NEW YORK, NY — (MARKET WIRE) — 11/10/06 — Prospect Energy Corporation (NASDAQ: PSEC)today announced financial results for our first fiscal quarter endedSeptember 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 netassets resulting from operations was $3.96 million, or 40 cents perweighted average number of shares. At September 30, 2006, our net assetvalue per share was $14.86.
We estimate that our net investment income for the current second fiscalquarter ending December 31, 2006, will be $0.33 to $0.39 per share. Wewill announce our second fiscal quarter dividend in the next few weeks.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Stockholders' equity as of September 30, 2006: $191.17 million Net asset value per share: $14.86First 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: $0.38Portfolio: Number of new portfolio companies invested: 2 Number of portfolio companies at end of period: 17
PORTFOLIO AND INVESTMENT ACTIVITY
September 30, 2006, marked our first fiscal quarter and ninth full quartersince our initial public offering. Our portfolio on September 30, 2006, wasinvested approximately $156.96 million in 17 long-term investments, and theremainder 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 yieldincludes interest from all our long-term investments as well as dividendsfrom Gas Solutions Holdings, Inc. (“Gas Solutions”). Excluding suchdividends, 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 theexisting portfolio, totaling approximately $24.57 million in the priorquarter. Both of these new investments were structured as senior secureddebt with equity-like participation rights.
On September 1, 2006, we provided $11.0 million in senior secured debtfinancing and acquired a controlling interest in NRG (“NRG”), a leadingfabricator of structures and vessels for oil and gas drilling applicationsbased in Tomball, Texas.
On September 1, 2006, we provided $4.3 million in senior secured debtfinancing to Cypress Consulting Services, Inc. (“Cypress”), a seismicsurveying company based in Houston, Texas.
On August 2, 2006, we completed the sale of all Evolution PetroleumCorporation (“EPM”) registered common shares. The capital gain from thesesales is approximately $2.27 million.
Since September 30, 2006, we have provided further follow-on capital toexisting portfolio companies, including a $5.0 million follow-on investmentin Conquest Cherokee, LLC (“Conquest”), and we have also completed two newinvestments totaling $22.0 million in TLOGH, L.P. (“TLOGH”), and JettcoMarine Services LLC (“Jettco”). TLOGH is a Barnett Shale gas developmentcompany based in Dallas, Texas. Jettco is an offshore supply vessel companybased in Morgan City, Louisiana.
LIQUIDITY
On August 10, 2006, we priced a public offering of 4.97 million shares ofcommon stock at $15.30 per share, raising $76.06 million in gross proceeds.On August 28, 2006, the underwriters exercised their over-allotment optionto purchase 0.75 million shares, raising an additional $11.41 million ingross proceeds.
We currently have a $50.0 million revolving credit facility through HSHNordbank, which we closed July 25, 2006. That facility is currentlyundrawn. We will draw on this facility to fund additional long-terminvestments. We are currently seeking to increase the size of this facilityto include other lending institutions.
CONFERENCE CALL
We will host a conference call Monday, November 13, 2006, at 11:00 amEastern Time. The conference call dial-in number is (877) 407-9205. Arecording of the conference call will be available for approximately 7days. To hear a replay, call (877) 660-6853 and use Playback Access Accountcode 286 and Playback Conference ID code 220023.
STATEMENTS OF NET ASSETS As of As of (in thousands) September 30, June 30, 2006 2006AssetsCash and cash equivalents $ 33,453 $ 1,608Investments in controlled entities at fair value (cost - $62,585 and $39,759, respectively) 73,610 49,585Investments in affiliated entities at fair value (cost - $28,382 and $25,329, respectively) 28,383 25,329Investments in non-controlled and non-affiliated entities, at fair value (cost - $56,874 and $58,505, respectively) 54,964 59,055Interest receivable 1,959 1,639Dividends receivable 149 13Loan Principal Receivable 454 385Due from broker - 369Due from Prospect Capital Management, LLC - 28Due from Prospect Administration, LLC 21 5Prepaid expenses 266 77Deferred financing fees 830 355Deferred offering costs - 32Total assets 194,089 138,480LiabilitiesCredit facility payable - 28,500Accrued liabilities 1,616 843Due to Prospect Capital Management, LLC 1,141 745Other current liabilities 158 122Total liabilities 2,915 30,210Net Assets $ 191,174 $ 108,270Components of Net AssetsCommon 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 $ 7Paid-in capital in excess of par 181,059 97,266Undistributed (distributions in excess of) net investment income (1,266) 319Realized gain (loss) 2,252 301Net unrealized appreciation 9,116 10,377Net Assets $ 191,174 $ 108,270Net Asset Value Per Share $ 14.86 $ 15.31 Three Three months months ended ended STATEMENTS OF OPERATIONS September September (in thousands) 30, 2006 30, 2005Investment IncomeInterest income, controlled entities. $ 2,246 $ 828Interest income, affiliated entities (net of foreign tax withholding of $110) 981 -Interest income, non controlled and non-affiliated entities 2,079 1,350Interest income, cash equivalents - 179 Total interest income 5,306 2,357Dividend income, controlled entities 850 556Dividend income, non-controlled and non-affiliated entities - 146Dividend income, money market funds 276 50 Total dividend income 1,126 752Total investment income 6,432 3,109Operating ExpensesInvestment advisory feesBase management fee 616 510Income incentive fee 818 -Total investment advisory fees 1,434 510Interest expense and credit facility costs 662 -Chief Compliance Officer and Sub-administration fees 119 81Legal fees 280 719Valuation services 93 41Sarbanes-Oxley compliance expenses 45 -Other professional fees 292 122Insurance expense 75 98Directors fees 63 55Other general and administrative expenses 95 68Total operating expenses 3,158 1,694Net investment income 3,274 1,415Net realized gain (loss) 1,951 (18)Net unrealized appreciation (depreciation) (1,261) 76Net increase in net assets resulting from operations $ 3,964 $ 1,473Net 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 SeptemberPER SHARE DATA 30, 2006 30, 2005Net asset value, beginning of period $ 15.31 $ 14.59Costs related to the secondary public offering (0.47) -Net investment income 0.33 0.20Realized gain 0.20 -Net unrealized appreciation (0.13) 0.01Dividend declared and paid (0.38) (0.20)Net asset value at end of period $ 14.86 $ 14.60
ABOUT PROSPECT ENERGY CORPORATION
Prospect Energy Corporation (www.prospectenergy.com) is a closed-endinvestment company that lends to and invests in energy-related businesses.Prospect Energy’s investment objective is to generate both current incomeand long-term capital appreciation through debt and equity investments.
Prospect Energy has elected to be treated as a business development companyunder the Investment Company Act of 1940 (“1940 Act”). We are required tocomply with a series of regulatory requirements under the 1940 Act as wellas applicable NASDAQ, federal and state rules and regulations. We haveelected to be treated as a regulated investment company under the InternalRevenue Code of 1986. Failure to comply with any of the laws andregulations that apply to Prospect Energy could have an adverse effect onProspect Energy and its shareholders.
This press release contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995. Any suchstatements, other than statements of historical fact, are highly likely tobe affected by other unknowable future events and conditions, includingelements of the future that are or are not under the Company’s control, andthat the Company may or may not have considered; accordingly, suchstatements cannot be guarantees or assurances of any aspect of futureperformance. Actual developments and results are highly likely to varymaterially from these estimates and projections of the future. Suchstatements speak only as of the time when made, and the Company undertakesno obligation to update any such statement now or in the future.
Please send investment proposals to:Grier EliasekPresident and Chief Operating Officergrier@prospectstreet.comTelephone (212) 448-0702