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                            [Clifford Chance Letterhead]

July 18, 2006

Securities and Exchange Commission
Judiciary Plaza
100 F Street, NE
Washington, D.C. 20549
Attention: Vincent Di Stefano, Division of Investment Management

RE:  PROSPECT ENERGY CORPORATION
     FILE NOS. 333-132575 AND 814-659

Dear Mr. Di Stefano:

     Thank you for your telephonic comments on July 13, 2006 regarding the
registration statement on Form N-2 (the "Registration Statement") for Prospect
Energy Corporation (the "Fund") filed with the Securities and Exchange
Commission (the "Commission") on March 20, 2006. The Registration Statement
relates to the shelf offering of the Fund. Below, we describe the changes made
to the Registration Statement in response to the Staff's comments and provide
any responses to or any supplemental explanations of such comments, as
requested.

     The Fund has considered the Staff's comments and has authorized us to make
on its behalf the responses and changes discussed below to the Registration
Statement. These changes will be reflected in pre-effective amendment No. 2 to
the Registration Statement, which will be filed via EDGAR shortly after we have
confirmed with you that the responses below are acceptable.

COMMENTS TO PROSPECTUS
----------------------

COMMENT 1. PLEASE REVISE THE DISCLOSURE TO INCLUDE THE MATERIAL TERMS OF THE
           SUBJECT SECURITIES SUCH AS PREFERRED STOCK, WARRANTS OR DEBT
           SECURITIES.

               Response 1. Language has been added accordingly, as reflected in
               the attached pages 76 to 85.

COMMENT 2. PLEASE REMOVE THE FOOTNOTES FROM BETWEEN THE FEE TABLE AND EXAMPLE
           AND INSERT THEM IMMEDIATELY AFTER THE EXAMPLE.

               Response 2. We have moved the footnotes to immediately after the
               Example, as reflected in the attached pages 7 to 10.

COMMENT 3. THE FIRST PARAGRAPH OF "RISK FACTORS-POTENTIAL CONFLICTS OF INTEREST
           COULD IMPACT OUR INVESTMENT RETURNS" STATES THAT THE FUND'S EXECUTIVE
           OFFICERS AND DIRECTORS AND MANAGEMENT OF THE INVESTMENT ADVISER MAY
           HAVE OBLIGATIONS TO INVESTORS IN OTHER ENTITIES. PLEASE DISCLOSE THE
           POTENTIAL CONFLICT OF INTEREST ISSUES (GIVE EXAMPLES) AND WHAT
           PROCEDURE THE COMPANY WILL TAKE TO RESOLVE THEM.

               Response 3. We have revised this risk factor to address this
               comment, as reflected on the attached page 18.

COMMENT 4. PLEASE FILE COUNSEL OPINION.

               Response 4. We will file our opinion with pre-effective amendment
               No. 2 to the Registration Statement.

COMMENT 5. ON PAGE 6 OF THE "FEES AND EXPENSES" SECTION, PLEASE ADD "AND USED
           THE CONTRACTUAL FEE DUE TO THE INVESTMENT ADVISER." AT THE END OF THE
           EXISTING SENTENCE "THE TABLE IS BASED ON OUR NET ASSETS OF MARCH 31,
           2006 AND ASSUMES THAT WE HAVE BORROWED ALL $30 MILLION AVAILABLE
           UNDER OUR LINE OF CREDIT ON THAT DATE."

               Response 5. The language has been revised accordingly, as
               reflected on the attached page 7.

COMMENT 6. FOOTNOTE (6) ON PAGE 7 SAYS "IN THE CHART ABOVE, WE HAVE ASSUMED A
           PRE-INCENTIVE FEE NET INVESTMENT OF INCOME OF 10.20% AS A PERCENTAGE
           OF NET ASSETS." WHERE DOES THE 10.20% COME FROM?

               Response 6. 10.20% is based on the actual amount of the incentive
               fee paid by the Fund for the quarter ended March 31, 2006.

COMMENT 7. IN THE "EXAMPLE" OF EXPENSES TABLE FOR 1, 3, 5, AND 10 YEARS, THE
           NUMBERS SEEM LOW. PLEASE REVISE TO TAKE INTO ACCOUNT THE TRANSACTION
           EXPENSES.

