Tortoise Capital Resources Corp. Releases Fiscal 2009 Second Quarter Financial Results

FOR IMMEDIATE RELEASE

LEAWOOD, Kan.– July 09, 2009 – Tortoise Capital Resources Corp. (NYSE: TTO) (the company) today announced that it has filed its Form 10-Q for its second quarter ended May 31, 2009.

Recent Highlights

·  
Net assets of $80.2 million or $8.91 per share as of May 31, 2009
·  
Total assets of $100.9 million as of May 31, 2009
·  
Distributable cash flow of $1.3 million for the fiscal quarter ended May 31, 2009
·  
Second quarter 2009 distribution of $0.13 per share paid June 01, 2009
·  
Credit facility balance of $11.7 million as of July 06, 2009

Performance Review

The company views distributable cash flow (DCF) as a key indicator of its core financial performance. The company determines the amount of distributions paid to stockholders based on DCF which is distributions received from investments less total expenses. Credit constraints and liquidity concerns have been factors in the reduction or suspension of cash distributions of certain investments in the portfolio, including Eagle Rock Energy Partners, L.P., Quest Midstream Partners, L.P. and Abraxas Energy Partners, L.P., thus reducing the company’s DCF.  DCF for the fiscal quarter ended May 31, 2009 was approximately $1.3 million as shown below.  On June 1, 2009, the company paid a distribution of $0.13 per common share, a decrease of $0.10 per share compared to the prior quarter.

Leverage

On June 19, 2009, the company entered into a 60-day extension of its amended credit facility effective June 20, 2009 through August 20, 2009. The company reduced the balance on its credit facility from $23.1 million at Feb. 28, 2009 to a current balance of $11.7 million.  The amended credit facility retains the provision from the previous extension requiring the company to apply 100 percent of the proceeds from any private investment liquidation and 50 percent of the proceeds from the sale of any publicly traded portfolio assets to the outstanding balance of the facility.  In addition, each prepayment of principal of the loans under the amended credit facility will permanently reduce the maximum amount of the loans under the amended credit agreement to an amount equal to the outstanding principal balance of the loans under the amended credit agreement immediately following the prepayment. During the extension, outstanding loan balances generally will accrue interest at a variable rate equal to the greater of (i) one-month LIBOR plus 3.00 percent, and (ii) 5.50 percent.  The company continues to seek a longer-term lending arrangement and to reduce its leverage position through the sale of publicly traded securities.  Additionally, the company may have opportunities to realize liquidity from private holdings in order to further reduce, or even eliminate, its leverage.

Net Asset Value

At May 31, 2009, the company’s net asset value was $8.91 per share compared to $8.67 per share at Feb. 28, 2009.  Total assets decreased from $103.5 million as of Feb. 28, 2009 to $100.9 million as of May 31, 2009.  The decrease in total assets resulted from a $16.4 million increase in net unrealized appreciation of investments (before income taxes), offset by a reduction in assets due to sales of publicly traded securities and the utilization of those sales proceeds to reduce leverage.  Total assets also decreased this quarter due to a decrease in the deferred tax asset (as a result of the increase in unrealized appreciation) to $5.2 million (net of a $5.3 million valuation allowance), or approximately $0.58 per share, compared to $9.3 million (net of a $4.0 million valuation allowance), or approximately $1.04 per share at Feb. 28, 2009 .  The company does not include the deferred tax asset in the calculation of its management fee.

Portfolio Review

As of May 31, 2009, the fair value of the company’s investment portfolio (excluding short-term investments) totaled $91.2 million, including equity investments of $82.4 million and debt investments of $8.8 million. The portfolio consists of 60 percent midstream and downstream investments, 8 percent upstream investments, and 32 percent in aggregates and coal.  The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of May 31, 2009 was 6.2 percent.
 
