The FORT Podcast – Ken Hersh – Co-Founder NGP Energy Capital Management – The Godfather of Energy Private Equity
Ken Hersh is a co-founder of Natural Gas Partners, one of the most influential private equity firms focused on energy investing with a track record spanning several decades. Known for pioneering a people-first investment model, he helped reshape the oil and gas landscape by backing entrepreneurial owner-operators rather than just assets. Hersh’s approach has been instrumental in driving the unconventional shale revolution and changing how capital flows into the energy sector.
Chris Powers and Hersh discuss the origins and lessons learned from early investments and the critical pivot from commodity betting to partnering with strong management teams. They explore how the shale revolution unfolded, the importance of intellectual honesty in investing, and what it takes to build lasting partnerships in a volatile industry.
They also touch on:
- How a focus on entrepreneurial teams over assets became the foundation for lasting value creation
- The role of networking and culture in energy sourcing and sustaining investments
- Insights into the evolution and complexities of unconventional shale drilling
- Fundraising challenges and strategies amidst market upheavals
- The enduring influence of Richard Rainwater on Hersh’s investment philosophy
Listen on:
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Topics
(00:00:00) – Intro
(00:03:53) – Ken’s early career
(00:16:36) – Richard Rainwater and creating NGP
(00:29:25) – The original thesis for NGP
(00:34:55) – Scaling NGP
(00:46:36) – The Shale revolution
(00:49:29) – Horizontal Drilling in 2025
(00:51:45) – The importance of having a great business partner
(00:54:01) – Is “Let’s back teams” still the best model for investing?
(00:55:01) – Ken’s approach to raising capital
(00:56:37) – Is there a modern day Richard Rainwater?
(00:58:34) – When a deal goes wrong
(01:06:04) – The global state of energy in 2025
Episode Summary
Ken Hersh, a seasoned investor and co-founder of Natural Gas Partners, joined Chris Powers to discuss his extensive experience in energy investment, focusing on principal investing strategies and the evolution of the oil and gas industry over several decades. Hersh began by sharing his early career, launching a $100 million fund while still at Stanford, with an initial thesis centered on benefiting from rising natural gas prices. However, he quickly realized that commodity price trends could be unreliable, prompting a shift in approach toward backing strong management teams capable of thriving in various market conditions.
The conversation delved into the strategic pivot from solely betting on commodity price increases to prioritizing “owner managers” and entrepreneurial teams who demonstrate the ability to make operational improvements regardless of external price pressures. Hersh emphasized the importance of intellectual honesty when evaluating deals, noting that success often relies on leaders who can turn challenging situations into opportunities. Their model focused on providing capital to passionate managers willing to invest their own money alongside, ensuring alignment of interests.
Hersh detailed how their firm identified opportunities by actively networking across major energy hubs, such as Houston, Midland, Calgary, and Denver. This grassroots outreach allowed them to find entrepreneurs with promising ideas who required capital rather than assets. Their approach contrasted with competitors who staffed internal engineering teams; instead, Hersh’s team concentrated on financial oversight and cultural evaluation, letting operators lead technical decisions.
The discussion then turned to the shale revolution, which Hersh described as largely sparked by George Mitchell’s innovations with horizontal drilling and hydraulic fracturing in the Barnett Shale. While their firm wasn’t the originator, they were fast followers, quickly adopting new drilling technologies to enhance production. Hersh pointed out that this disruption reshaped the industry from the 1990s onwards, eventually drawing major oil companies back into unconventional shale plays after years of divestiture.
Hersh underscored the complex geology of shale plays, explaining how horizontal drilling targets multiple formations stacked vertically, which often appear as multiple wells placed closely on the surface but in fact penetrate vastly different reservoirs. This technical sophistication required investment partners who understood operational nuances but refrained from micromanaging, focusing instead on financial discipline, culture, and leadership quality.
Reflecting on the firm’s culture, Hersh highlighted their hands-off yet engaged partnership style, stressing the importance of nurturing strong management teams and maintaining clear communication. He contrasted their approach with that of competitors, who sometimes demanded micromanagement through internal engineering teams, which could stifle operational independence. Hersh stressed that successful investing involves giving operators the “rope they can handle” while overseeing financial and strategic performance.
Hersh also shared insights on fundraising history, recounting how their initial limited partner, The Equitable, faced bankruptcy in the early 1990s, which forced them to diversify their investor base. Through consistent performance and transparent communication, they expanded their network to include university endowments and other institutional investors, building credibility over multiple funds.
Part of the dialogue addressed learning from failure, with Hersh discussing a significant setback involving a large acquisition that failed amid the 1998 financial crisis. He explained that management weakness and undercapitalization, exacerbated by a bank’s failure to honor funding commitments, led to the company’s collapse. Hersh used this example to emphasize the importance of having resilient management teams and adequate capital buffers to withstand financial shocks.
The conversation touched on the personal traits of successful partners, with Hersh outlining key characteristics such as passion, resourcefulness, competitiveness, and commitment. He pointed out the value of having partners who are fully “all in,” willing to risk personal resources and handle the demands of entrepreneurial oil and gas operations. Hersh also mentioned the benefit of having co-founders or partners to share the burden, given the isolated nature of running oilfield ventures.
Hersh discussed the influence of Richard Rainwater, Hersh’s early mentor, whose vision and charisma shaped their investment philosophy. Rainwater’s ability to connect with people and create deal opportunities without micromanaging set a standard for thoughtful partnership that Hersh and his team sought to emulate. Hersh noted Rainwater’s office environment reflected his efficient, focused style and his preference for human interaction over digital communication, a contrast to today’s more impersonal methods.
Lastly, Hersh offered observations on current energy market narratives, acknowledging ongoing debate about fossil fuels’ role amid the rise of renewable energy. He suggested while sentiment is evolving, the fundamental economics and capital discipline in oil and gas investing remain vital. Hersh reaffirmed their business model’s longevity by focusing on dedicated entrepreneurs who can consistently execute regardless of market cycles.
The FORT is produced by Johnny Podcasts