Hedge Fund Westbeck Capital Management: Time to Bet on Canadian Energy


The fund gained 40% in 2019 thanks to shrewd bets on U.S. shale stocks

Westbeck Capital Management is turning its attention to beaten-down Canadian energy companies. The energy hedge fund believes that these firms will have stronger cash flows in the year ahead compared to their U.S. shale competition. The fund also says that U.S. producers are facing stronger production drops than the Canadian firms.

The contrarian bet comes at a time that Canadian oil stocks continue to face difficult growth outlooks. A lack of pipelines, ongoing political pressure out of Ottawa, and souring international investor sentiment have hurt the sector over the last year. Bloomberg reports that global investors have ditched $30 billion in asset over the last three years.

Westbeck Capital Management Looks North

Westbeck Capital experienced 40% gains in 2019. Following its founding in 2016, it experienced back-to-back losing years. However, it had a solid year after betting against a basket of 12 U.S. shale companies.  Now, it’s turning its attention to Canada.

“At current oil prices, Canadian oil names are generating gigantic amounts of free cash flows as they aren’t spending money to grow their product, they are just spending to maintain it,” said Westbeck Capital CEO Jean-Louis Le Mee in a conversation with Bloomberg. “It’s just a little bit odd to have energy valuations at all-time lows when S&P valuations are at all-time highs. It’s truly unprecedented.”

The CEO spoke favorably of mid-cap producers like MEG Energy, Baytex Energy, Crescent Point Energy, Parex Resources, and Torc Oil & Gas.

Related: Dominion Energy Transfers Stake in Cove Point to Brookfield Asset Management

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