ttpnq.htm




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY




Investment Company Act file number 811-22585



Tortoise Pipeline & Energy Fund, Inc.
(Exact name of registrant as specified in charter)


11550 Ash Street, Suite 300, Leawood, KS 66211
(Address of principal executive offices) (Zip code)



Terry Matlack
Diane Bono
11550 Ash Street, Suite 300, Leawood, KS 66211

(Name and address of agent for service)



913-981-1020
Registrant's telephone number, including area code



Date of fiscal year end: November 30


Date of reporting period: August 31. 2016
 
 
 
Item 1. Schedule of Investments.
 
Tortoise Pipeline & Energy Fund, Inc.
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
               
        August 31, 2016  
       Shares
Fair Value
  
Common Stock - 88.7%(1)
  
 
        
Crude Oil Pipelines - 26.9%(1)
            
Canada - 12.6%(1)
            
Enbridge Inc.
     281,987     $ 11,135,667  
Inter Pipeline Ltd.
     502,133       10,920,263  
Pembina Pipeline Corporation
     177,160       5,330,741  
United States - 14.3%(1)
                
Plains GP Holdings, L.P.
     2,059,195       23,433,639  
SemGroup Corporation
     251,765       7,829,892  
                58,650,202  
Natural Gas Gathering/Processing - 9.3%(1)
                
United States - 9.3%(1)
                
EnLink Midstream, LLC
     530,288       8,829,295  
Targa Resources Corp.
     263,723       11,493,048  
                20,322,343  
Natural Gas/Natural Gas Liquids Pipelines - 35.1%(1)
                
Canada - 11.5%(1)
                
Keyera Corp.
     58,564       1,808,187  
TransCanada Corporation
     513,716       23,348,392  
United States - 23.6%(1)
                
ONEOK, Inc.
     490,833       23,015,159  
Spectra Energy Corp
     687,868       24,501,858  
Tallgrass Energy GP, LP
     175,642       4,087,189  
                76,760,785  
Oil and Gas Production - 14.0%(1)
                
United States - 14.0%(1)
                
Anadarko Petroleum Corporation(2)
     30,500       1,630,835  
Antero Resources Corporation(2)(3)
     36,400       930,384  
Cabot Oil & Gas Corporation(2)
     115,900       2,854,617  
Carrizo Oil & Gas, Inc.(2)(3)
     20,100       769,629  
Cimarex Energy Co.(2)
     16,700       2,207,406  
Concho Resources Inc.(2)(3)
     24,400       3,152,480  
Continental Resources, Inc.(2)(3)
     22,900       1,098,284  
Diamondback Energy, Inc.(2)(3)
     10,400       990,600  
EOG Resources, Inc.(2)
     53,000       4,689,970  
EQT Corporation(2)
     8,300       593,450  
Gulfport Energy Corporation(2)(3)
     30,200       863,720  
Hess Corporation(2)
     10,200       553,860  
Laredo Petroleum, Inc.(2)(3)
     57,900       711,012  
Newfield Exploration Company(2)(3)
     31,500       1,365,840  
Noble Energy, Inc.(2)
     40,700       1,403,336  
Occidental Petroleum Corporation(2)
     7,200       553,320  
PDC Energy, Inc.(2)(3)
     2,300       152,720  
Pioneer Natural Resources Company(2)
     21,100       3,777,955  
Range Resources Corporation(2)
     31,800       1,226,526  
RSP Permian, Inc.(2)(3)
     24,600       960,630  
                30,486,574  
Refined Product Pipelines - 3.4%(1)
                
United States - 3.4%(1)
                
VTTI Energy Partners LP
     384,360       7,391,243  
                   
Total Common Stock (Cost $189,872,482)
             193,611,147  
                   
Master Limited Partnerships and Related Companies - 39.2%(1)
                
Crude Oil Pipelines - 15.1%(1)
                
United States - 15.1%(1)
                
Enbridge Energy Management, L.L.C.(4)
     760,852       17,316,998  
Genesis Energy L.P.
     76,499       2,737,899  
Plains All American Pipeline, L.P.
     166,915       4,683,635  
Shell Midstream Partners, L.P.
     34,207       1,042,287  
Sunoco Logistics Partners L.P.
     161,024       4,766,310  
Tesoro Logistics LP
     50,022       2,399,055  
 
               32,946,184  
Natural Gas/Natural Gas Liquids Pipelines - 9.3%(1)
                
