POWERS Podcast #387 – Ken Hersh: The Godfather of Energy Private Equity

Date: June 3, 2025
Host: Chris Powers
Guest: Ken Hersh, Co-Founder of NGP Energy Capital Management

Overview

In this richly insightful episode, Chris Powers sits down with Ken Hersh, the co-founder of NGP Energy Capital Management—often called “the godfather of energy private equity.” The conversation traces Ken’s unplanned journey from a politics student at Princeton to one of the most influential figures in the energy investment landscape. The discussion weaves through founding Natural Gas Partners, the bet on people over assets, the evolution of the U.S. energy industry, partnership lessons, and the realities and future of global energy markets.

Key Topics and Insights

1. Ken’s Path to Investing and the Formation of NGP

• From Politics to Private Equity ([04:03] – [11:09])

  • Ken discusses his non-linear trajectory: intending to be a lawyer, “falling into” business through student leadership, and learning about investment banking by accident.

  • A chance acceptance letter to Stanford’s MBA program changed his path, leading to a role in Morgan Stanley’s energy group simply because he was from Texas.

    “I didn’t know the difference between natural gas and gasoline, but they said, here, you’re from Texas, you go sit there.”
    — Ken Hersh [08:33]

• First Steps with Richard Rainwater ([11:11] – [24:58])

  • Ken cold-called Rainwater for a summer project, proposing an analysis of natural gas markets that ultimately became the seed for NGP. Rainwater’s unconventional hiring approach and trust in Ken marked the start of an extraordinary business relationship.

  • Anecdotes about early meetings, the “blue binder,” and how a $5,000 check with no note began a lasting partnership.

    “There’s a check for $5,000. There’s no note... I guess I have my first client.”
    — Ken Hersh [24:58]

• Forming NGP and The Early Thesis ([25:26] – [33:19])

  • The original thesis: bet on rising natural gas prices. For seven years, prices declined, so the model pivoted.

  • Key insight: success came from backing talented, adaptable management teams—not just asset bets.

    “Let’s not do any more... let’s focus on the people who can do well in any environment.”
    — Ken Hersh [33:02]

2. The Bet on People, Not Assets: How NGP Changed the Industry

• Pivoting the Investment Model ([33:25] – [36:00])

  • Ken explains how NGP moved from asset-centric investments to giving “walking around money” to talented operators—soon emulated by the industry.

  • This approach led to the shale revolution and fundamentally changed U.S. energy geopolitics.

    “Our model that we did was poo-pooed... one by one, every single firm pivoted to our model.”
    — Ken Hersh [34:21]

• Unlocking ‘Other People’s Trash’ ([36:21] – [43:35])

  • Persuasive breakdown of oilfield economics: how old fields and overlooked wells, in the hands of entrepreneurial managers, became valuable via operational ingenuity.

  • The importance of networking in the industry, identifying unfulfilled talent ready to “make lemonade out of lemons,” and recognizing when large companies overlook valuable assets.

    “In oil and gas there were diseconomies of scale as you got bigger, and that’s why they could divest these old tired fields without really much, you know, second guessing themselves.”
    — Ken Hersh [50:04]

3. The Barnett Shale & the Shale Revolution

• Fast Followers and Industry Change ([47:47] – [51:21])

  • George Mitchell’s pioneering use of horizontal drilling and hydraulic fracturing in the Barnett Shale was the catalyst.

  • NGP and its portfolio companies amplified this by rapidly adopting and spreading these methods.

    “The unconventional shale revolution was not brought to you by Chevron and Exxon and Conoco. It was brought to you by the independent oil and gas entrepreneurs...”
    — Ken Hersh [00:00, 35:11]

4. Building True Partnerships

• Backing People and Culture ([43:35] – [46:43])

  • Empathy, passion, and hunger distinguished winning entrepreneurs.

  • NGP’s culture: let operators operate, don’t micromanage technical work—focus on partnership and accountability.

    “Whether you own 99% or 1% of the company, don’t forget you work for them.”
    — Richard Rainwater, described by Ken Hersh [43:22]

• What Makes a 30-Year Partnership Work? ([52:56] – [55:11])

  • Ken reflects on 30 years with David Albin: mutual trust, different but complementary skills, willingness to support each other through personal and professional crises.

    “There’s no substitute for trust. David and I had each other’s back.”
    — Ken Hersh [53:14]

5. Lessons in Failure: The Sonoma Story

• Managing Through a Major Loss ([59:45] – [67:15])

  • The failed Sonoma deal: success for three deals led to complacency and too much concentration in a fourth, which coincided with external shocks and a credit pull-back.

