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UPDATED 22/1/07

Valuation of Chaco Resources : 'Rule of Thumb' based on 550m shares and using 10% DCF on oil at $60/barrel is 1p on the sp for every 1m barrels (CHP's share) that is proved. Until oil reserves are proven the 1p/1m barrels will be discounted by the market.

Chaco Resources now has three exploration blocks in Colombia and three areas in Paraguay. The next year should see a steady news flow as it establishes the companys transformation from being an exploration company only to also becoming a significant oil production company. Set out below are some of the milestones which should produce announcements and have a positive effect on the share price. All reserves are quoted in recoverable oil assets.



Alea, Colombia :

25% interest in a field currently assessed at holding 38.1m barrels of light sweet crude oil. Drilling of the field by the operating partner, Ecopetrol, was programmed for 2006 to provide early cash flow, but a shortage of drilling rigs, then the rainy season and increased environmental requirements have caused a re-think and it is now expected that this block will be drilled in first half 2007.The proposal to drill a step out well as part of that drilling programme will also provide the opportunity to establish if the estimate of recoverable oil should be increased. (Some estimates suggest the field contains as much as 70m barrels.)

RNS : Updated w/c 30/4//07. Drilling contract should be imminent but actual drilling unlikely to take place second half 2007.



Puerto Lopez, Colombia :

54% Interest in a field containing light sweet crude oil.On 3.10.06 CHP announced that the original TEA area had been extended by the ANH to include further territory which it is expected will greatly increase the potential to find and exploit a structure which may contain as much oil as there is believed to be in Primavera, where Hardman and Co estimate that there is a potential value of 120p per CHP share.

RNS :Updated 22/1/07. Further seismic now obtained and decision not to proceed made because closures too small to be economic and drilling funds earmarked for this project now being retained for use on a more prospective block yet to be announced



Primavera west, Colombia :

55% interest. Two shallow drills in April turned out to be dry. Areas adjacent to this block contain oil (Cana Limon, also in the Mirador basin, the largest oilfield so far, 1.8b barrels) Chaco believe that the area in their block contains the thicker end of a wedge shaped oil-bearing sandstone structure; the area to the east in the neighbouring block has been estimated as containing 400m barrels and the El Miedo oilfield, 8 kms.away has 325m barrels. ANH Contract signed w/c 8/5/06 (1 week sooner than forecast). GED are drilling their neighbouring block in February 2007; two of their targets may contain oil deriving from Chaco's area so some earlier cash flow may result.

RNS : The drilling programme has now been completed but the company has yet to say whether the block will be explored further or abandonned.

New block announced in April known as Tigra in the Magdelana Basin. CHP has a 48.75% interest. Believed to be very promising but company is doing 3-d seismic over the next 18 months with drilling projected in the following 16 months. (Timescales seem to be set to allow a lot of room for delays or speeding up if progress is easier than anticipated)



Curupayty Block, Paraguay :

1.39m hectares in north, close to Bolivia. Two wells previously drilled and both showed oil.

RNS : Expect partnership with larger producer.



San Pedro Block, Paraguay :

1m hectares in south-east. Previous drilling showed oil.

RNS : Expect partnership with larger producer.



Parana Basin, Paraguay :

Canindeyu block covering 1,789,000 hectares. Bordering Brazil. Oil field on Brazilian side already drilled. Chaco also expect to find oil and, at a deeper level, considerable quantities of gas. Chaco has obtained valuable historic seismic for re-evaluation.

RNS : Presidential Decree received 2/11/06.. Petrobras has announced its intention to increase substantially its effort to exploit Paraguay's hydrocarbons and has announced a farm-in on CDS's adjacent block. Possibility that they or another major will do likewise with CHP



Corporate Activity :

CHP obtained an independent evaluation of their exploration assets by Hardman and Co., during July 2006.This is updated monthly. As Chaco Resources line up their assets ready for production they may attract a bid. There are also other actions that the mgt. could take to increase the Chaco's asset share subject to negotiation since the position of the Colombian state oil company, Ecopetrol, is believed to be under review. Other actions could be taken which would have the attraction in bringing more resources to bear on a quicker timeframe plus help streamline the management of their assets. De-merging the Colombian and Paraguayan assets at an appropriate time might hold out some advantages to shareholders at some stage.
Last Placing announced at 15.1p per share on 18/5/06.
Chairman and FD bought shares 8/06 and the Chairman recently exercised his option on further shares which would suggest that he regards the share price to be going north from here on.
Updated 22/1/07.




Here are some dates for your diary courtesy of KJKelly, who posts on ADVFN

1. Curupayty - complete reprocessing of seismic by end July 06
2. Curupayty - complete interpretation of seismic by end August 06
3. Curupayty - decide whether to proceed to drilling or proceed with a farmout campaign - end September 06
4. Platanillo - commence re-entry of Alea 1 early in 1st quarter 2007
5. Primavera - two structural targets will be selected from 10 potential targets for drilling commencing Feb. 2007.
6.Hardman updates should now happen monthly.

sounds as though the booze-up was the most constructive and useful element to the whole day out.

on that basis, probably worth selling at least some as it is short odds that you will be able to buy them back later cheaper if you are so inclined

Well that was not expected...............

i like the long term prospects of chp but not much happening until 07 really. when i will buy. but short term looking at goo (also long term). production testing two hydrocarbon bearing sand zones in next few weeks in Peru block XXI. producer in Colombia (albeit small at this stage). applied for new exploration license colombia.

Interesting to watch all those that bought on Monday following the Telegraph tip for a fast buck bailing out today. Whilst I was unable to attend the AGM, the story continues to improve. The only problem is patience and investors lack thereof. No doubt there will be further high level presentations going on this week and further developments in the coming months. All bodes well in my opinion.

