US oil companies are attracting a wave of new investment from unlikely sources - hedge funds and private equity firms flocking to the energy market for the first time to bet on a rebound.
HOUSTON, May 20 (Reuters) - U.S. oil companies, still smarting from the crude price rout, are attracting a wave of new investment from unlikely sources - hedge funds and private equity firms flocking to the energy market for the first time to bet on a rebound.
By pouring billions of dollars into energy shares and bonds in the past few months these newcomers, dubbed "energy tourists" by Houston's seasoned dealmakers, have thrown a lifeline to scores of companies that a few months ago looked like potential targets for bigger rivals or distressed debt and restructuring specialists.
"You've got generalist funds that have never invested in energy coming out of the woodwork," Michael Ames, an energy investment banker at Raymond James, told a meeting of oil and gas executives this month.
So far this year, 40 oil and gas companies raised $18.7 billion in new share sales, while 35 firms issued $26.4 billion in debt in the first four months, Thomson Reuters data show. The share sales are the highest in at least 15 years while bond issuance is on track to be the heaviest in three years. Ames estimated private equity firms have raised about $35 billion in dedicated U.S. energy sector funds in the past six months.
Among those that see opportunity in energy are distressed investor Marc Lasry at Avenue Capital Group and hedge fund Och Ziff Capital Management Group LLC.
With record-low interest rates and stock indexes near record highs, energy assets are one of the few sectors to offer a significant upside because of heavy losses of more than 50 percent suffered during the crude price slide, investors say.
But local veterans, mindful of past busts, worry a 34 percent rise in U.S. crude since mid-March to nearly $60 a barrel might not continue. Some also point out that debt and equity valuations imply oil prices of $85 to $90 and warn of an industry shakeout if crude prices stall.
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