Apollo Investment Corp. (NASDAQ:AINV) capped off a rocky year with its fiscal fourth-quarter earnings report before the bell on Tuesday.

In Q4 the company earned $0.22 per share in net investment income, a measure that excludes gains and losses in its portfolio of investments. When gains and losses are included, the company lost $0.05 per share.

Its net asset value (book value) declined from $8.43 to $8.18 per share during the quarter due to the payment of a $0.20 dividend and portfolio losses in excess of portfolio gains.

Oil exposure crimps book value
Apollo Investment has significant exposure to the oil and gas industry, which has suffered lately due to depressed commodity prices. In its 2015 fiscal year, Apollo's energy-related investments were the largest source of unrealized and realized losses on its portfolio investments.

The company saw net realized losses of $13.4 million for the fiscal 2015 year. Net unrealized losses -- i.e., writedowns on portfolio investments it hasn't realized through a sale -- came to $139.2 million.

The unrealized losses are heavily concentrated in energy-related investments, with $61.9 million in losses coming from just two energy investments, Venoco and LVI Group, during the 2015 fiscal year.

Company management previously indicated that it underwrote its investments based on an oil price of $80 per barrel and that it generally requires its oil borrowers to hedge at least 80% of their oil exposure for "two to three years." As time goes on and Apollo's portfolio companies' hedges fall off, one would expect its portfolio performance to more closely follow changes in oil prices from quarter to quarter.

Notably, oil prices have trended higher since the quarter ended on March 31, 2015, moving from roughly $56 to $60 per barrel.

Recent portfolio moves
Apollo Investment's management made it a goal to sell off some of its "legacy" private equity investments in the 2015 calendar year. It believes it can monetize its investments at higher multiples of earnings and use the proceeds to invest in high-yielding debt investments.

Yesterday, after the quarter ended, the company announced the sale of PlayPower, its third-largest portfolio investment at 3.4% of the total portfolio at fair value. The company marked its investments in PlayPower at roughly $115.3 million as of the end of Q4.

PlayPower is not a cash-flowing asset for Apollo, as it did not pay any cash to Apollo during the 2015 fiscal year. Selling PlayPower to redeploy the proceeds into interest-producing debt investments should be a driver of interest income going forward.

Roughly $500 million (15%) of Apollo's portfolio at fair value is currently dedicated to equity investments -- preferred, common, and warrants. Excluding PlayPower and aircraft leasing unit Merx Aviation, Apollo has roughly $220 million in additional equity investments that it could monetize to rotate into yielding investments.

Given Apollo's yield of 10%, a full rotation of its equity investments (excluding Merx Aviation) into debt investments could add cash net investment income of roughly $0.11 per share annually. This will be something to watch carefully as Apollo seeks ways to drive routine interest income to support its beefy quarterly dividend.