  • Radical transparency: waiving fees, telling LPs they could withdraw from the fund post-loss, and maintaining trust.

  • Takeaways: Don’t turn your brain off after a few successes; always have a Plan B; partnership and integrity matter more in the long view.

    “We didn’t lose confidence in ourselves, and we didn’t lose confidence in our business plan... There were some blessings in there too.”
    — Ken Hersh [66:34]

6. The State and Future of Energy

• Drill, Baby, Drill—Is it Feasible Today? ([67:16] – [69:31])

  • Trump-era slogans vs. reality: regulatory and physical bottlenecks, energy’s declining share of U.S. disposable income, and the real math around energy and tariffs.

    “So much of the drilling bottlenecks are at the state level, local level, infrastructure... it’s not as easy as just three words, unfortunately.”
    — Ken Hersh [69:11]

• The “All of the Above” World and Adaptation ([69:54] – [76:26])

  • The persistence of fossil fuels: despite trillions invested in renewables, global energy consumption is still over 80% fossil-fueled; demand for energy is inexorably driven by population and rising living standards.

  • Renewables have not achieved scale sufficient to truly substitute for hydrocarbons; adaptation and technological innovation should be equal priorities alongside renewables.

    “The world has spent about $14 trillion on renewable energy in the last 15 years... and congratulations, fossil fuels has gone from 84% market share to 82%.”
    — Ken Hersh [70:24]

    “The platform that I’ve been on is we need to appreciate that fossil fuels are not going anywhere unless we want to impoverish ourselves...”
    — Ken Hersh [73:11]

Notable Quotes

• On Energy Entrepreneurship:

  “The unconventional shale revolution was not brought to you by Chevron and Exxon... It was brought to you by the independent oil and gas entrepreneurs…”
  — Ken Hersh [00:00, echoed throughout]

• On the People Bet:

  “Why do we even need the assets? Why don’t we find great people and just give them walking around money?”
  — Ken Hersh [33:15]

• On Partnership:

  “There’s no substitute for trust. David and I had each other’s back. You know, I call it the foxhole…”
  — Ken Hersh [53:14]

• On Transparency and Recovery from Failure:

  “Take the high road, play the long game. This was not something to get all emotional about… I'm proud of the way that we carried ourselves, and I'm proud of our partners who stuck with us.”
  — Ken Hersh [66:53]

Timestamps for Major Segments

• 00:00 – The independent shale revolution and personal pride in impact
• 04:03 – Ken’s winding career start, from politics at Princeton to Morgan Stanley
• 11:11 – Reaching out to Richard Rainwater, the pivotal summer project
• 25:26 – Founding of NGP and forming partnerships
• 33:02 – The NGP pivot: betting on people over assets
• 43:22 – How to recognize great teams and passion in entrepreneurs
• 47:47 – The Barnett Shale and the unconventional revolution
• 52:56 – 30-year partnership lessons
• 59:45 – Navigating failure with integrity: the Sonoma story
• 67:16 – Drill baby drill, energy policy and the realities of U.S. energy production
• 69:54 – The energy future: renewables, adaptation, and hard truths

Memorable Moments

• Ken’s accidental foray into investment banking (attending a Morgan Stanley dinner thinking it was a law firm) [06:12]
• Richard Rainwater’s style: spinning the blue McKinsey binder, writing a $5k check for a summer’s work, and assembling people serendipitously [18:28, 24:58]
• The 20-bankers’-box misadventure: being unprepared for high-level meetings, and the Equitable’s old-school process of wiring $100 million “on day one” [28:34, 30:01]
• The unconventional thinking that led majors to divest “trash fields”—which became gold in entrepreneurial hands [41:00–43:00]
• Doing the right thing in a crisis, waiving fees, and maintaining relationships through loss [62:45–66:53]
• Straight talk on the math behind energy markets, policy, and the difference between wishful thinking and physical reality [69:54–76:26]

Closing Thoughts

Ken Hersh’s clarity, candor, and storytelling offer a rare retrospective and primer for anyone building organizations, investing, or operating in complex, cyclical industries. The emphasis on people, the long game, adaptation, and trust over technical or theoretical advantage stands out as the true ‘edge’—timeless for business and life.

For more on Ken Hersh’s philosophies and stories, see his book The Fastest Tortoise.