United States - 9.3%(1)
                
Columbia Pipeline Partners LP
     13,783       187,035  
Energy Transfer Partners, L.P.
     290,907       11,618,826  
Enterprise Products Partners L.P.
     174,456       4,605,638  
EQT Midstream Partners, LP
     37,838       2,974,445  
Tallgrass Energy Partners, LP
     20,140       928,051  
                20,313,995  
Natural Gas Gathering/Processing - 9.3%(1)
                
United States - 9.3%(1)
                
DCP Midstream Partners, LP
     58,115       1,904,429  
EnLink Midstream Partners, LP
     60,432       1,066,625  
MPLX LP
     225,964       7,486,187  
Rice Midstream Partners LP
     42,736       976,945  
Western Gas Partners, LP
     35,547       1,788,725  
Williams Partners L.P.
     185,555       7,069,646  
                20,292,557  
Refined Product Pipelines - 5.5%(1)
                
United States - 5.5%(1)
                
Buckeye Partners, L.P.
     92,750       6,516,615  
Magellan Midstream Partners, L.P.
     35,211       2,476,390  
Phillips 66 Partners LP
     36,049       1,783,344  
Valero Energy Partners LP
     31,129       1,303,994  
                12,080,343  
                   
Total Master Limited Partnerships and Related Companies (Cost $79,063,940)
             85,633,079  
                   
Preferred Stock - 1.8%(1)
                
Natural Gas Gathering/Processing - 1.1%(1)
                
United States - 1.1%(1)
                
Targa Resources Corp., 9.500%(5)
     2,108       2,359,292  
                   
Oil and Gas Production - 0.7%(1)
                
United States - 0.7%(1)
                
Anadarko Petroleum Corporation, 7.500%, 06/07/2018
     39,500       1,508,900  
                   
Total Preferred Stock (Cost $3,577,521)
             3,868,192  
                   
Warrants - 0.4%(1)
                
Natural Gas Gathering/Processing - 0.4%(1)
                
United States - 0.4%(1)
                
Targa Resources Corp. - Series A, $18.88, 03/16/2023(3)(5)
     29,596       675,832  
Targa Resources Corp. - Series B, $25.11, 03/16/2023(3)(5)
     14,271       241,804  
                   
Total Warrants (Cost $304,733)
             917,636  
                   
Short-Term Investment - 0.0%(1)
                
United States Investment Company - 0.0%(1)
                
Government & Agency Portfolio - Institutional Class, 0.29%(6) (Cost $103,289)
     103,289       103,289  
                   
Total Investments - 130.1%(1) (Cost $272,921,965)
             284,133,343  
Total Value of Options Written (Premiums received $350,280) - (0.1)%(1)
             (195,685 )
Other Assets and Liabilities - (0.2)%(1)
             (569,297 )
Credit Facility Borrowings - (6.9)%(1)
             (15,000,000 )
Senior Notes - (15.6)%(1)
             (34,000,000 )
Mandatory Redeemable Preferred Stock at Liquidation Value - (7.3)%(1)
             (16,000,000 )
Total Net Assets Applicable to Common Stockholders - 100.0%(1)
           $ 218,368,361  
                   
                   
(1)
Calculated as a percentage of net assets applicable to common stockholders.
                
(2)
All or a portion of the security represents cover for outstanding call option contracts written.
          
(3)
Non-income producing security.
                
(4)
Security distributions are paid-in-kind.
                
(5)
Restricted securities have been fair valued in accordance with procedures approved by the Board of Directors and have
  
 
a total fair value of $3,276,928, which represents 1.5% of net assets.
 
(6)
Rate indicated is the current yield as of August 31, 2016.
                
 
 
 

Tortoise Pipeline & Energy Fund, Inc.
          
