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Are AFC Energy plc, LGO Energy PLC And Xcite Energy Limited The Perfect Future Proof Combination?

While prediction is very difficult (especially, as Nils Bohr remarked, if it’s about the future), it appears as though the world will gradually move away from fossil fuels and towards cleaner and more sustainable energy over the long run.

This, though, may take longer than many people currently believe, since a lower oil price makes fossil fuels much cheaper than this time last year, which could cause the transition away from them to take place at a slower pace than it otherwise would have.

So with oil likely to meet a significant proportion of the world’s energy needs for many decades to come, having a mix of fossil fuel and cleaner energy companies in your portfolio might be a wise move.

With that in mind, could AFC Energy (LSE: AFC), LGO Energy (LSE: LGO) and Xcite Energy (LSE: XEL) fit the bill and future proof your portfolio?

AFC

Shares in alkaline fuel cell company, AFC Energy, have risen by an incredible 393% in the last three months. The key reason for this is a flurry of upbeat news flow, with AFC entering into a joint venture in Korea which is forecast to generate revenue of up to $1bn over the next ten years. In addition, it has also recently announced a collaboration with a Thai industrial gas company to develop a 10MW fuel cell in three separate stages.

Looking ahead, AFC is highly dependent on further positive news flow to push its shares higher in the short run. However, it looks set to benefit from the move towards hydrogen fuel cells and, while it could be a volatile transition, AFC appears to be well placed to benefit.

LGO

Oil producer, LGO Energy, has seen its share price fall by 36% since the turn of the year. That’s a rather surprising result, since the Trinidad-focused company has delivered numerous pieces of positive news flow, notably regarding meeting its goal of producing 2,000 barrels of oil per day, which is did earlier this year.

Clearly, a lower oil price has hurt investor sentiment, but LGO’s cost base is extremely low and this means that its Goudron field remains economically viable even with a lower oil price. And, with its 2014 and 2015 drilling programmes delivering solid results, it could be a strong performer over the medium to long term, with now seemingly a good time to buy a slice of it.

Xcite Energy

North Sea oil explorer, Xcite Energy, has seen its shares bounce back strongly from a 26p low earlier in the year to trade as high as 43p in the last month. A key reason for this, of course, is a rising oil price, with Xcite reporting that the value of its reserves has increased. In addition, a lower tax regime should help to boost not only its finances, but also improve investor sentiment in the company, too.

Clearly, Xcite has a number of lucrative partnerships with blue-chip producers, but with significant costs and a lack of revenue forecast for the next two years, it remains a relatively risky play. That’s especially the case when costs are increasingly under the microscope and the North Sea remains a relatively high cost place from which to extract oil. As such, there appear to be better opportunities elsewhere in the oil sector, although Xcite Energy is worth keeping an eye on.

Of course, there are a number of smaller companies that could be worth buying right now and, with that in mind, the analysts at The Motley Fool have written a free and without obligation guide called 1 Top Small-Cap Stock From The Motley Fool.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.