NEW YORK, NY — (MARKET WIRE) — 02/09/06 — Prospect Energy Corporation (NASDAQ: PSEC)today announced financial results for its second fiscal quarter endedDecember 31, 2005.
Our net investment income for the second fiscal quarter of 2005 was $2.040million, or $0.29 per share. Excluding non-recurring expense, our netinvestment income was $2.250 million, or $0.32 per share (see SupplementalFinancial Information below). At December 31, 2005, our net asset value pershare was $14.69, an increase of $0.09 over the prior quarter end.
We estimate that our net investment income for the current third fiscalquarter ending March 31, 2006, will be $0.28 to $0.32 per share. Excludingnon-recurring expense, we estimate that our net investment income for thecurrent quarter will be $0.30 to $0.34 per share. We will announce ourthird fiscal quarter dividend in the next few weeks.
OPERATING RESULTS
We have included additional disclosures in this release separatingrecurring and non-recurring charges. Non-recurring charges include legalfees associated with previously reported events, including certain judicialproceedings.
HIGHLIGHTS
Equity values:
Stockholders’ equity as of December 31, 2005: $103.653 million
Net asset value per share: $14.69
Second Fiscal Quarter Operating Results:
Net investment income: $2.040 million
Net investment income per share: $0.29
Net investment income excluding non-recurring items*: $2.250 million
Net investment income per share excluding non-recurring items*: $0.32
Net unrealized appreciation: $0.488 million
Dividends to shareholders per share: $0.28
See Supplemental Financial Information.
PORTFOLIO AND INVESTMENT ACTIVITY
December 31, 2005, marked the end of our second fiscal quarter with ourportfolio invested approximately $77.826 million in eight long-terminvestments, and the remainder in cash and short-term instruments.
As of December 31, 2005, our portfolio generated a current yield of 18.3%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”) and Unity VirginiaHoldings (“Unity”). Monetization of, or dividends from, other equitypositions is not included in this current yield calculation.
During the second fiscal quarter, we were repaid our loan to MillerPetroleum, Inc. (“Miller”), retaining our warrants in Miller.
Since December 31, 2005, we have provided follow-on capital of $0.790million to and have become the majority shareholder of Worcester EnergyPartners, Inc. (“WECO”). We have also provided follow-on capital of $0.100million to Whymore Coal Company, Inc. (“Whymore”), and $1.000 million toNatural Gas Systems, Inc. (“NGS”). Our capital in each case has beeninvested as additional senior secured debt with additional equityparticipation rights.
During the second fiscal quarter, we completed no new investments, asinvestments we were targeting to close in that quarter were delayed intothe current quarter, reflecting the lengthy negotiation, structuring, duediligence, and documentation that must be completed prior to closing.
On February 9, 2006, we provided $6.925 million of senior secured debtfinancing to Genesis Coal Company, Inc. (“Genesis”), and we received asignificant equity ownership investment in Genesis as part of theinvestment.
CREDIT FACILITY
We have substantially completed our discussions and negotiations with amajor North American financial institution and expect to close our creditfacility this month barring unforeseen delays.
CONFERENCE CALL
We will host a conference call Friday, February 10, 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 190588.
