Billionaire U.S. investor Wilbur Ross poses for a photo after an interview with Reuters on the sidelines of a conference at a hotel in Singapore September 25, 2012.

Analysis & Opinion

TORONTO (Reuters) — U.S. billionaire investor Wilbur Ross is looking at investing in the Canadian and U.S. energy sectors, betting a long-term recovery in oil prices will boost the fortunes of small and mid-cap companies whose shares have been battered since June.

Ross, who made his name by snapping up out-of-favor assets ranging from banks to textile firms, told Reuters he is in the early stages of assessing companies in the oil, natural gas and rail transportation sectors.

We’re looking for things that are idiosyncratically distressed, where we believe the long-term fundamentals are in place, Ross said in a telephone interview on Tuesday.

If you (have) a theory that the longer-term outlook for oil is okay, then the very severe price decline of some of the equities might very well be a buying opportunity.

Signs of weak demand and amply supply have pushed crude oil prices lower, with the Brent crude benchmark down 15 percent this year. Last week, Brent November crude LCOc1 hit a June 2012 low.

Canadian energy stocks are down about 18 percent since hitting a peak in June, while the U.S. energy sector has shed about 12 percent over the same period.

If the stocks keep going down, it (investment) will probably be quicker, Ross said. Many of the oil stocks are off 20 or 30 percent. So we’re certainly inclined to think that they are closer to the bottom than to the top.

The 76-year-old chairman and chief strategist of WL Ross & Co. a unit of asset manager Invesco Ltd ( IVZ.N ), did not give any names of potential investment targets.

Money managers, as well as the proxy firms that help shareholder activists and targeted companies navigate these battles, said in September that they expect activity to pick up in the Canadian energy sector.

Any investment by Ross would be his first in the Canadian energy space.

Canada has very good oil reserves and the stocks have certainly been under a lot of pressure. So that’s why we’re giving a good serious look at them, Ross said.

He would be following in the path of U.S. investor Warren Buffett who last year acquired a stake in Suncor Energy Inc ( SU.TO ), Canada’s biggest energy company. Activist investor Carl Icahn bought a piece of Talisman Energy Inc ( TLM.TO ) in 2013.

Ross said he is also evaluating rail transportation projects that have sprung up around the Canadian oil patch.

It doesn’t feel like the Keystone pipeline will get done anytime soon, and that’s going to put pressure on rail.

TransCanada Corp’s ( TRP.TO ) C$5.4 billion Keystone XL pipeline has been bitterly opposed by environmentalists and has awaited approval from the Obama administration for six years.

Calgary-based TransCanada is emerging as a possible target with several U.S. activist hedge funds reviewing the nearly C$40 billion ($36 billion) pipeline operator as a break-up candidate, people close to the matter told Reuters last month.

On Tuesday, Ross said that, while he is looking across the sector, he is gravitating toward small- and mid-cap companies because they have been the hardest hit.

We’re generally making investments that are in the nine figures,” he said when asked about the size of any potential deals.

In August, Canexus Corp ( CUS.TO ), the developer of Canada’s first dedicated oil train terminal, said it was in talks with interested parties about potentially selling its 70,000 barrel-per-day loading facility in Alberta.

It is unclear whether Ross is in talks with Canexus. RBC Capital Markets analyst Nelson Ng, after a meeting with Canexus management in late September, said in a note to clients that the asset is drawing strong interest from a wide range of parties.