               Response 7. The expense figures have been revised accordingly.

     If you would like to discuss any of these responses in further detail or if
you have any questions, please feel free to contact me at (212) 878-8489. Thank
you.

Best Regards,

/s/ Leonard B. Mackey

Leonard B. Mackey

Attachments

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Fees and Expenses

The following table is intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly.  We caution you that some of the percentages indicated in the table below are estimates and may vary.  The table is based on our net assets at March 31, 2006 and assumes that we have borrowed all $30 million available under our line of credit on that date and used the contractual fee due to the Investment Adviser.  Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by "you," "us" or "Prospect Energy," or that "we" will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Prospect Energy.

Stockholder transaction expenses:

Sales load (as a percentage of offering price)(1)

 5.50%

Offering expenses borne by us (as a percentage of offering price)(2)

 1.32%

Dividend reinvestment plan expenses (3)

 None

Total stockholder transaction expenses (as a percentage of offering price)(4)

 6.82%

Annual expenses (as a percentage of net assets attributable to common stock)*:

Base management fee

 2.60%(5)

Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of pre-incentive fee net investment income)

 2.04%(6)

Interest payments on borrowed funds

 2.58%(7)

Other expenses

 1.96%(8)

Total annual expenses (estimated)

 9.18%(6)(8)(9)

Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock.  In calculating the following expense amounts, we have assumed we would have no leverage and that our annual operating expenses would remain at the levels set forth in the table above.

  1 year

 3 years

 5 years

 10 years

You would pay the following expenses on a $1,000 investment, assuming

a 5% annual return

 $162

 $338

 $499

 $843

While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%.  The income incentive fee under the Investment Advisory Agreement would be zero at the 5% annual return assumption, as required by the SEC for this table, since no incentive fee is paid until the annual return exceeds 7%; however, the income incentive fee currently being earned is nevertheless used to aggregate total expenses in the example as if the annual return were at the level recently achieved, which is higher than 5%, in accordance with SEC requirements.  Accordingly, the resulting calculations overstate expenses at the 5% annual return as these calculations do not reflect the provisions of the Investment Advisory Agreement as it would actually be applied in the case of a 5% annual return.  This illustration assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation in any of the indicated time periods.  If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors after such expenses, would be higher.  In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the dividend.  See "Dividend reinvestment plan" for additional information regarding our dividend reinvestment plan.

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This example and the expenses in the table above should not be considered a representation of our future expenses.  Actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

*                Net assets attributable to our common stock equal net assets (i.e., total assets less liabilities other than liabilities for money borrowed for investment purposes) at March 31, 2006.

(1)              In the event that the Securities to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load.

(2)              The related prospectus supplement will disclose the estimated amount of offering expenses, the offering price and the offering expenses borne by us as a percentage of the offering price.

(3)              The expenses of the dividend reinvestment plan are included in "other expenses."

(4)              The related prospectus supplement will disclose the offering price and the total stockholder transaction expenses as a percentage of the offering price.

(5)              Our base management fee is 2.00% of our gross assets (which include any amount borrowed, i.e., total assets without deduction for any liabilities).  Assuming that we have borrowed $30 million, the 2.00% management fee of gross assets equals 2.60% of net assets.  See "Management—Investment Advisory Agreement" and footnote 6 below.

