Tortoise Capital Resources Corp. Releases Fiscal 2008 Third Quarter Financial Results


FOR IMMEDIATE RELEASE

LEAWOOD, Kan.– Oct. 09, 2008 – Tortoise Capital Resources Corp. (NYSE: TTO) (the company) today announced that it has filed its Form 10-Q for the third quarter ended Aug. 31, 2008.

Recent Highlights
·  
Third quarter distribution of $0.2650 per share paid Sept. 02, 2008 (annualized yield of 7.1% based on initial offering price of $15.00 per share and the fifth consecutive distribution increase since the IPO)
·  
Net assets at quarter end of $119.0 million, or $13.38 per share
·  
Received a substantial distribution from LONESTAR Midstream Partners LP and LSMP GP, LP (collectively LONESTAR) related to its sale of assets to Penn Virginia Resource Partners, L.P. (NYSE:  PVR)
·   
  Millennium Midstream Partners, LP (Millennium) sold its partnership interests to Eagle Rock Energy Partners, L.P. (NASDAQ:  EROC)
 
Portfolio and Investment Activity

Net assets at Aug. 31, 2008 were $119.0 million or $13.38 per share as compared to $121.5 million or $13.69 per share at May 31, 2008.  As of Aug. 31, 2008, the fair value of the company’s investment portfolio (excluding short-term investments) totaled $160.3 million including equity investments of $153.2 million and debt investments of $7.1 million, with 63 percent in midstream and downstream investments, 23 percent in aggregates and coal investments and 14 percent in upstream investments.  The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of Aug. 31, 2008 was 8.8 percent.

On Oct. 01, 2008, Millennium sold its partnership interests to EROC for $181 million in cash and approximately four million EROC unregistered common units. In exchange for its Millennium partnership interests, the company received $13.7 million in cash and 373,224 EROC unregistered common units with an aggregate basis of $5.0 million for total proceeds at close of approximately $18.7 million.  The company originally invested $17.5 million in Millennium, and had an adjusted cost basis of approximately $15.1 million (after reducing its basis for expected cash distributions received since investment that were treated as return of capital), resulting in a realized gain for book purposes of approximately $3.6 million.  For purposes of the capital gain incentive fee, the realized gain will be approximately $1.2 million, which excludes that portion of the fee that would be due as a result of expected cash distributions characterized as return of capital for book purposes.  The capital gains incentive fee is accrued during the year as a result of increases or decreases in the fair value of investments and realized gains or losses, but it is only paid annually if there are realization events and if the calculation defined in the Investment Advisory Agreement results in an amount due.  In addition, approximately $84,000 in cash and 253,113 units with an aggregate basis of $3.5 million will be held in escrow for 18 months, subject to customary closing adjustments.

On July 17, 2008, LONESTAR closed a transaction with Penn Virginia Resource Partners, L.P. (NYSE:  PVR) for the sale of its gas gathering and transportation assets. LONESTAR distributed substantially all of the initial sales proceeds to its limited partners but did not redeem partnership interests. On July 24, 2008, the company received a distribution of $10.5 million in cash, 468,001 newly issued unregistered common units of PVR at an aggregate basis of approximately $10.8 million, and 59,503 unregistered common units of Penn Virginia GP Holdings, L.P. (NYSE: PVG) at an aggregate basis of approximately $1.6 million.  The company characterized this distribution as approximately $20.8 million return of capital and approximately $2.1 million as realized gain from the sale of the underlying assets.  The realized gain is considered in the calculation of the accrued capital gains incentive fees as reflected in the current financial statements; however, it will not be deemed a realization event for purposes of payment of the capital gains incentive fee until such time as the LONESTAR partnership interests are sold or otherwise disposed. The company expects to receive additional unregistered PVR and PVG units which are held in escrow, due to be released to LONESTAR in the next six to twelve months along with cash distributions received on the escrow units retained by the escrow agent, subject to customary closing adjustments.

Additionally, the company expects a future cash distribution from LONESTAR of approximately $1.0 million payable on December 31, 2009 and two future contingent payments due LONESTAR for which the company’s expected portion would total approximately $9.6 million, payable in cash or common units of PVR (at PVR’s election).  The contingent payments are based on the achievement of specific revenue targets by or before June 30, 2013, and no payments are due if these revenue targets are not achieved.

