EQUUS ANNOUNCES FOURTH QUARTER NET ASSET VALUE
March 31 2020 - 04:30PM
Equus Total Return, Inc. (NYSE: EQS) (the “Fund”
or “Equus”) reports net assets as of December 31, 2019, of $46.0
million, a decrease of approximately $3.0 million since September
30, 2019. Net asset value per share decreased to $3.40 as of
December 31, 2019 from $3.63 as of September 30, 2019.
Comparative data is summarized below (in thousands, except
per share amounts):
As of the Quarter Ended |
12/31/2019 |
9/30/2019 |
6/30/2019 |
3/31/2019 |
12/31/2018 |
Net assets |
$ |
45,989 |
$ |
49,024 |
$ |
47,933 |
$ |
46,552 |
$ |
43,495 |
Shares outstanding |
|
13,518 |
|
13,518 |
|
13,518 |
|
13,518 |
|
13,518 |
Net assets per share |
$ |
3.40 |
$ |
3.63 |
$ |
3.55 |
$ |
3.44 |
$ |
3.22 |
The following were the portfolio companies that
had significant changes to their fair values during the fourth
quarter of 2019:
- Decrease in the Value of
Equus Energy. The Fund established Equus Energy, LLC
(“Equus Energy”) as a wholly-owned subsidiary in 2011 to be used as
a platform for energy-related investments, with particular emphasis
on oil and gas enterprises. Equus Energy owns various working
interests, which are presently derived from 141 producing and
non-producing oil and gas wells, including associated development
rights of approximately 21,520 acres, situated on 11 separate
properties in Texas and Oklahoma. The working interests range from
a de minimus amount to 50% of the leasehold that includes these
wells. Also included in the interests acquired by Equus Energy are
working interests of 7.5% and 2.5% in the Burnell and North Pettus
Units, respectively, which collectively comprise approximately
13,000 acres located in the area known as the “Eagle Ford Shale”
play. During the fourth quarter of 2019, the price of natural
gas continued to decline and the short and long-term pricing curves
for oil and gas declined substantially, resulting in a decline in
the fair value of this holding from $10.5 million as of September
30, 2019 to $8.0 million as of December 31, 2019. The Fund
received advice and assistance from a third-party valuation firm to
support its determination of the fair value of this
investment. Recent events, however, may likely have a
materially negative impact on the value of this investment as of
the end of the first quarter of 2020 (see A Note About the
Coronavirus and Other Events below).
- Increase in the Value of
MVC Capital Shares. The trading price of MVC
Capital, Inc.’s (“MVC”) common stock increased from $8.90 per share
on September 30, 2019 to $9.17 per share as of December 31,
2019. In addition, the Fund also received 10,338 MVC shares
as dividends during the quarter, resulting in a total of 563,894
MVC shares held at December 31, 2019. The fair value of this
holding increased from $5.0 million at September 30, 2019 to $5.2
million as of December 31, 2019. Recent events, however, may
likely have a materially negative impact on the value of this
investment as of the end of the first quarter of 2020 (see A Note
About the Coronavirus and Other Events below).
A Note About The Coronavirus and Other
Events
The Impact of the Coronavirus Generally.
The introduction in late 2019 of SARS-CoV-2, also known as the
pathogen that causes COVID-19, coronavirus disease, or simply, the
“coronavirus”, has had a substantial detrimental impact on markets
and economic forecasts for governments and businesses worldwide,
and could have a materially adverse impact upon our operations and
that of our portfolio companies, although the extent of the impact
cannot be determined at the present time. The World Health
Organization has declared the coronavirus a pandemic, underscoring
the global nature of the spread of the virus and, as of the date of
filing of this release, the President of the United States has
declared a national emergency to enable federal and state
governments to access federal emergency funds and resources.
National, state, and local governments across the United States
have already implemented significant travel, movement, and assembly
restrictions, as well as restrictions on the movement of goods, all
of which are expected to have a material adverse impact upon
consumer and business demand. If the coronavirus continues to
spread, or if the economic disruption caused thus far by the
coronavirus continues, our operations and financial condition could
be materially adversely affected.
Impact of the Coronavirus on Our Operations. The
highly contagious nature of the coronavirus has caused numerous
private and public organizations to substantially alter the way in
which they operate. Many such organizations have, to the extent
possible, required employees to work remotely to reduce
opportunities for contagion. We have also taken steps to minimize
the exposure of our employees and service providers by requiring
all such persons to work from a remote location. We utilize a
cloud-based storage and retrieval system for our records and can
communicate electronically or by telephone with third parties such
as our financial institutions, legal and accounting advisors, and
our portfolio companies. However, government directives on social
distancing and shelter-in-place mandates have rendered us unable to
travel to attend board meetings, negotiations, and other functions
which are endemic to the interpersonal nature of private equity
investing. Should these disruptions and restrictions on travel
continue as a result of the coronavirus, we cannot, therefore,
assure you that our operations will not be materially adversely
affected thereby.
Impact of the Coronavirus on Our Portfolio
Companies. Our portfolio companies may be affected by various
force majeure events that include the recent global outbreak of the
coronavirus. These events may have a material adverse impact
on our portfolio companies’ supply chains, limit access to key
commodities or technologies, otherwise impact their customers,
manufacturers or suppliers or otherwise cause material disruptions
to their industry or the industries they serve. In the case of the
coronavirus, such a force majeure event could have a broader
negative impact on the world economy and international business
activity generally. A substantial negative impact to one or more of
our portfolio companies as a result of the coronavirus could have a
material adverse effects on our business, financial condition and
results of operations.
Impact of Geopolitical Events and the
Coronavirus on the Oil and Gas Sector. The substantial recent
downturn in world markets has been prominent in the oil and gas
sector, with crude prices falling to 18-year lows in mid-March
2020. The collapse in prices was the result of a price war
between the Russian Federation and Saudi Arabia and a massive drop
in forecasted demand as a consequence of the coronavirus. Should
prices not recover to sustainable levels, a number of smaller oil
and gas firms that have incurred leverage could experience severe
economic challenges, including insolvency and bankruptcy.
Other firms, such as Equus Energy, could see future capital
expenditures to generate additional reserves from existing mineral
interests postponed indefinitely, which could have a material
adverse effect upon the operations and financial condition of Equus
Energy.
About Equus
The Fund is a business development company that
trades as a closed-end fund on the New York Stock Exchange under
the symbol "EQS". Additional information on the Fund may be
obtained from the Fund’s website at www.equuscap.com.
This press release may contain certain
forward-looking statements regarding future circumstances. These
forward-looking statements are based upon the Fund’s current
expectations and assumptions and are subject to various risks and
uncertainties that could cause actual results to differ materially
from those contemplated in such forward-looking statements
including, in particular, the performance of the Fund, including
our ability to achieve our expected financial and business
objectives, and the other risks and uncertainties described in the
Fund’s filings with the SEC. Actual results, events, and
performance may differ. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
to the date hereof. Except as required by law, the Fund undertakes
no obligation to release publicly any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The inclusion of any statement in this
release does not constitute an admission by the Fund or any other
person that the events or circumstances described in such
statements are material.
Contact:
Patricia Baronowski Pristine Advisers, LLC (631) 756-2486
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