On June 30, 2009, Abraxas Petroleum Corporation (NASDAQ: AXAS) (“Abraxas Petroleum”)  and Abraxas Energy Partners, L.P. (“Abraxas Energy”) announced that they had entered into a definitive merger agreement pursuant to which Abraxas Energy will merge into Abraxas Petroleum.  The agreement provides for Abraxas Petroleum to acquire the outstanding common units of Abraxas Energy not currently held by a wholly-owned subsidiary of Abraxas Petroleum for $6.00 per common unit payable in shares of Abraxas Petroleum common stock. The number of shares of Abraxas Petroleum common stock will be not less than 4.25 shares, and not more than 6.0 shares, per common unit of Abraxas Energy.  The final number of shares will be determined by dividing $6.00 by the volume weighted average closing price of Abraxas Petroleum on the NASDAQ during the 20 trading days ending three business days prior to a special meeting of Abraxas Petroleum stockholders.  Holders of 96% of the common units of Abraxas Energy not held by a wholly-owned subsidiary of Abraxas Petroleum have executed a voting, registration rights and lock-up agreement with Abraxas Petroleum and Abraxas Energy.  The voting agreement provides an automatic vote, or proxy to vote, by the unaffiliated unitholders of Abraxas Energy in favor of the merger and for a 90-day lock-up period followed by a multi-year staggered lock-up period.  The voting agreement also provides for a standstill by the private investors on their rights under the existing exchange and registration rights agreement and a standstill by Abraxas Energy on its initial public offering.  The merger is subject to approval by the holders of a majority of the outstanding Abraxas Petroleum common stock and 80% of the outstanding Abraxas Energy common units, and other usual and customary closing conditions.
 
 
On July 6, 2009, Quest Resource Corporation (NASDAQ: QRCP) (“QRCP”), Quest Energy Partners, L.P. (NASDAQ: QELP) (“QELP”) and Quest Midstream Partners, L.P. (“QMLP”) announced that they had entered into a definitive merger agreement pursuant to which the three companies would recombine.  The recombination would be effected by forming a new, yet to be named, publicly-traded corporation that, through a series of mergers and entity conversions, would wholly-own all three entities. The completion of a recombination is subject to the satisfaction of a number of conditions, including the arrangement of one or more satisfactory credit facilities for the new entity, the approval of the transaction by the stockholders of QRCP and the unit holders of QELP and QMLP, and consents from each entity’s existing lenders. There can be no assurance that the definitive documentation will be agreed to or that a recombination will occur.
 
Earnings Call

The company will host a conference call at 4 p.m. CST on Thursday, July 09, 2009 to discuss its financial results for the fiscal quarter ended May 31, 2009. Please dial-in approximately five to 10 minutes prior to the scheduled start time.

U.S./Canada: (866) 225-8754

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. CST on July 09, 2009 and continuing until 11:59 p.m. CST July 23, 2009, by dialing (800) 406-7325 (U.S./Canada).  The replay access code is 4075823#.  A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through July 09, 2010.
 
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..

About Tortoise Capital Advisors
Tortoise Capital Advisors, LLC is a pioneer in 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 sector. As of June 30, 2009, the adviser had approximately $2.0 billion of assets under management. For more information, visit our Web site at www.tortoiseadvisors.com.

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.

Forward-Looking Statement
This press release contains certain statements that may include “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Although the company and Tortoise Capital Advisors believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the company’s reports that are filed with the Securities and Exchange Commission. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this press release. Other than as required by law, the company and Tortoise Capital Advisors do not assume a duty to update this forward-looking statement.  Any distribution paid in the future to our stockholders will depend on the actual performance of the company’s investments, its costs of leverage and other operating expenses and will be subject to the approval of the company’s Board and compliance with asset coverage requirements of the Investment Company Act of 1940 and the leverage covenants.


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

 

Tortoise Capital Resources Corporation
            
STATEMENTS OF ASSETS & LIABILITIES
            
             
             
   
May 31, 2009
    
November 30, 2008
  
   
(Unaudited)
        
Assets
            
Investments at fair value, control (cost $29,312,205 and $30,418,802, respectively)
   $
32,264,166
     $
30,213,280
  
Investments at fair value, affiliated (cost $54,231,519 and $56,662,500, respectively)
    
40,682,061
      
48,016,925
  
Investments at fair value, non-affiliated (cost $39,046,320 and $49,760,304, respectively)
    
22,402,239
      
27,921,025
  
Total investments (cost $122,590,044 and $136,841,606, respectively)
    
95,348,466
      
106,151,230
  
Cash
    
68,200
      
-
  
Income tax receivable
    
-
      
212,054
  
Receivable for Adviser expense reimbursement
    
56,364
      
88,925
  
Interest receivable from control investments
    
-
      
76,609
  
Dividends receivable
    
94
      
696
  
Deferred tax asset, net
    
5,243,357
      
5,683,747
  
Prepaid expenses and other assets
    
157,945
      
107,796
  
Total assets
    
100,874,426
      
112,321,057
  
                 
Liabilities
                
Base management fees payable to Adviser
    
338,187
      
533,552
  
Distribution payable to common stockholders
    
1,170,247
      
-
  
Accrued expenses and other liabilities
    
340,055
      
362,205
  
Short-term borrowings
    
18,800,000
      
22,200,000
  
Total liabilities
    
20,648,489
      
23,095,757
  
Net assets applicable to common stockholders
   $
80,225,937
     $
89,225,300
  
                 
Net Assets Applicable to Common Stockholders Consist of:
                