(6)              We expect to invest all of the net proceeds from securities registered under the registration statement of which this prospectus is a part within three years or less of the date of the initial registration and may have capital gains and interest income that could result in the payment of an incentive fee to our Investment Adviser in the first year after completion of this offering. However, the incentive fee payable to our investment adviser is based on our performance and will not be paid unless we achieve certain goals. In the chart above, we have assumed aour pre-incentive fee net investment income ofis an amount equal to 10.20% as a percentage of our net assets.  The incentive fee consists of two parts.  The first part, the income incentive fee, which is payable quarterly in arrears, will equal 20% of the excess, if any, of our pre-incentive fee net investment income that exceeds a 1.75% quarterly (7% annualized) hurdle rate, subject to a "catch up" provision measured as of the end of each calendar quarter.  In April 2006, we paid an incentive fee of $531,489 (see calculation below).  We expect the incentive fees we pay to increase to the extent we earn greater interest and dividend income through our investments in portfolio companies and, to a lesser extent, realize capital gains upon the sale of warrants or other equity investments in our portfolio companies.  Our Investment Adviser has voluntarily agreed that, for each fiscal quarter after January 1, 2005, the quarterly hurdle rate will be equal to the greater of (a) 1.75% and (b) a percentage equal to (i) the sum of the daily average of the "quoted treasury rate" for each month in the immediately preceding two quarters plus (ii) 0.50%.  Our Investment Adviser may terminate this voluntary agreement at any time upon 90 days' prior notice.  The "catch-up" provision requires us to pay 100% of our pre-incentive fee net investment income with respect to that portion of such income, if any, that exceeds the hurdle rate but is less than 125% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming an annualized hurdle rate of 7%).  The catch-up provision is meant to provide our Investment Adviser with 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply when our pre-incentive fee net investment income exceeds 125% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming an annualized hurdle rate of 7%).  The income incentive fee will be computed and paid on income that may include interest that is accrued but not yet received in cash.  Our pre-incentive fee net investment income used to calculate the income incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee (see footnote 5 above).  The second part of the incentive fee, the capital gains incentive fee, will equal 20% of our realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation.

Examples of how the incentive fee is calculated are as follows:

Assuming pre-incentive fee net investment income of 0.55%, there would be no income incentive fee because such income would not exceed the hurdle rate of 1.75%.

Assuming pre-incentive fee net investment income of 2.00%, the income incentive fee would be as follows:

= 100% × (2.00%—1.75%)

= 0.25%

Assuming pre-incentive fee net investment income of 2.30%, the income incentive fee would be as follows:

= (100% × ("catch-up": 2.1875%—1.75%)) + (20% × (2.30%—2.1875%))

= (100% × 0.4375%) + (20% × 0.1125%)

= 0.4375% + 0.0225%

= 0.46%

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Assuming net realized capital gains of 6% and realized capital losses and unrealized capital depreciation of 1%, the capital gains incentive fee would be as follows:

= 20% × (6% – 1%)

= 20% × 5%

= 1%

The following is a calculation of the most recently paid Incentive fee of $531,489 in April 2006:

Prior Quarter Net Asset Value

 $105,363,891

Quarterly Hurdle Rate

 1.7500%**

Current Quarter Hurdle

 $1,843,868

125% of the Quarterly Hurdle Rate

 2.1875%

125% of the Current Quarter Hurdle

 $2,304,835

Current Quarter Pre Incentive Fee Net Investment Income

 $2,657,446

Incentive Fee – "Catch-Up"

 $460,967

Incentive Fee – 20% in excess of 125% of the Current Quarter Hurdle

 $70,522

Total Current Quarter Incentive Fee

 $531,489

** Please note that the quoted treasury rate plus 0.50% was 1.5575%, therefore the quarterly hurdle rate of 1.75% was used.

For a more detailed discussion of the calculation of the two-part incentive fee, see "Management—Investment Advisory Agreement."

(7)              Although we may incur indebtedness before the proceeds of an offering are substantially invested, we have not yet decided to what extent we will finance investments using debt.  We currently have $30 million available to us under a credit facility.  For more information, see "Risk Factors—Changes in interest rates may affect our cost of capital and net investment income" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources, Capital Raising Activities."  The table above assumes that we have borrowed all $30 million available under our line of credit.  The table below shows our estimated annual expenses as a percentage of net assets attributable to common stock, assuming that we did not incur any indebtedness.

Base management fee

 2.03%

Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of

pre-incentive fee net investment income)

 2.04%

Interest payments on borrowed funds

 None

Other expenses

 1.96%

Total annual expenses (estimated)

 6.03%

(8)              "Other expenses" is based on an estimate of expenses during the current fiscal year representing all of our estimated recurring operating expenses (except fees and expenses reported in other items of this table) that are deducted from our operating income and reflected as expenses in our Statement of Operations.  The estimate of our overhead expenses, including payments under the administration agreement based on our projected allocable portion of overhead and other expenses incurred by Prospect Administration in performing its obligations under the administration agreement.  "Other expenses" does not include non-recurring expenses.  See "Management—Administration Agreement."

(9)              Total annual expenses as a percentage of net assets attributable to our common stock are higher than the total annual expenses percentage would be for a