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Portfolio Manager Insights
Unlocking value in offshore oil services stocks
Large oil producers have increasingly invested in offshore oil-production projects in recent months, driven by declining development costs and other favorable factors, according to Fidelity’s Kristen Dougherty.
- Fidelity Portfolio Manager Kristen Dougherty has recently sought to position Fidelity Advisor® Energy Fund in several companies that provide services to major oil firms launching deepwater basin production projects, believing they can capitalize on improved business conditions.
- “I am optimistic about prospects for several offshore oil services providers,” explains Dougherty. “In 2025, several global supermajor oil producers have sought to refresh their deepwater project pipelines.”
- In managing the energy-focused fund, Dougherty believes stocks can become mispriced relative to their intrinsic value for a variety of reasons, including cyclically depressed earnings or overly positive or negative sentiment. Her investment process is grounded in the conviction that long-term free-cash-flow generation is a reliable indicator of value. She seeks high-quality companies whose stocks are attractively valued relative to projected free cash flow, believing these investments have the potential to outperform.
- Dougherty believes oil prices could hover around the $60-per-barrel range in the near term, barring any changes in the macroeconomic environment or significant geopolitical disruption. “This price level does support solid returns for offshore development projects in many parts of the world,” she says.
- She has positioned the fund (as of November 30) with overweight stakes in several companies linked to offshore oil projects, including TechnipFMC, SLB (formerly Schlumberger) and Subsea 7, explaining that more producers have recently received approval to begin offshore drilling operations.
- “Offshore production has increased, particularly since the cost of development has declined sharply over the past decade, due to technology improvement,” Dougherty says. “Further, expectations about when the world will reach peak oil demand have moved further into the future, giving corporate leaders license to approve investments in new, long-cycle deepwater projects.”
- TechnipFMC is an oilfield services company specializing in the manufacturing and installation of subsea equipment used in deepwater oil and gas production. Dougherty notes that although oil prices have declined in 2025, deepwater projects have been less affected because they are multiyear investments, and their profitability often breaks even at a very low oil price. She adds that TechnipFMC’s equipment is long-lead in nature, providing good visibility into demand.
- “With weaker oil prices in the fourth quarter, onshore shale drilling activity has declined, whereas deepwater projects have remained more robust,” Dougherty explains. “Once a large deepwater development is underway, it’s hard to interrupt it, and most of those projects have a relatively low breakeven oil price. As a result, their economics remain favorable in most reasonable scenarios for the price of oil.”
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Fidelity Advisor Energy Fund (FFNWX)
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