Is now the right time to bet on energy?

Having suffered for almost two years you could forgive energy investment firms for hoping that they had finally seen oil prices bottom out. With the price of a barrel limping back to $40 in recent weeks some specialists seem to think that the time has arrived to reinvest in the sector.

Of course, many of these experts made the same call over a year ago when prices dropped to $50. This, they thought, must be the bottom of the market and the price of a barrel would soon recover to $100 or above. They were to be sorely disappointed. Having gone in too early, they lost money.

In the meantime, a slew of energy debt funds have been raised to target the sector. Angelo, Gordon & Co’s energy credit fund and Carlyle’s energy mezzanine fund are still garnering commitments, while the Orion Energy Credit Opportunities Fund II filed for a $750 million offering this week.

“Everybody is trying to time this thing, and you can’t. So our view is, look, it’s time to invest,” Avenue Capital’s Marc Lasry told the Financial Times.

Over at GSO Capital Partners, folks seem to share a similar view. The firm, which has one of the largest energy-focused debt management businesses around, has re-underwritten many of its energy positions and says companies are cutting CapEx and getting fresh equity infusions from their private equity parents.

GSO, which has energy as its only industry vertical, says these businesses can therefore operate profitably even if oil prices remain low.

Not that the firm is finding it easy to make new loans or pinpoint recent price movements, but its long-term commitment to the sector remains unchanged.

“The timing of that recovery is hard to predict but we believe that, over time, we’re investing under the theory that prices will recover and these companies will be able to make returns,” GSO’s head of energy, Dwight Scott, told PDI for this month’s Capital Talk interview.

“Energy has always been a big part of what we do and it will continue to be a big part of what we do. These companies will need our capital more in a recovery than they do now.”

So the big shots in the energy space are sticking to their guns, but investors willing to back them will need a strong stomach to cope with the sector’s cyclical unpredictability. Maybe oil will one day recover to 100 bucks a barrel. But at this point, it would seem wise to place your next round of energy bets with an expectation that oil prices will remain low for some time to come.