The funds' shift away from a focus on smarter capital deployment, such as dividend payments and share buybacks, comes as a renewed price slide deals another blow to many companies’ financial results and balance sheets.

Activist involvement in the Canadian energy sector has been increasing, with more proxy contests so far this year than in all of 2014, according to proxy solicitation firm Kingsdale Shareholder Services. U.S. hedge funds FrontFour Capital, Orange Capital and Livermore Partners, as well as Toronto-based West Face Capital, have been the most active.

"The activists are more emboldened than ever. They are carrying a bigger stick than they have in the past," said Shane Fildes, head of global energy investment banking at BMO Capital Markets.

To be sure, putting pressure on energy company executives alone won't make buyers appear and get deals done.

The second quarter was the worst in nearly a decade for Canadian energy M&A, according to Thomson Reuters data. But bankers predict a pickup in M&A later this fall or early next year once crude prices finally bottom out.

U.S. hedge fund Livermore Partners has pushed for change at Zargon Oil and Gas Ltd (>> Zargon Oil and Gas Ltd), whose shares have lost 74 percent of their value in the past year and 25 percent since May. The fund, which built most of its stake in the last three months, owned about 3 percent of Zargon in July.

Livermore Managing Director David Neuhauser said while he is not looking to force a near-term sale of the entire company, Zargon should be considering asset sales or a joint venture. Zargon did not respond to a request for comment.

"At some point, the market is going to improve, the pricing is going to improve,” Neuhauser said. “I'm not in a rush to do anything. But my view is that we should look strategically, whether it is internally or by engaging a banker.”

An example of a fund that is probably staring at big losses on an investment is New York-based Orange Capital. When it announced it had a 5.3 percent stake in oil and gas company Bellatrix Exploration Ltd (>> Bellatrix Exploration Ltd) last August, the shares were trading at C$7.91. On Thursday afternoon they were at C$2.29.

Thomson Reuters data shows Orange has been increasing its stake through the downturn and now owns 16.4 percent of Bellatrix. Seth Klarman's Baupost Group, another U.S. hedge fund, has also been accumulating a position in Bellatrix and owns 11.4 percent.

Bellatrix is trying to sell some of its midstream assets following pressure from Orange, two sources familiar with the process said. A Bellatrix spokesman declined comment. Orange did not immediately respond to a request for comment.

"Activists typically prefer the quick capture of a takeover premium, as compared to the time and effort it could take to restructure a lagging portfolio company," said Chris Young, head of contested situations in the M&A group at Credit Suisse. "The M&A option is often particularly appealing when a fund manager is seeking to unload an underwater position."

Gran Tierra Energy Inc , a Calgary-based oil and gas company with operations in South America, has been pressured by West Face, a Canadian hedge fund.

In April, West Face expressed dissatisfaction over Gran Tierra's strategy and succeeded in getting its nominees on the board. One source involved in the process said that West Face is pushing the company to look at acquisitions in Colombia while assets are cheap. Gran Tierra and West Face did not respond to requests for comment.

(With additional reporting by Shailesh Kuber in Bengaluru; Editing by Jeffrey Hodgson and Amran Abocar)

By John Tilak