On Aug. 04, 2008, the company invested an additional $1.5 million of equity in Mowood, LLC (Mowood).  The investment was used for Mowood’s subsidiary, Timberline Energy, LLC, to complete landfill gas to energy projects in Butler, Neb. and Hernando, Fla.  The Butler facility became operational in September.  Construction on the Hernando facility is complete and the facility is expected to be operational shortly.  With the completion of the Butler and Hernando facilities, Timberline will operate a high Btu facility, a direct use facility and an electricity generation facility — one of each of the three types of landfill gas to energy projects feasible under current technology.

On Aug. 04, 2008, the company invested $9.9 million in VantaCore Partners LP (VantaCore), an existing portfolio company focused on the aggregates industry.  VantaCore repaid the company’s $3.75 million term note at a three percent premium to par value.  The company reinvested the proceeds from this repayment, and an additional $6.1 million, to purchase 508,430 common units and 199 incentive distribution rights of VantaCore.  VantaCore used the proceeds from this investment to partially fund its acquisition of Southern Aggregates LLC, a sand and gravel operation located near Baton Rouge, La.  The Southern Aggregates acquisition is the third acquisition for VantaCore, and diversifies VantaCore’s earnings base and geographic footprint to include the Baton Rouge and Lafayette, La. markets.

On Sept. 26, the company invested an additional $0.5 million in Mowood in the form of a promissory note.  The note has a variable annual interest rate equal to the one-month LIBOR plus 3.75 percent and matures on Nov. 29, 2008.  Mowood plans to use the proceeds for working capital purposes.

As of Aug. 31, 2008, all portfolio companies had a risk profile rating of (1), with the exception of Quest Midstream Partners, L.P. (Quest), High Sierra Energy, LP, and High Sierra Energy GP, LLC (collectively High Sierra), each of which had a rating of (2).  Quest is re-negotiating the terms of its credit facility following announcements of an alleged misappropriation of funds by Mr. Jerry Cash, former Chairman and CEO of Quest Resource Corporation, Quest Energy Partners, L.P. and Quest Midstream Partners, L.P.  High Sierra Energy, LP also is re-negotiating the terms of its credit facility amidst tight conditions in the credit markets, further complicated by its material aggregate exposure to the SemGroup, L.P. bankruptcy in the form of unsecured trade debts.

“We are pleased to have completed two investments in the third quarter which funded growth in our portfolio companies.  Our investment in VantaCore helped to facilitate the acquisition of Southern Aggregates LLC which significantly increases the size and geographic diversification of VantaCore’s operations.  Our investment in Mowood will allow its subsidiary, Timberline Energy, LLC, to complete two additional landfill gas to energy projects.  The completion of the three initial projects will signal a change in Timberline from a development company to an operating company” said Ed Russell President.  “We believe these events, along with the sale of Millennium’s partnership interests to EROC, are positive events for our stockholders and we are pleased to see continued growth in several of our portfolio companies despite recent market turmoil.”

Capital Resources
 
As of Aug. 31, 2008, the principal balance outstanding on the company’s credit facility was $31.8 million at a rate of 4.24 percent.  As of Oct. 8, 2008, the company had $28.8 million of availability under its credit facility; with an outstanding principal balance of $21.2 million at a rate of 4.29 percent.
 
On Apr. 8, 2008, the company filed an initial shelf registration statement, and on June 19, 2008 filed a pre-effective amendment, with the Securities and Exchange Commission.  When effective, the shelf registration will allow the company to prudently raise additional capital when market conditions are acceptable.
 
Performance Review

The company views distributable cash flow (DCF) as the best indicator of its operating performance and distribution-paying capacity.  The Board of Directors determines the amount of distributions paid to stockholders based on DCF which is defined as distributions received from investments less total expenses.  DCF for the three months ended Aug. 31, 2008 was approximately $2.5 million, an increase over the prior quarter of approximately $0.1 million.

Distributions

In the third quarter of 2008, the Board of Directors declared a distribution of $0.2650 per share which was paid on Sept. 02, 2008. The distribution represents an annualized yield of 7.1% based upon the initial public offering price of $15.00 per share, and is the fifth consecutive distribution increase since the IPO. The company continues to pursue its investment objective of providing its stockholders with a high level of total return, with an emphasis on distribution growth.