Warrants, no par value; 945,594 issued and outstanding
                
at May 31, 2009 and November 30, 2008
                
(5,000,000 authorized)
   $
1,370,700
     $
1,370,700
  
Capital stock, $0.001 par value; 9,001,902 shares issued and
                
outstanding at May 31, 2009 and 8,962,147 issued and outstanding at
          
November 30, 2008 (100,000,000 shares authorized)
    
9,002
      
8,962
  
Additional paid-in capital
    
103,868,927
      
106,869,132
  
Accumulated net investment loss, net of income taxes
     (3,809,797 )     (2,544,267 )
Accumulated realized gain (loss), net of income taxes
     (2,091,430 )    
6,364,262
  
Net unrealized depreciation of investments, net of income taxes
     (19,121,465 )     (22,843,489 )
Net assets applicable to common stockholders
   $
80,225,937
     $
89,225,300
  
                 
Net Asset Value per common share outstanding (net assets applicable
          
to common stock, divided by common shares outstanding)
   $
8.91
     $
9.96
  
                 



   
For the three months ended
    
For the three months ended
    
For the six months ended
    
For the six months ended
  
Distributable Cash Flow
  
May 31, 2009
    
May 31, 2008
    
May 31, 2009
    
May 31, 2008
  
                         
Total from Investments
                        
Distributions from investments
   $
1,852,148
     $
2,773,933
     $
4,543,782
     $
5,394,648
  
Distributions paid in stock (1)
    
-
      
484,200
      
-
      
937,720
  
Interest income from investments
    
202,400
      
301,944
      
403,998
      
615,353
  
Dividends from money market mutual funds
    
420
      
817
      
1,145
      
3,127
  
Other income
    
15,000
      
-
      
30,000
      
28,987
  
Total from Investments
    
2,069,968
      
3,560,894
      
4,978,925
      
6,979,835
  
                                 
Operating Expenses Before Leverage Costs
                                
Advisory fees (net of expense reimbursement by Adviser)
    
281,821
      
485,768
      
609,129
      
979,374
  
Other operating expenses (excluding capital gain incentive fees)
    
236,014
      
262,515
      
453,596
      
512,796
  
Total Operating Expenses
    
517,835
      
748,283
      
1,062,725
      
1,492,170
  
Distributable cash flow before leverage costs
    
1,552,133
      
2,812,611
      
3,916,200
      
5,487,665
  
Leverage Costs
    
256,842
      
435,594
      
427,958
      
933,498
  
Distributable Cash Flow
   $
1,295,291
     $
2,377,017
     $
3,488,242
     $
4,554,167
  
                                 
Distributions paid on common stock
   $
1,170,247
     $
2,330,092
     $
3,231,540
     $
4,544,679
  
                                 
Payout percentage for period (2)
     90 %     98 %     93 %     100 %
                                 
                                 
DCF/GAAP Reconciliation
                                
Distributable Cash Flow
   $
1,295,291
     $
2,377,017
     $
3,488,242
     $
4,554,167
  
Adjustments to reconcile to Net Investment Income, before Income Taxes
                                
Distributions paid in stock (1)
    
28,377
       (484,200 )    
56,514
       (937,720 )
Return of capital on distributions received from equity investments
     (2,864,138 )     (2,330,564 )     (4,717,386 )     (4,190,305 )
Capital gain incentive fees
    
-
       (1,367,168 )    
-
       (1,087,503 )
Net Investment Income, before Income Taxes
   $ (1,540,470 )   $ (1,804,915 )   $ (1,172,630 )   $ (1,661,361 )
                                 
                                 
                                 
(1) The only distributions paid in stock for the three and six months ended May 31, 2009 were from Abraxas Energy Partners, L.P. which were paid
          
in stock as a result of credit constraints and therefore were not included in DCF. Distributions paid in stock for the three and six months ended
          
May 31, 2008 represent paid-in-kind distributions from LONESTAR Midstream Partners, LP
                          
(2) Distributions paid as a percentage of Distributable Cash Flow.
                                
