NEW YORK, NY — (MARKET WIRE) — 09/28/06 — Prospect Energy Corporation (NASDAQ: PSEC)today announced financial results for our fiscal year ended June 30, 2006.
Our net investment income for the fourth fiscal quarter of 2006 was $3.00million, or $0.42 per share. At June 30, 2006, our net asset value pershare was $15.31, an increase of $0.50 over the prior quarter end.
Our net investment income for the fiscal year ended June 30, 2006, was$8.56 million, representing an increase of $6.15 million over the priorfiscal year net investment income of $2.41 million.
We estimate that our net investment income for the current first fiscalquarter ending September 30, 2006, will be $0.29 to $0.35 per share. Thisrepresents a drop in quarterly net investment income per share from theprevious quarter due to the increase in shares outstanding during thequarter from the secondary offering and subsequent over-allotment option.However, we expect our net investment income to increase over the next fewquarters as we deploy the additional capital received during the quarter.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Stockholders' equity as of June 30, 2006: $108.27 million Net asset value per share: $15.31Fourth Fiscal Quarter Operating Results: Net investment income: $3.00 million Net investment income per share: $0.42 Net realized and unrealized appreciation: $2.96 million Dividends to shareholders per share: $0.34Fiscal Year Operating Results: Net investment income: $8.56 million Net investment income per share: $1.21 Net realized and unrealized appreciation: $4.34 million Dividends to shareholders per share: $1.12* See Supplemental Financial Information.
PORTFOLIO AND INVESTMENT ACTIVITY
June 30, 2006, marked the end of our second fiscal year and eighth fullquarter since our initial public offering. Our portfolio on June 30, 2006,was invested approximately $133.97 million in fifteen long-terminvestments, and the remainder in cash and short-term instruments.
As of June 30, 2006, our portfolio generated a current yield of 17.0%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 June 30, 2006,was 14.3%.
We completed five new investments totaling approximately $42.75 million inthe prior quarter, as well as follow-on investments in the existingportfolio. All of these new investments were structured as senior secureddebt, with four also receiving equity-like participation rights.
On April 20, 2006, we provided $5.5 million in senior secured debtfinancing to Charlevoix Energy Trading LLC (“Charlevoix”), a natural gasmarketing company based in Charlevoix, Michigan.
On April 24, 2006, we provided $6.25 million in senior secured debtfinancing to Iron Horse Coiled Tubing, Ltd. (“Iron Horse”), an oilfieldservices company based in Medicine Hat, Alberta. Subsequently on August 31,2006, Iron Horse drew down an additional $3.0 million.
On April 25, 2006, we provided $8.0 million in senior secured debtfinancing to Central Illinois Energy, LLC (“CIE”), an ethanol productioncompany based in Buckheart Township in Fulton County, Illinois.
On May 9, 2006, we provided $3.5 million in senior secured debt financingin Conquest Cherokee, LLC (“Conquest”), an oil and gas company based inNashville, Tennessee, and Independence, Kansas.
On June 1, 2006, we provided $16.5 million in senior secured debt financingto Advantage Oilfield Group, Ltd. (“Advantage”), a pipeline and facilityconstruction company based in Medicine Hat, Alberta.
On May 22, 2006, Unity Virginia Holdings, LLC and affiliates (“Unity”)filed voluntarily for reorganization under Chapter 11 of Title 11 of theUnited States Code. At this time the outcome of this investment isuncertain. We are currently exploring possible operational and financialrestructurings for Unity.
On June 1, 2006, we received full repayment of our $5.00 million seniorsecured loan to Natural Gas Systems, Inc. (“NGS”) including a prepaymentpremium of $375 thousand. In addition, we converted all of our warrantsinto registered and unregistered common shares of NGS stock, and as of thistime we have sold all of our registered shares.
Operating income for Gas Solutions for the trailing twelve months endedJune 30, 2006, was $15.5 million. On May 1, 2006, Gas Solutions enteredinto a hedge whereby Gas Solutions purchased propane puts for approximately80% of the projected net monthly volumes for one year.
