Earning US$7 on the dollar is any investor’s dream. Buyout group Apollo has shown with its investment in oil exploration and production company Athlon Energy that such reveries can become reality.

A slump in oil prices has spurred activity among private equity investors around the world hoping for their own bumper returns by scooping up assets on the cheap.

“Clearly what you’re seeing in the energy market with the cataclysmic fall in oil prices halved in such a short period I think you will have haves and have nots,” said Leon Black, founding partner at Apollo.

“We along with others in our industry are dusting off (opportunities),” added Black, speaking at the annual private equity SuperReturn conference in Berlin.

Global crude prices almost halved to around US$60 a barrel in the past 12 months, slashing company values, forcing budget cuts and putting more than US$150-billion of oil and gas exploration projects in jeopardy this year.

The time may look right for investments now, but what if oil prices continue to fall or fail to rebound for years?

Indeed, despite the Athlon deal, the value of Apollo’s overall portfolio suffered in the final three months of 2014 because of a markdown in the equity value of some other energy-related companies, or their loans and bonds.

“You’re catching a falling knife,” said Simon Henry, chief financial officer at Royal Dutch Shell, explaining limits on dealmaking in the sector.

While some investors are taking a wait-and-see stance, others are more bullish.

“I think when these knifes are falling is when the opportunities actually present themselves. Everyone is running in the opposite direction,” Joseph Landy, co-CEO of Warburg Pincus told Reuters. The private equity group is flush with cash after closing an energy-focused fund in October.

ACTIVITY PICKS UP

While several funds are working out their strategy quietly, afraid to tip off rivals, others like Blackstone  are more vocal about it.

“Our people are scrambling and trying to come up for air, we are very busy looking at specific deals,” Blackstone’s President Tony James said last month.

Already, buyout groups’ activity in the oil and gas sector has picked up significantly.

They poured US$31-billion into the oil and gas sector in 2014, clearly outstripping the US$8-billion in investments that sponsors have invested in the sector over the five prior years, according to ThomsonReuters data.

After equity investments in the software sector, oil and gas came in second on buyout groups’ shopping list last year.

“In the long-term the equilibrium point of oil prices is in the US$70-85 range. The question is when is it going to get there, are we talking 9 months or 30 months? That is were the risk lies,” Warburg Pincus’ Landy said.

Investment opportunities seem abundant. Based on company filings and announcements compiled by oil and gas consultancy 1Derrick, assets worth about US$112-billion are up for sale.

Half of these are North American, mostly U.S. oil and gas shale fields such as Anadarko’s Wyoming field and Reliance Industries’ Eagle Ford assets, as well as ConocoPhillips’ oil-sands operations in Canada.

Outside North America, Russian oil giant Rosneft  is offering its non-core operations while Apache has mainly Egyptian assets for sale.

While oil majors are offloading assets to cope with lower earnings some smaller companies are being forced to sell oil fields, exploration and infrastructure firms to survive.

Blackstone is raising its first energy-focused credit fund in the latest sign that private equity firms are seeing investment opportunities among distressed assets.

Blackstone is betting that the bonds of some exploration and production companies that rode North America’s oil and natural gas boom are now undervalued, or could be soon.

Marcel Van Poecke, managing director of Carlyle International Energy Partners, agreed.

“After a crash like this, there is clearly more upside than downside. This will be a great time to invest but there is no need to rush into it, because I don’t think we have seen the bottom yet,” he recently told Reuters.