Fidelity Portfolio Manager Maurice FitzMaurice believes the total return potential of Canadian energy companies that produce oil from sand regions in Western Canada are currently among the most appealing investments within the energy sector.
“Given my favorable intermediate-term outlook for crude-oil prices, and due to the unique aspects of these companies’ business models, I believe Canadian oil sands producers have particularly compelling growth prospects,” says FitzMaurice, who co-manages Fidelity® Select Energy Portfolio (FSENX) with Kristen Dougherty.
In helming the sector-based, equity-focused strategy, the managers look to invest in the stocks of companies that they believe are mispriced relative to their intrinsic value for a variety of reasons, including cyclically depressed earnings or overly positive or negative investor sentiment.
FitzMaurice says Canadian oil sands producers outshine U.S. oil producers for several reasons. First, they have decades of oil reserves – crude oil that can be extracted from known underground deposits − compared with much shorter reserve lives for U.S. and other international oil producers. Second, the oil-production decline rate for companies north of the border is low, which may lead to light spending on maintenance in the oil-rich sand regions, he says.
“Operating costs are higher in Canadian oil sands regions,” FitzMaurice acknowledges, but notes that minimal maintenance costs could lead to “attractive and globally competitive ‘all-in’ production costs.”
Among other attributes, FitzMaurice likes the regulatory and political environment in Canada, which he considers fairly stable and supportive of the oil and gas industry, due largely to its importance in terms of employment, economic development, government royalties and taxes.
He also cites new export capabilities for these companies. “Egress from Canada, which has historically been limited, has improved with the recent startup of the long-delayed Trans Mountain Pipeline – a system that carries crude and refined products from Edmonton, Alberta, to the coast of British Columbia – ensuring that producers have access to export markets at a reasonable cost,” he says.
FitzMaurice notes that, despite these positives, Canadian oil sands firms trade at a large valuation discount to their U.S.-based oil-and-gas-producing peers. For example, on consensus 2026 earnings estimates, the large Canadian oil sands producers trade at a free-cash-flow yield of 10% to 13%, versus 8% to 9% for U.S. oil & gas exploration & production firms. He cautions that potential U.S. tariffs on Canadian-produced oil could potentially hinder these companies’ earnings growth, but believes the market has already priced in this risk.
As of February 28, the fund had sizable out-of-benchmark positions in Cenovus Energy (CVE), Canadian Natural Resources (CNQ) and Suncor Energy (SU), all Calgary-based oil sands producers.
“With active capital-return programs tilted toward share buybacks, I believe these Canadian oil sands companies should be able to drive a significant decline in share count while modestly growing production and earnings, leading to a healthy increase in free cash flow per share,” he concludes.
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In this role, Mr. FitzMaurice manages Fidelity Select Energy Portfolio, Fidelity Advisor Energy Fund, and VIP Energy Portfolio. In addition, he is responsible for researching companies in the energy and power sectors. He also collaborates with Fidelity's equity income portfolio managers to expand the firm's value-oriented coverage and works on the firm's portfolio management strategic objectives.
Prior to assuming his current position in January 2017, Mr. FitzMaurice served as managing director of research in Fidelity's High Income division. In this capacity, he managed a team of research analysts and research associates based in Boston and London. Previously, Mr. FitzMaurice was a research analyst in FMR Co.'s Equity division. During this time, he also managed Midcap Financials Pilot Fund, Fidelity Select Defense and Aerospace Portfolio, Fidelity Select Air Transportation Portfolio, and Fidelity Select Transportation Portfolio. Prior to that, Mr. FitzMaurice was a research analyst in the High Income division, during which time he also managed the high yield sub-portfolios of Fidelity Balanced Fund, Fidelity Advisor Balanced Fund, and VIP Balanced Fund, as well as the high yield sub-portfolio of Fidelity Total Bond Fund.
Before joining Fidelity in 1998, Mr. FitzMaurice was an investment banking analyst at Lehman Brothers. He has been in the financial industry since 1994.
Mr. FitzMaurice earned his bachelor of arts degree in economics from Cornell University and his master of business administration degree from the Tuck School of Business at Dartmouth College.