                                 



Tortoise Capital Resources Corporation
                        
STATEMENTS OF OPERATIONS (Unaudited)
                        
                         
   
For the three months ended May 31, 2009
    
For the three months ended May 31, 2008
    
For the six months ended May 31, 2009
    
For the six months ended May 31, 2008
  
Investment Income
                        
   Distributions from investments
                        
Control investments
   $
579,215
     $
344,597
     $
1,158,430
     $
627,501
  
Affiliated investments
    
836,038
      
1,709,792
      
1,665,376
      
3,359,680
  
Non-affiliated investments
    
465,272
      
719,544
      
1,776,490
      
1,407,467
  
   Total distributions from investments
    
1,880,525
      
2,773,933
      
4,600,296
      
5,394,648
  
   Less return of capital on distributions
     (2,864,138 )     (2,330,564 )     (4,717,386 )     (4,190,305 )
            Net distributions from investments
     (983,613 )    
443,369
       (117,090 )    
1,204,343
  
   Interest income from control investments
    
202,400
      
301,944
      
403,998
      
615,353
  
   Dividends from money market mutual funds
    
420
      
817
      
1,145
      
3,127
  
   Fee income
    
15,000
      
-
      
30,000
      
-
  
   Other income
    
-
      
-
      
-
      
28,987
  
Total Investment Income
     (765,793 )    
746,130
      
318,053
      
1,851,810
  
                                 
Operating Expenses
                                
   Base management fees
    
338,186
      
589,996
      
730,955
      
1,175,249
  
   Capital gain incentive fees (Note 4)
    
-
      
1,367,168
      
-
      
1,087,503
  
   Professional fees
    
145,017
      
164,131
      
274,109
      
315,882
  
   Administrator fees
    
15,782
      
27,408
      
34,111
      
54,558
  
   Directors' fees
    
22,080
      
22,083
      
43,737
      
44,746
  
   Reports to stockholders
    
15,408
      
13,056
      
30,481
      
25,971
  
   Fund accounting fees
    
8,735
      
8,550
      
16,740
      
17,038
  
   Registration fees
    
7,891
      
7,458
      
15,610
      
14,834
  
   Custodian fees and expenses
    
4,673
      
4,684
      
7,760
      
9,369
  
   Stock transfer agent fees
    
3,403
      
3,403
      
6,584
      
6,769
  
   Other expenses
    
13,025
      
11,742
      
24,464
      
23,629
  
Total Operating Expenses
    
574,200
      
2,219,679
      
1,184,551
      
2,775,548
  
   Interest expense
    
256,842
      
435,594
      
427,958
      
933,498
  
Total Expenses
    
831,042
      
2,655,273
      
1,612,509
      
3,709,046
  
   Less expense reimbursement by Adviser
     (56,365 )     (104,228 )     (121,826 )     (195,875 )
Net Expenses
    
774,677
      
2,551,045
      
1,490,683
      
3,513,171
  
Net Investment Loss, before Income Taxes
     (1,540,470 )     (1,804,915 )     (1,172,630 )     (1,661,361 )
     Deferred tax benefit (expense)
    
8,283
      
685,869
       (92,900 )    
631,318
  
Net Investment Loss
     (1,532,187 )     (1,119,046 )     (1,265,530 )     (1,030,043 )
                                 
Realized and Unrealized Gain (Loss) on Investments
                                
   Net realized loss on investments, before income taxes
     (7,335,157 )    
-
       (7,834,975 )    
-
  
Deferred tax expense
     (758,204 )    
-
       (620,717 )    
-
  
Net realized loss on investments
     (8,093,361 )    
-
       (8,455,692 )    
-
  
   Net unrealized appreciation (depreciation) of control investments
    
3,029,773
       (1,257,164 )    
3,157,483
      
3,336
  
   Net unrealized appreciation (depreciation) of affiliated investments
    
3,374,165
      
10,055,991
       (4,903,883 )    
9,749,617
  
   Net unrealized appreciation (depreciation) of non-affiliated investments
    
9,978,917
      
2,646,187
      
5,195,197
       (1,755,646 )
Net unrealized appreciation, before income taxes
    
16,382,855
      
11,445,014
      
3,448,797
      
7,997,307
  
Deferred tax benefit (expense)
     (3,284,590 )     (4,349,106 )    
273,227
       (3,038,977 )
Net unrealized appreciation of investments
    
13,098,265
      
7,095,908
      
3,722,024
      
4,958,330
  
Net Realized and Unrealized Gain (Loss) on Investments
    
5,004,904
      
7,095,908
       (4,733,668 )    
4,958,330
  
                                 
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
                          
   Resulting from Operations
   $
3,472,717
     $
5,976,862
     $ (5,999,198 )   $
3,928,287
  
                                 
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
                          
   Resulting from Operations Per Common Share:
                                
Basic and Diluted
   $
0.39
     $
0.67
     $ (0.67 )   $
0.44
  
                                 
Weighted Average Shares of Common Stock Outstanding:
                                
Basic and Diluted
    
9,000,174
      
8,876,540
      
8,981,369
      
8,858,213