SCHEDULE OF OPTIONS WRITTEN (Unaudited)
      
August 31, 2016
    
 
      
             
Call Options Written
Expiration
Date
Strike Price
Contracts
 Fair Value
Anadarko Petroleum Corporation
September 2016
 $                              57.50
  
                305
 $                                           (10,675)
Antero Resources Corporation
September 2016
             29.00
  
                241
            (1,632)
Antero Resources Corporation
September 2016
             29.50
  
                123
               (616)
Cabot Oil & Gas Corporation
September 2016
             26.50
  
             1,159
          (19,467)
Carrizo Oil & Gas, Inc.
September 2016
             39.50
  
                108
            (9,973)
Carrizo Oil & Gas, Inc.
September 2016
             40.00
  
                  93
            (6,510)
Cimarex Energy Co.
September 2016
           140.00
  
                167
          (10,438)
Concho Resources Inc.
September 2016
           143.50
  
                244
            (8,559)
Continental Resources, Inc.
September 2016
             51.50
  
                229
          (13,202)
Diamondback Energy, Inc.
September 2016
           105.00
  
                104
            (1,144)
EOG Resources, Inc.
September 2016
             97.50
  
                530
            (2,650)
EQT Corporation
September 2016
             72.50
  
                  83
            (9,710)
Gulfport Energy Corporation
September 2016
             28.50
  
                126
          (11,810)
Gulfport Energy Corporation
September 2016
             29.00
  
                176
          (12,345)
Hess Corporation
September 2016
             60.00
  
                102
            (1,530)
Laredo Petroleum, Inc.
September 2016
             13.00
  
                292
          (10,220)
Laredo Petroleum, Inc.
September 2016
             13.60
  
                287
            (7,513)
Newfield Exploration Company
September 2016
             49.00
  
                315
            (1,890)
Noble Energy, Inc.
September 2016
             37.50
  
                407
            (8,140)
Occidental Petroleum Corporation
September 2016
             80.00
  
                  72
               (576)
PDC Energy, Inc.
September 2016
             68.25
  
                  23
            (3,121)
Pioneer Natural Resources Company
September 2016
           197.50
  
                211
          (18,462)
Range Resources Corporation
September 2016
             41.00
  
                318
          (15,900)
RSP Permian, Inc.
September 2016
             41.50
  
                  88
            (4,597)
RSP Permian, Inc.
September 2016
             42.75
  
                158
            (5,005)
             
Total Value of Call Options Written (Premiums received $350,280)
    
 $                                      (195,685)


 
 
 

Various inputs are used in determining the fair value of the Company’s investments and financial instruments.  These inputs are summarized in the three broad levels listed below:

Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)
Level 3 – significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments)
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following table provides the fair value measurements of applicable assets and liabilities by level within the fair value hierarchy as of August 31, 2016.  These assets and liabilities are measured on a recurring basis.

 
Description
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Assets
                        
Investments:
                        
Common Stock(a)
   $ 193,611,147     $ -     $ -     $ 193,611,147  
Master Limited Partnerships and Related Companies(a)
     85,633,079       -       -       85,633,079  
Preferred Stock(a)
     1,508,900       -       2,359,292       3,868,192  
Warrants(a)
     -       -       917,636       917,636  
Short-Term Investment(b)
     103,289       -       -       103,289  
Total Assets
   $ 280,856,415     $ -     $ 3,276,928     $ 284,133,343  
Liabilities
                                
Written Call Options
   $ 88,135     $ 107,550     $ -     $ 195,685  
 
(a)  
All other industry classifications are identified in the Schedule of Investments.
(b)  
Short-term investment is a sweep investment for cash balances.
 
The Company utilizes the beginning of reporting period method for determining transfers between levels.  During the period ended August 31, 2016, Rice Midstream Partners LP common units held by the Company in the amount of $558,987 were transferred from Level 2 to Level 1 when they converted into registered and unrestricted common units of Rice Midstream Partners LP.  There were no other transfers between levels for the Company during the period ended August 31, 2016.

Valuation Techniques

In general, and where applicable, the Company uses readily available market quotations based upon the last updated sales price from the principal market to determine fair value. The Company primarily owns securities that are listed on a securities exchange or are traded in the over-the-counter market. The Company values those securities at their last sale price on that exchange or over-the-counter market on the valuation date. If the security is listed on more than one exchange, the Company uses the price from the exchange that it considers to be the principal exchange on which the security is traded. Securities listed on the NASDAQ are valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or over-the-counter market on such day, the security is valued at the mean between the last bid price and last ask price on such day. These securities are categorized as Level 1 in the fair value hierarchy.
 
Restricted securities are subject to statutory or contractual restrictions on their public resale, which may make it more difficult to obtain a valuation and may limit the Company's ability to dispose of them. Investments in private placement securities and other securities for which market quotations are not readily available are valued in good faith by using certain fair value procedures. Such fair value procedures consider factors such as discounts to publicly traded issues, time until conversion date, securities with similar yields, quality, type of issue, coupon, duration and rating. If events occur that affect the value of the Company's portfolio securities before the net asset value has been calculated (a “significant event”), the portfolio securities so affected are generally priced using fair value procedures.