Earnings Call

The company will host a conference call at 4:00 p.m. CDT on Oct. 09, 2008 to discuss its third quarter financial results. Please dial-in approximately five to 10 minutes prior to the scheduled start time.

U.S./Canada: (800) 218-0204

International:  (303) 262-2175

The call will also be webcast in a listen-only format. A link to the webcast will be accessible at www.tortoiseadvisors.com.

A replay of the call will be available beginning at 7:00 p.m. CDT on Oct. 09, 2008 and continuing until 11:59 p.m. CDT Oct. 23, 2008, by dialing (303) 590-3000 (U.S./Canada).  The replay access code is 11118970#.  A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through Oct. 09, 2009.
 
About Tortoise Capital Resources Corp.
Tortoise Capital Resources invests primarily in privately-held and micro-cap public companies operating in the midstream and downstream segments, and to a lesser extent the upstream segment, of the U.S. energy infrastructure sector. Tortoise Capital Resources seeks to provide stockholders a high level of total return, with an emphasis on distributions and distribution growth.

About Tortoise Capital Advisors, LLC
Tortoise Capital Advisors, LLC, the adviser to Tortoise Capital Resources Corp., is a pioneer in the capital markets for master limited partnership (MLP) investment companies and a leader in closed-end funds and separately managed accounts focused on MLPs in the energy infrastructure sector. As of Sept. 30, 2008, the adviser had approximately $2.2 billion of assets under management.

Safe Harbor Statement
This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

Contact information
Tortoise Capital Advisors, LLC Pam Kearney, Investor Relations, (866) 362-9331, pkearney@tortoiseadvisors.com


Tortoise Capital Resources Corporation
            
STATEMENTS OF ASSETS & LIABILITIES
            
             
             
   
August 31, 2008
    
November 30, 2007
  
   
(Unaudited)
        
Assets
            
Investments at fair value, control (cost $29,645,849 and $20,521,816, respectively)
   $
32,655,040
     $
23,292,904
  
Investments at fair value, affiliated (cost $72,023,625 and $95,507,198, respectively)
    
84,914,692
      
98,007,275
  
Investments at fair value, non-affiliated (cost $42,777,633 and $31,716,576, respectively)
    
43,331,758
      
37,336,154
  
Total investments (cost $144,447,107 and $147,745,590, respectively)
    
160,901,490
      
158,636,333
  
Income tax receivable
    
218,935
      
218,935
  
Receivable for Adviser expense reimbursement
    
100,822
      
94,181
  
Interest receivable from control investments
    
72,850
      
68,686
  
Dividends and distributions receivable
    
135,602
      
1,419
  
Prepaid expenses and other assets
    
201,793
      
154,766
  
Total assets
    
161,631,492
      
159,174,320
  
                 
Liabilities
                
Base management fees payable to Adviser
    
604,930
      
565,086
  
Accrued capital gain incentive fees payable to Adviser
   
1,054,745
      
307,611
  
Distribution payable to common stockholders
    
2,356,874
      
-
  
Payable for investments purchased
    
-
      
1,235,994
  
Accrued expenses and other liabilities
    
423,402
      
419,744
  
Short-term borrowings
    
31,800,000
      
30,550,000
  
Deferred tax liability
    
6,372,081
      
4,182,919
  
Total liabilities
    
42,612,032
      
37,261,354
  
Net assets applicable to common stockholders
   $
119,019,460
     $
121,912,966
  
                 
Net Assets Applicable to Common Stockholders Consist of:
                
Warrants, no par value; 945,594 issued and outstanding
                
at August 31, 2008 and 945,774 issued and outstanding at
                
November 30, 2007 (5,000,000 authorized)
   $
1,370,700
     $
1,370,957
  
Capital stock, $0.001 par value; 8,893,866 shares issued and
                
  outstanding at August 31, 2008 and 8,858,168 issued and outstanding
          
at November 30, 2007 (100,000,000 shares authorized)
    
8,894
      
8,858
  
Additional paid-in capital
    
108,721,336
      
115,186,412
  
Accumulated net investment loss, net of deferred tax benefit
     (2,822,758 )     (1,565,774 )
Accumulated realized gain, net of deferred tax expense
    