Since June 30, 2006, we have provided further follow-on capital to existingportfolio companies, and we have also completed two new investmentstotaling $15.3 million in NRG Manufacturing, Inc. (“NRG”), and CypressConsulting Services, Inc. (“Cypress”). NRG is a leading fabricator ofstructures and vessels for oil and gas drilling applications based inTomball, Texas. Cypress is a seismic surveying company based in Houston,Texas.
LIQUIDITY
We currently have a $50.0 million revolving credit facility through HSHNordbank. That facility is currently undrawn, following our recentsecondary offering in which we raised approximately $87.5 million in grossproceeds. We currently have approximately $35.4 million of short-terminvestments available for deployment into long-term investments.
CONFERENCE CALL
We will host a conference call Friday, September 29, 2006, at 11:00 amEastern Time. The conference call dial-in number is (877) 407-8031. 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 214918.
BALANCE SHEETS As of June As of June (in thousands) 30, 2006 30, 2005AssetsCash and cash equivalents $ - $ -Cash held in segregated account - 9,587Investments in controlled entities at fair value (cost - $39,759 and $23,327, respectively) 49,585 29,500Investments in affiliated entities at fair value (cost - $25,329 and $ - , respectively) 25,329 -Investments in uncontrolled and unaffiliated entities, at fair value (cost - $60,113 and $64,197, respectively) 60,663 64,366Accrued interest and dividend receivable 1,652 206Loan principal receivable 385 -Due from broker 369 -Due from Gas Solutions Holdings, Inc. - 201Due from Prospect Capital Management, LLC 5 -Due from Prospect Administration, LLC 28 -Prepaid expenses 77 49Deferred financing fees 355 -Deferred offering costs 32 -Total assets $ 138,480 $ 103,909LiabilitiesCredit facility payable $ 28,500 $ -Accrued liabilities 843 818Due to Prospect Capital Management, LLC 745 77Other current liabilities 122 47Total liabilities 30,210 942Stockholders’ EquityCommon stock, par value $.001 per share, (100,000,000 and 100,000,000 common shares authorized, respectively; 7,069,873 and 7,055,100 issued and outstanding, respectively) 7 7Paid-in capital in excess of par 97,266 96,955Undistributed (distributions in excess of) net investment income 319 (335)Realized gain (loss) 321 (2)Net unrealized appreciation 10,377 6,342Total stockholders’ equity 108,270 102,967Total liabilities and stockholders’ equity $ 138,480 $ 103,909 STATEMENTS OF OPERATIONS Twelve Twelve (in thousands) months ended months ended June 30, June 30, 2006 2005Investment IncomeInterest income $ 6,997 $ 1,882Interest income, controlled entities 4,810 2,704Interest income, affiliated entities 560 -Dividend income, controlled entities 3,099 3,151Dividend income, uncontrolled and unaffiliated entities 502 284Other income 901 72Total investment income 16,869 8,093Operating ExpensesInvestment advisory fees Base management fee 2,082 1,808 Income incentive fee 1,786 - Total investment advisory fees 3,868 1,808Interest expense and credit facility costs 642Administration costs 310 266Legal fees 1,835 2,575Valuation services 193 42Other professional fees 485 230Insurance expense 365 325Directors fees 220 220Organizational costs 25General and administrative expenses 393 191Total operating expenses 8,311 5,682Net investment income 8,558 2,411Net realized gain (loss) 303 (2)Net unrealized appreciation 4,035 6,342Net increase in stockholders’ equity resulting from operations $ 12,896 $ 8,751Basic net increase in stockholders’ equity per common share resulting from operations $ 1.83 $ 1.24PER SHARE DATA (UNAUDITED) For the For the twelve twelve months months ended June ended June 30, 2006 30, 2005Net asset value, beginning of period $ 14.59 $ (.01)Proceeds from initial public offering - 13.95Costs related to the initial public offering 0.01 (.21)Net investment income 1.21 0.34Realized gain 0.04 -Net unrealized appreciation 0.58 0.90Dividend declared and paid (1.12) (.38)Net asset value at end of period $ 15.31 $ 14.59
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