Ponderosa's Porter Bennett shares his data-driven energy outlook
In an industry niche he helped create, leveraging data and analytics
Colorado native Porter Bennett is fueled by the energy business. After more than three decades in the coal, oil and natural gas industries, the 64-year-old formed Denver-based Ponderosa Advisors in 2012. The boutique firm leverages advanced databases and analytical tools for clients involved in energy as well as agriculture and other water-related industries in Colorado and beyond. He recently sat down with ColoradoBiz to share his love of the energy market – through its ups and downs.
You attended Colorado School of Mines. How did that set you up for future career pursuits?
I had just finished a degree – masters in international affairs at Columbia University– and I studied Chinese and mostly economics, resource issues. I came back here and visited a number of different companies and they all said, ‘You’ve got an interesting background but you don’t know beans about energy.’ So I got a full-ride Ph.D. fellowship up at Mines, and that’s how I got started. The day I got accepted into that program I got a job.
Describe some of your early work.
I built a big database of all the local coal mines in the Rockies, the utilities that bought their coal, and a little bit of information about the coal quality. I left Mountain West, bought that database and co-founded RDI in 1982. I had a non-compete with coal, and had met some guys in natural gas. I started working and building an information system around natural gas markets.
Briefly describe your company BENTEK.
Every year, we did a survey and assessment of 100 utilities all over the country, and we sold those multi-client studies starting in 1991.
Then in about 2003 we began to reform our company, and interest in Rockies’ natural gas really began to pick up. So I figured maybe I’d do a multi-client study. The prices got really low, and producers wanted to know why. I knew why – it was because the pipelines were too congested. But I couldn’t prove it. So I started playing around with the operational capacity report on the interstate pipelines. I realized that if you decode all the receipt and delivery points, you could put the information together associated with each point and build a daily supply and demand balance for the country. What was ironic was there were a couple other companies that sold the raw data from the pipelines, but they didn’t know what to do with it. We were charging five times what they were for the same data because we had made sense of it. You couldn’t trade without it in the end.
Then in 2010 you sold. Why?
BENTEK was a great business – very successful. I just got an offer (from Platts, a provider of energy and metals information and a source of benchmark price assessments in the energy markets) I couldn’t refuse. After the sale I continued to work for Platts, but it was not culturally a good fit, so I left after a year and started Ponderosa the next year, in 2012.
Were there lessons you learned in past business-building experiences that directed you with Ponderosa?
Oh, hell yes. Number one, I love the energy market.
Even in the downturns?
It’s even more fun in the down times, because then you have to figure out why did it go down and when is it going to come back up. Trying to understand why the market moves the way it does is really an interesting thing.
Describe your management style.
I had one adviser who used to always tell me I was reluctant to hire people who were smarter than me, and I used to get pissed every time, because that wasn’t right. The challenge is finding good ones. The group out there (at Ponderosa) is made up of some of the most creative people I’ve ever worked with. I try to keep controls, keep everybody focused, but I try to do it with a really light rein. I push these guys to ask themselves questions.
Talk about some of the work Ponderosa is involved in.
Ponderosa has two buckets – water and energy. We’re merging IT and database management capabilities.
What’s your forecast for the struggling energy industry right now?
The $64,000 question is what the hell do I do? A lot of what we’re doing with clients is trying to understand the big market trends so we’ve got a better sense of timing. We see no reason why crude prices should rise anytime soon, and that’s because the world is producing roughly 1.5 to 2 million tons more a day than it’s consuming, and that only changes when we either quit producing or increase what we’re using. And unfortunately, progress on either front ain’t real speedy right now, so I don’t think that problem is going to get solved this year.
Are circumstances likely to get worse?
I’ve been surprised at how quiet the bank redeterminations have been. But there’s a hell of a lot of pressure being put on these companies right now, particularly the ones that have bad balance sheets. I suspect you’re going to see more layoffs and consolidation over the course of this year. I don’t see any way around it. On the other hand, if gas prices rise and you have companies that have not so good balance sheets but are fortunately in good gas producing areas, they could benefit by this process, and so as their hedges run off, they’ll do much better. It’s very much a company-by-company issue.
What do you anticipate in the long term?
You’re going to have a smaller, much more efficient industry. We don’t see in the next five to 10 years a return to $100 crude.
Do you think that leaves a void in the market for alternative energy to fill?
This is probably where I separate from a whole lot of the world, and it’s because I’m not smart enough to know whether global warming is the real deal or not. I don’t think anybody else is either, by the way, but it’s a problem we’ve got to deal with 50 years from now. In the short term, we’ve got a really sick economy that we’ve got to fix and it’s not fair to increase people’s electric bills from now until whenever. We’ve been subsidizing wind and solar for 10 years, and it’s marginally more competitive than it was 10 years ago. Is it really worth spending public money to try to elicit that? Nobody seems willing to ask that question.
Talk about basing your business in Colorado and your perspective on the local economy.
I consider it one of my seminal accomplishments to have had a successful career in the natural gas and oil business and never live in Houston. It’s been fascinating to watch the industry ebb and flow here. The tax base here that draws from resources like oil and gas is going to be smaller. I was looking at the numbers a couple weeks ago, and there’s a $250 million shortfall in Colorado just because of lost severance taxes, and it’s not clear to me how you fill that. You’re certainly not going to fill it with marijuana.
(Today, Colorado’s) economy is more diversified, sure, but we’re also a hell of a lot bigger and we spend much more money, so I’m not sure that the net-net is all that much better.
What keeps you up at night?
Hillary Clinton winning the election.
Jokes aside, we spend ridiculous amounts of money on things we shouldn’t be spending money on. And it particularly bothers me when I see literally none of the presidential candidates talking about it.
How do you unwind?
I bought a cattle ranch in Montana and truth be known, if I had my preference I’d be riding my horse, chasing cows.