1,539,792
      
160,474
  
Net unrealized appreciation of investments, net of deferred tax expense
    
10,201,496
      
6,752,039
  
 Net assets applicable to common stockholders
   $
119,019,460
     $
121,912,966
  
                 
Net Asset Value per common share outstanding (net assets applicable
          
to common stock, divided by common shares outstanding)
   $
13.38
     $
13.76
  
                 
                 
                 
 
                
 
   
 
    
 
    
 
    
 
  
Distributable Cash Flow
  
 For the three
    
For the three
    
For the nine
    
 For the nine
 
   
months ended
August 31, 2008
    
months ended
August 31, 2007
    
months ended
August 31, 2008
    
months ended
August 31, 2007
  
                         
Total from Investments
                        
Distributions from investments
   $
2,734,812
     $
2,009,605
     $
8,129,460
     $
4,038,759
  
Distributions paid in stock (1)
    
621,122
      
-
      
1,558,842
      
-
  
Interest income from investments
    
269,235
      
306,738
      
884,588
      
597,614
  
Dividends from money market mutual funds
    
3,643
      
38,726
      
6,770
      
620,385
  
Other income
    
-
      
-
      
28,987
      
-
  
Total from Investments
    
3,628,812
      
2,355,069
      
10,608,647
      
5,256,758
  
                                 
Operating Expenses Before Leverage Costs and Current Taxes
                                
Advisory fees (net of expense reimbursement by Adviser)
    
504,109
      
512,894
      
1,483,483
      
1,360,973
  
Other operating expenses (excluding capital gain incentive fees)
    
253,236
      
293,643
      
766,032
      
656,662
  
Total Operating Expenses
    
757,345
      
806,537
      
2,249,515
      
2,017,635
  
Distributable cash flow before leverage costs and current taxes
    
2,871,467
      
1,548,532
      
8,359,132
      
3,239,123
  
Leverage Costs
    
395,791
      
229,692
      
1,329,289
      
576,152
  
Distributable Cash Flow
   $
2,475,676
     $
1,318,840
     $
7,029,843
     $
2,662,971
  
                                 
DCF/GAAP Reconciliation
                                
Distributable Cash Flow
   $
2,475,676
     $
1,318,840
     $
7,029,843
     $
2,662,971
  
Adjustments to reconcile to Net Investment Loss, before Income Taxes
                                
Distributions paid in stock (1)
     (621,122 )    
-
       (1,558,842 )    
-
  
Pro forma distribution on new investment (2)
     (254,215 )             (254,215 )        
Return of capital on distributions received from equity investments
     (2,306,739 )     (1,552,395 )     (6,497,044 )     (3,516,593 )
Capital gain incentive fees
    
340,369
      
170,648
       (747,134 )     (1,325,846 )
Loss on redemption of preferred stock
    
-
      
-
      
-
       (731,713 )
Net Investment Loss, before Income Taxes
   $ (366,031 )   $ (62,907 )   $ (2,027,392 )   $ (2,911,181 )
                                 
                                 
(1) Distributions paid in stock for the three and nine months ended August 31, 2008 include shares received from High Sierra Energy, LP as a distribution received in lieu of cash for their second quarter distribution paid on August 15, 2008.
 
(2) Consists of $254,215 as pro forma distribution on new investment in VantaCore Partners, LP common units this quarter.
 
 
 
 
Tortoise Capital Resources Corporation
                        
STATEMENTS OF OPERATIONS (Unaudited)
                        
                         
   
For the three
months ended
August 31, 2008
    
For the three
months ended
August 31, 2007
    
For the nine
months ended
August 31, 2008
    
For the nine
months ended
August 31, 2007
  
Investment Income
                        
   Distributions from investments
                        
Control investments
   $
347,500
     $
148,080
     $
975,001
     $
148,080
  
Affiliated investments
    
1,139,402
      
1,328,533
      
4,499,082
      
2,661,815
  
Non-affiliated investments
    
993,695
      
532,992
      
2,401,162
      
1,228,864
  
   Total distributions from investments
    
2,480,597
      
2,009,605
      
7,875,245
      
4,038,759
  
   Less return of capital on distributions
     (2,306,739 )     (1,552,395 )     (6,497,044 )     (3,516,593 )
            Net distributions from investments
    
