Three small-cap oil plays for the bold

Tom Bulford tips his three favourite small-cap exploration companies currently prospecting in oil's most promising frontiers.

If you're looking for a diversified play on frontier regions, there are two stocks I'd favour. Heritage Oil (LSE: HOIL) has projects in Uganda, Russia, Iraq, the Congo and Mali, among others. Or you could invest in Cairn Energy (LSE: CNE), which is in frontier regions such as India, Greenland, Albania and Tunisia. But if you're happy to take the risk involved in backing purer plays and do be aware that it's risky, so don't invest money that you can't afford to lose here are my current top picks.

San Leon Energy (Aim: SLE). Following its recent merger with Island Oil & Gas, San Leon now has on-shore and off-shore exploration interests in the US, Ireland, the Netherlands, Albania, Sicily, Poland and Iraq. But its main hope is North Africa. Identified worldwide resources of oil shale and tar sand exceed those of conventional oil reserves by a factor of 5:1 and some of the biggest reserves are in Morocco. Work done by Shell in the 1980s indicated that Morocco has oil-shale reserves sufficient for a 50,000 barrels/day (b/d)production over 30 years. Now San Leon is aiming to extract this oil using In-Situ Vapour Extraction technology, which forces heated gas into the fractured, oil-yielding shale. Tests are being carried out this year, and the market will be watching results closely.

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Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.