Investors Still Bet on Benton to Strike It Big in Oil or Gas : Exploration: Despite low production so far, patient shareholders of the Ventura company are banking on the impressive track record of its staff.

Benton Oil & Gas Co. in Ventura is a small company that went public at $5 a share in March 1989. Since then it has been out hunting for oil and gas reserves on leased land in California, Texas, Louisiana, Oklahoma and Colorado.

So far, Benton’s production levels have been meager, consisting of 150 to 175 barrels of oil a day, compared to 200,000 barrels daily for oil giant Occidental Petroleum.

Benton’s financial performance hasn’t been stellar either: In 1989, it lost $513,352 on revenues of $408,997.

But don’t tell that to Benton’s stockholders, who are convinced that little Benton will hit some big targets. Since its initial public offering, Benton’s stock price has climbed to $13.75 a share, and it was one of the best performing initial public offerings of 1989.

Why are investors betting on Benton? “It’s our contacts. That’s the whole key to this company,” said John T. Moore, Benton’s executive vice president and one of the founders of the company.

Benton might be a new company, but Moore said its staff is technically oriented and has a long track record in the oil and gas business, and all of the company’s employees have worked for major oil companies, including Amoco Corp., Shell Oil Co. and Texaco. President Alex Benton, a geophysicist, is the former director of applied geophysical research at Amoco, did geophysical research for a subsidiary of Mobil Oil Corp. and was senior vice president of exploration at May Petroleum Inc. in Dallas.

“They’re clearly the best independent oil and gas opportunity that exists today because of their staff,” said Kenny George, president of North Bay Energy Inc., a Los Angeles oil and gas investment company that has sponsored partnerships for some of Benton’s projects.

But Benton hasn’t got forever to deliver.

Analyst Lorraine Maxfield at Paulson Investment Co. in Portland, Ore. warned that investors will need to see something tangible from Benton within the coming year. “They’ve raised a considerable amount of money,” she said. “Now they’re going to have to discover something.”

Will Benton score the find it needs to keep investors happy? “It’s 50-50,” Maxfield said. “They’ll either hit it or they won’t.”

Alex Benton said he expects the company to be profitable by the end of the year. But Benton’s stockholders “aren’t interested in seeing a penny a share in profits,” Benton said. “We could be profitable right now. All we have to do is stop exploring.

“What we’re trying to do is make this company grow,” he said.

Benton isn’t kidding. Moore said Benton’s 14 employees all left jobs at larger oil companies because they believe “we can build a $300-million to $500-million company in the next few years.”

Benton said the company is about to begin drilling on three wildcat projects, one in Texas and two in California, that could be the major finds investors are banking on. These projects, Benton said, have “the potential of doubling the size of this company overnight.”

But in a business as risky as oil and gas exploration and production, Benton’s chances of reaching its goals are far from certain.

“The oil business is a pot-of-gold business,” said Richard Fetzner, a professor at Cal Lutheran University’s School of Business Administration and former president of Sun Oil Co.’s Sun Exploration and Production Co. unit.

“You can lose your shirt drilling an oil well,” said Fetzner, who recently became a Benton director. That’s because, despite detailed research using sophisticated computers and geophysical analysis, discovering reserves that can be pulled from the ground or from under the ocean is still something of a guessing game.

Nonetheless, Benton is sticking with its growth estimates. One reason things look good for the company, Moore said, is that after oil prices collapsed in the mid-1980s, many oil and gas companies went belly-up. Also, the 1986 Tax Reform Act took away many tax breaks that encouraged investment in drilling partnerships as a tax shelter. “We’re one of the few people left at the Easter egg hunt,” Moore said.

Now that there are fewer independent companies in the business, the cost of support services has declined and there is less competition for drilling sites--and the more a company drills at well-researched sites, Moore said, the better the chances of hitting pay dirt.

Wells in production for Benton include several in the Grimes Gas Field in the Sacramento Basin, which has supplied more than 900 billion cubic feet of gas through 1988, and four oil wells in Colorado. It also acquired a 50% interest in the existing oil production at Pershing Field in Oklahoma, where Benton expects to recover 2.6-million barrels over about a 10-year period.

The company also is drilling or about to start drilling at about a dozen sites, some offshore, in Texas, Louisiana, Oklahoma and in the Los Angeles suburb of Montebello.

Benton currently gets about $18.50 a barrel for its oil and $2.10 per thousand cubic feet of gas. Almost all of its gas is purchased by Pacific Gas & Electric, and it sells its oil to major oil companies and independent refiners.

Oil prices have fluctuated recently, but Moore is optimistic about long-term prospects. “We think prices are going to rise in the next five to 10 years for both oil and gas. It’s a perfect time to find reserves.”

Nonetheless, Benton said, the company plans projects with the assumption that oil prices could fall to $14 a barrel.

Benton stressed that the money raised from stockholders has so far gone into drilling at sites with known reserves or at sites calculated to be of low to moderate risk.

But on “wildcat” drilling prospects with big potential, Benton said he hedges the company against the riskiness of such ventures by raising drilling money through partnerships. If the well strikes, Benton pays 25% of the cost of completing the well and keeps 25% of the reserves.

One such project is the Newhall Resources well in Northern California, which Benton completed last month. The well, which Benton said will produce 4 million cubic feet of gas a day, will likely be a moderately successful producer for the company, Benton said.

Alex Benton teamed up with John Moore at May Petroleum, a now-defunct Dallas oil and gas company. When May was acquired by a real estate company in 1986, Moore and a handful of other former May staff members, mostly geophysicists, left to start Benton Petroleum, which became a subsidiary of Patrick Petroleum Co. in Jackson, Mich.

But two years later, Benton, Moore and several others at Benton Petroleum decided to strike out on their own and agreed to purchase all of Benton Petroleum’s assets from Patrick for $1.2 million, using cash from an initial public stock offering and a note.

Moore said Benton’s stock offering was oversubscribed, with much of the demand coming from former investors in May Petroleum, who had profited handsomely when May’s stock went from $2 a share in 1972 to $65 in 1980. With Benton Oil, these investors are betting the same group of people will work their magic again, he said.

“There are a lot of smart people out there, but they can’t raise the money,” said Benton. “We have people who believe we know what we’re doing.”

Phillip McAndrews, vice president of Patrick Petroleum, said Benton and his staff do seem to have a knack for raising money. In the little more than two years that Benton Petroleum was a subsidiary of Patrick, “we raised about $5.8 million. And that was during terrible market conditions,” McAndrews said.

Analyst Maxfield gave much of the credit for Benton’s ability to raise funds to Moore, who spends much of his time glad-handing the investment community.