173,858
      
457,210
      
1,378,201
      
522,166
  
   Interest income from control investments
    
269,235
      
306,738
      
884,588
      
597,614
  
   Dividends from money market mutual funds
    
3,643
      
38,726
      
6,770
      
620,385
  
   Other income
    
-
      
-
      
28,987
      
-
  
Total Investment Income
    
446,736
      
802,674
      
2,298,546
      
1,740,165
  
                                 
Operating Expenses
                                
   Base management fees
    
604,930
      
512,894
      
1,780,179
      
1,360,973
  
   Capital gain incentive fees
    (340,369 )     (170,648 )    
747,134
      
1,325,846
  
   Professional fees
    
153,157
      
187,014
      
469,039
      
401,862
  
   Administrator fees
    
27,930
      
24,193
      
82,488
      
54,929
  
   Directors' fees
    
22,181
      
25,205
      
66,927
      
73,578
  
   Reports to stockholders
    
13,057
      
10,083
      
39,028
      
26,388
  
   Fund accounting fees
    
8,652
      
9,294
      
25,690
      
23,571
  
   Registration fees
    
7,458
      
14,686
      
22,292
      
22,749
  
   Custodian fees and expenses
    
5,545
      
3,044
      
14,914
      
8,189
  
   Stock transfer agent fees
    
3,403
      
3,180
      
10,172
      
10,460
  
   Other expenses
    
11,853
      
16,944
      
35,482
      
34,936
  
Total Operating Expenses
    
517,797
      
635,889
      
3,293,345
      
3,343,481
  
   Interest expense
    
395,791
      
229,692
      
1,329,289
      
347,402
  
   Preferred stock distributions
    
-
      
-
      
-
      
228,750
  
   Loss on redemption of preferred stock
    
-
      
-
      
-
      
731,713
  
  Total Interest Expense, Preferred Stock Distributions
                                
and Loss on Redemption of Preferred Stock
    
395,791
      
229,692
      
1,329,289
      
1,307,865
  
Total Expenses
    
913,588
      
865,581
      
4,622,634
      
4,651,346
  
   Less expense reimbursement by Adviser
     (100,821 )    
-
       (296,696 )    
-
  
Net Expenses
    
812,767
      
865,581
      
4,325,938
      
4,651,346
  
Net Investment Loss, before Income Taxes
     (366,031 )     (62,907 )     (2,027,392 )     (2,911,181 )
     Current tax benefit
    
-
      
42,732
      
-
      
42,732
  
     Deferred tax benefit (expense)
    
139,090
       (5,109 )    
770,408
      
742,149
  
Net Investment Loss
     (226,941 )     (25,284 )     (1,256,984 )     (2,126,300 )
                                 
Realized and Unrealized Gain (Loss) on Investments
                                
   Net realized gain on investments, before deferred tax expense
    
2,224,706
      
-
      
2,224,706
      
13,712
  
Deferred tax expense
     (845,388 )    
-
       (845,388 )     (5,211 )
Net Realized Gain on Investments
    
1,379,318
      
-
      
1,379,318
      
8,501
  
   Net unrealized appreciation of control investments
    
234,767
      
615,708
      
238,103
      
789,662
  
   Net unrealized appreciation of affiliated investments
    
641,373
      
68,414
      
10,390,990
      
2,034,365
  
   Net unrealized appreciation (depreciation) of non-affiliated investments
     (3,309,808 )     (1,821,769 )     (5,065,454 )    
5,686,094
  
Net unrealized appreciation (depreciation), before deferred taxes
     (2,433,668 )     (1,137,647 )    
5,563,639
      
8,510,121
  
Deferred tax benefit (expense)
    
924,795
      
432,306
       (2,114,182 )     (3,233,846 )
Net Unrealized Gain (Loss) on Investments
     (1,508,873 )     (705,341 )    
3,449,457
      
5,276,275
  
Net Realized and Unrealized Gain (Loss) on Investments
     (129,555 )     (705,341 )    
4,828,775
      
5,284,776
  
                                 
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
                  
   Resulting from Operations
   $ (356,496 )   $ (730,625 )   $
3,571,791
     $
3,158,476
  
                                 
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
                  
   Resulting from Operations Per Common Share:
                                
Basic and Diluted
   $ (0.04 )   $ (0.08 )   $
0.40
     $
0.43
  
                                 
Weighted Average Shares of Common Stock Outstanding:
                                
Basic and Diluted
    
8,893,866
      
8,840,487
      
8,876,079
      
7,387,780