BALANCE SHEETS As of As of (in thousands) December June 30, 31, 2005 2005------------------------------------------------------------------------Assets (Unaudited)Cash held in segregated account $- $9,587Investment, Gas Solutions Holdings, Inc.at value (cost - $23,274 and $23,327,respectively) 30,100 29,500Investments, at value (cost - $74,477 and$64,197, respectively) 74,557 64,366Accrued interest receivable 483 206Prepaid expenses 219 49Due from affiliates 25 201Total assets $105,384 $103,909LiabilitiesAccrued liabilities 592 818Due to Investment Adviser 1,032 77Other current liabilities 107 47Total liabilities 1,731 942Stockholders' EquityCommon stock, par value $.001 per share, 100,000,000 common shares authorized, 7,055,100 issued and outstanding 7 7Paid-in capital in excess of par 97,026 96,955Distributions in excess of net investment income (286) (337)Net unrealized appreciation 6,906 6,342Total stockholders' equity 103,653 102,967Total liabilities and stockholders' equity $105,384 $103,909STATEMENTS OF OPERATIONS Three months Three months (UNAUDITED) ended ended (in thousands) December 31, December 31, 2005 2004-------------------------------------------------------------------------Investment IncomeInterest income $ 1,855 $ 271Interest income, Gas Solutions Holdings, Inc. 828 976Dividend income 163 -Dividend income, Gas Solutions Holdings, Inc. 843 1,700Other income 246 -Total investment income 3,935 2,947Operating ExpensesInvestment advisory fees Base management fee 524 495 Income incentive fee 508 - Total investment advisory fees 1,032 495Administration costs 87 96Legal fees 391 984Valuation services 45 -Other professional fees 107 -Insurance expense 85 87Directors fees 55 55General and administrative expenses 93 1Total operating expenses 1,895 1,718Net investment income 2,040 1,229Net realized loss - -Net unrealized appreciation 488 -Net increase in stockholders' equity resulting from operations $ 2,528 $ 1,229Basic net increase in stockholders' equity per common share resulting from operations $ 0.36 $ 0.17PER SHARE DATA (UNAUDITED) For the six For the months ended twelve months December 31, ended June 2005 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 0.49 0.34Net unrealized appreciation 0.08 0.90Dividend declared and paid (0.48) (.38)Net asset value at end of period $ 14.69 $ 14.59
SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS)
Please note that the following supplemental financial informationrepresents a reconciliation of a GAAP measure (Net investment income) to anon-GAAP measure (Adjusted net investment income).
Three months Twelve ended months ended December 31, June 30, 2005 2005-------------------------------------------------------------------------Total investment income $3,935 $8,093Total operating expenses 1,895 5,682Net investment income 2,040 2,411Add back non-recurring items 210 2,083Adjusted net investment income $2,250 $4,494Net investment income per common share $0.29 $0.40Adjusted net investment income per common share $0.32 $0.64
ABOUT PROSPECT ENERGY CORPORATION
Prospect Energy Corporation (www.prospectenergy.com) is a closed-endinvestment company that lends to and invests in energy-related businessesand assets. Prospect Energy’s investment objective is to generate bothcurrent income and long-term capital appreciation through debt and equityinvestments.
Prospect Energy has elected to be treated as a business development companyunder the Investment Company Act of 1940 (“1940 Act”). Accordingly, we arerequired to comply with a series of regulatory requirements under the 1940Act as well as applicable NASDAQ, state, and federal rules and regulations.In addition, we have elected to be treated as a regulated investmentcompany under the Internal Revenue Code of 1986. Failure to comply with anyof the laws and regulations that apply to Prospect Energy could have amaterial adverse effect on Prospect Energy and its shareholders.
This press release contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995. Forward-lookingstatements involve risks and uncertainties, including, but not limited to,statements as to our future operating results; our business prospects andthe prospects of our portfolio companies; the impact of investments that weexpect to make; the dependence of our future success on the general economyand its impact on the industries in which we invest; the ability of ourportfolio companies to achieve their objectives; our expected financingsand investments; the adequacy of our cash resources and working capital;and the timing of cash flows, if any, from the operations of our portfoliocompanies.
We may use words such as “anticipates,” “believes,” “expects,” “intends,””will,” “should,” “may,” “hope” and similar expressions to identifyforward-looking statements. Such statements are based on currentlyavailable operating, financial and competitive information and are subjectto various risks and uncertainties that could cause actual results todiffer materially from our historical experience and our presentexpectations. Undue reliance should not be placed on such forward-lookingstatements as such statements speak only as of the date on which they aremade. We do not undertake to update our forward-looking statements unlessrequired by law.
Please send investment proposals to:Prospect Energy CorporationJohn BarryChairman and Chief Executive Officerjbarry@prospectstreet.comGrier EliasekPresident and Chief Operating Officergrier@prospectstreet.comTelephone (212) 448-0702