional $11.41 million in gross proceeds.

We currently have a $50.0 million revolving credit facility through HSH Nordbank, which we closed July 25, 2006. That facility is currently undrawn. We will draw on this facility to fund additional long-term investments. We are currently seeking to increase the size of this facility to include other lending institutions.


We will host a conference call Monday, November 13, 2006, at 11:00 am Eastern Time. The conference call dial-in number is (877) 407-9205. A recording of the conference call will be available for approximately 7 days. To hear a replay, call (877) 660-6853 and use Playback Access Account code 286 and Playback Conference ID code 220023.

            STATEMENTS OF NET ASSETS                As of          As of
                 (in thousands)                 September 30,     June 30,
                                                    2006           2006

Cash and cash equivalents                        $    33,453   $      1,608
Investments in controlled entities at fair
 value (cost - $62,585 and $39,759,
 respectively)                                        73,610         49,585
Investments in affiliated entities at fair
 value (cost - $28,382 and $25,329,
 respectively)                                        28,383         25,329
Investments in non-controlled and
 non-affiliated entities, at fair value (cost -
 $56,874 and $58,505, respectively)                   54,964         59,055
Interest receivable                                    1,959          1,639
Dividends receivable                                     149             13
Loan Principal Receivable                                454            385
Due from broker                                            -            369
Due from Prospect Capital Management, LLC                  -             28
Due from Prospect Administration, LLC                     21              5
Prepaid expenses                                         266             77
Deferred financing fees                                  830            355
Deferred offering costs                                    -             32
Total assets                                         194,089        138,480


Credit facility payable                                    -         28,500
Accrued liabilities                                    1,616            843
Due to Prospect Capital Management, LLC                1,141            745
Other current liabilities                                158            122
Total liabilities                                      2,915         30,210

Net Assets                                       $   191,174   $    108,270

Components of Net Assets

Common stock, par value $.001 per share,
 (100,000,000 and 100,000,000 common shares
 authorized, respectively; 12,867,341 and
 7,069,873 issued and outstanding,
 respectively)                                   $        13   $          7
Paid-in capital in excess of par                     181,059         97,266
Undistributed (distributions in excess of) net
 investment income                                    (1,266)           319
Realized gain (loss)                                   2,252            301
Net unrealized appreciation                            9,116         10,377

Net Assets                                       $   191,174   $    108,270

Net Asset Value Per Share                        $     14.86   $      15.31

                                                    Three         Three
                                                   months        months
                                                    ended         ended
            STATEMENTS OF OPERATIONS              September     September
                 (in thousands)                    30, 2006      30, 2005
Investment Income
Interest income, controlled entities.            $     2,246   $       828
Interest income, affiliated entities (net of
 foreign tax withholding of $110)                        981             -
Interest income, non controlled and
 non-affiliated entities                               2,079         1,350
Interest income, cash equivalents                          -           179
   Total interest income                               5,306         2,357
Dividend income, controlled entities                     850           556
Dividend income, non-controlled and
 non-affiliated entities                                   -           146
Dividend income, money market funds                      276            50
   Total dividend income                               1,126           752
Total investment income                                6,432         3,109

Operating Expenses
Investment advisory fees
Base management fee                                      616           510
Income incentive fee                                     818             -
Total investment advisory fees                         1,434           510

Interest expense and credit facility costs               662             -
Chief Compliance Officer and Sub-administration
 fees                                                    119            81
Legal fees                                               280           719
Valuation services                                        93            41
Sarbanes-Oxley compliance expenses                        45             -
Other professional fees                                  292           122
Insurance expense                                         75            98
Directors fees                                            63            55
Other general and administrative expenses                 95            68
Total operating expenses                               3,158         1,694

Net investment income                                  3,274         1,415

Net realized gain (loss)                               1,951           (18)
Net unrealized appreciation (depreciation)            (1,261)           76

Net increase in net assets resulting from
 operations                                      $     3,964   $     1,473

Net increase in net assets per weighted average
 shares of common stock resulting from
 operations                                      $      0.40   $      0.21

                                                   For the       For the
                                                    three         three
                                                   months        months
                                                    ended         ended
                                                  September     September
PER SHARE DATA                                     30, 2006      30, 2005

Net asset value, beginning of period             $     15.31   $     14.59
Costs related to the secondary public offering         (0.47)            -
Net investment income                                   0.33          0.20
Realized gain                                           0.20             -
Net unrealized appreciation                            (0.13)         0.01
Dividend declared and paid                             (0.38)        (0.20)

Net asset value at end of period                 $     14.86   $     14.60


Prospect Energy Corporation ( is a closed-end investment company that lends to and invests in energy-related businesses. Prospect Energy's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Prospect Energy has elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). We are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to Prospect Energy could have an adverse effect on Prospect Energy and its shareholders.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such statements, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under the Company's control, and that the Company may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from these estimates and projections of the future. Such statements speak only as of the time when made, and the Company undertakes no obligation to update any such statement now or in the future.

Contact Information

  • Please send investment proposals to:

    Grier Eliasek
    President and Chief Operating Officer
    Telephone (212) 448-0702