An equity security of a publicly traded company acquired in a private placement transaction without registration under the Securities Act of 1933, as amended (the “1933 Act”), is subject to restrictions on resale that can affect the security's liquidity and fair value. If such a security is convertible into publicly-traded common shares, the security generally will be valued at the common share market price adjusted by a percentage discount due to the restrictions and categorized as Level 2 in the fair value hierarchy. To the extent that such securities are convertible or otherwise become freely tradable within a time frame that may be reasonably determined, an amortization schedule may be used to determine the discount. If the security has characteristics that are dissimilar to the class of security that trades on the open market, the security will generally be valued and categorized as Level 3 in the fair value hierarchy.
 
Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity.  Unobservable inputs shall reflect the Company’s own beliefs about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs shall be developed based on the best information available in the circumstances, which might include the Company’s own data. The Company’s own data shall be adjusted if information is reasonably available without undue cost and effort that indicates that market participants would use different assumptions.
 
Exchange-traded options are valued at the last reported sale price on any exchange on which they trade. If no sales are reported on any exchange on the measurement date, exchange-traded options are valued at the mean between the last highest bid and last lowest asked prices obtained as of the closing of the exchanges on which the option is traded. The value of Flexible Exchange Options (FLEX Options) are determined (i) by an evaluated price as determined by a third-party valuation service; or (ii) by using a quotation provided by a broker-dealer.

The Company generally values debt securities at evaluated bid prices obtained from an independent third-party valuation service that utilizes a pricing matrix based upon yield data for securities with similar characteristics, or based on a direct written broker-dealer quotation from a dealer who has made a market in the security. Debt securities with 60 days or less to maturity at time of purchase are valued on the basis of amortized cost, which approximates market value.
 
The following table presents the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended August 31, 2016.
 
   
Preferred Stock
    
Warrants
  
Balance – beginning of period
   $ -     $ -  
Purchases
     1,866,506       304,734  
Return of capital
     (92,341 )     -  
Sales
     -       -  
Total realized gains
     -       -  
Change in unrealized gains
     585,127       612,902  
Balance – end of period
   $ 2,359,292     $ 917,636  

The $1,198,029 of unrealized gains relate to investments that are still held at the end of the reporting period.

Certain of the Company’s investments are restricted and are valued as determined in accordance with fair value procedures.  The following table shows the principal amount or shares, acquisition date(s), acquisition cost, fair value and the percent of net assets which the securities comprise at August 31, 2016.
 
Investment Security
 
Investment Type
  
Shares
  
Acquisition Date
  
Acquisition Cost
    
Fair Value
    
Fair Value as Percent of Net Assets
  
Targa Resources Corp., 9.500%
Preferred Stock
     2,108  
03/16/16
   $ 1,866,506     $ 2,359,292       1.1 %
Targa Resources Corp., Series A, $18.88, 03/16/2023
Warrants
     29,596  
03/16/16
     224,854       675,832       0.3  
Targa Resources Corp., Series B, $25.11, 03/16/2023
Warrants
     14,271  
03/16/16
     79,880       241,804       0.1  
                $ 2,171,240     $ 3,276,928       1.5 %
 
As of August 31, 2016, the aggregate cost of securities for federal income tax purposes was $259,900,276. The aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over tax cost was $36,704,602, the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over fair value was $12,471,535 and the net unrealized appreciation was $24,233,067.

 
 
 

Item 2. Controls and Procedures.
(a)  
The registrant’s Chief Executive Officer and its Principal Financial Officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b)  
There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3. Exhibits.
Separate certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) are filed herewith.

 
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
Tortoise Pipeline & Energy Fund, Inc.
  
       
Date: October 27, 2016
By:
/s/ P. Bradley Adams  
    P. Bradley Adams  
    Chief Executive Officer  
       



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 
Tortoise Pipeline & Energy Fund, Inc.
  
       
Date: October 27, 2016
By:
/s/ P. Bradley Adams  
    P. Bradley Adams  
    Chief Executive Officer  
       
 
Tortoise Pipeline & Energy Fund, Inc.
  
       
Date: October 27, 2016
By:
/s/ Brent Behrens  
    Brent Behrens  
    Principal Financial Officer and Treasurer