Good to see so many of the regulars on here at the AGM and to put faces to names.
This morning's sp reaction was probably likely as those who are not prepared to wait bail out. I will not be joining them as I think the 'flat period' is over and for the next 3/4 months there are a number of itms which will underpin and improve the sp. My surprise yesterday was not that the AGM itself didn't produce some comments on things like drilling dates but that these were not available as an RNS immediately before.
I think the Board were concerned at having to state that the likely delay on Platinillo was largely a result of them not being the operator and therefore not able to control progress in the way that they would wish. Reading between the lines the operator is a Gov. body and can you imagine a Gov. Dept. here being any better at running a commercial project. Maybe that will change since the Colombian Gov. wants oil production as much as we do. I didn't get the impression at all that on the other Colombian blocks the operators were anything other than competent and getting on with things.
Taking the time to decide where to drill has to be more intelligent than hiring a rig and just making a stab at the most likely spot to drill in.
Maybe some of those key issues will be resolved in the next couple of weeks as some of the Board might have preferred to be getting on with that rather than be in London all this week.
As for the next few weeks they are doing presentations this week and no doubt that will feed through into more institutional buying in the weeks ahead; there are also likely to be a few occasions for directly related news flow re drilling, 3rd block in Paraguay etc and indirect items from GED and Petrobras. I would also not be surprised at some beneficial corporate changes.
In the meantime the fact that the best mining and exploration broker in the City thinks that CHP is worth holding over 20% of the stock is good enough for me to feel confident for the coming 6 months.

Sharesure, thanks as always for your comments/feedback on AGM.

Thanks - sharesure. Meant to come, but frankly changed my mind when I saw the RNS in favour of other activities.

Not surprised at the trader sell-off today. Happy to see the SP still well above the Jan up-trend and also has bounced of the shorter term July up-trend.

Nothing has changed, except an extension of time.

How concerned are you about a Colombian gov. dept controlling the destiny of CHP's farm-in cash? Not ideal. However, even they cannot reduce what's in the ground.

Do you believe they (Petrobas) are acting prudently on proper advice in ascertaining the best drilling prospects? Can CHP have adequte influence on this? These are probably my concerns arising out of a mid-term view.

As ever, considerable patience required to make the real money on these low cap explorers. When it trusn into a 5-bagger, it's simply a question of whether it took 12 or 24 months to materialise - whichever it's still a good living.

Keep up the good work - respect your information and opinions. Thanks

sd

stockdog, Thanks. re Ecopetrel I would think that there is every chance that there may be some movement on that side of things soon since the Colombian Gov. too wants oil production as without it they get no tax revenue.
Time to keep the shares to one side and enjoy the next 6 months or so, accepting that there will be occasions when the sp takes a downturn. I don't want to start a rumour that a takeover is imminent because it would be just that - a rumour based on nothing - but I do not plan to sell any stock until there is one and I know of a good many other shareholders who feel the same.

Hi Sharesure, thanks for the update.

Did you get any clues as to why the Bohemia concession is taking so long?

dibbles, just speed of paperwork. Most of us at the AGM formed the impression that the formal notification is imminent - nobody wants to count chickens etc.
Just maybe the RNS which should announce that all Resolutions were passed is being held back to announce both - only a guess on my part.

Sharesure hi hope all is well, i think those who have sold out today mainly on impatience may well have egg on there faces shortly. The chaco management have never been ones to make false claims especially on the news front,but when they do release news it`s usually very measured and positive. I, like yourself and many others have never been tempted to sell especially now where coming up to the drilling period and hopefully we will all be rewarded soon.

Still no agm rns Sharesure......

Your theory is looking more likely, fingers xxd.

Today's slip was predictable given that yesterdays rns virtually stated to the traders they can go elsewhere with no drilling til January.
Personally, I think that the Bohemia concession followed by jv news will be the catalyst that moves us to a higher level before drilling news comes.

Here's hoping anyway.

and it is exactly dibbles observation that led me to make my own earlier today ..... have taken my own advice and sold 50%, but fully expect to be able to buy back (substantially?) cheaper before the end of the year.

Cynic, if you are so sure, why not sell the other half and find another stock? Or are you just not so sure that you are right? I don't need a reply.

suffering sucotash!!!

you've got to be in it to win it!!!!

I see it settling at this price +/- 10% until more positive news, i don't think the downside is worth selling and risking missing a hike in sp to another level, spreads and costs taken into account. happy to wait come back in 4 years mortgage free.

SS .... you may not need a reply but you'll get one anyway! ..... i only sold half because i quite like the share and have held for some time, and also i could be wrong and it will take off before i buy back .... however, if sp is going to be quiet to weak then have other places to put funds - e.g. SHP though may take a second profit there in the morning; yet to decide

Graeme Stephens said he would be paying very close attention to GED's success/failure of their drilling of Primavera. Success would no doubt be very encouraging for Chaco. As a side note, and if GS's original 'feeling' about the size of the field are confirmed, then GED is ludicrously undervalued (by about 100 times providing investors hang around long enough). The market has no idea how big the field is; but we do. Can you all remember?

If GS's original hunch is to be proved right then a doubling of GED's share price would still represent an outstanding buying opportunity. I have no idea about the quality of GED's management at this stage. I do hold GED shares - but not many.

Alfred

Small mention for Chaco in today's shares - slightly out of date as they will have gone to press before the AGM. But recommending the shares as a buy anyway.

This is an asset play. I'm not in it for a gradual rise over the years - if it goes, it will go substantially as SS and others have been - rightly in the my view - saying.

It's speculative; there are risks; but the potential upside is huge.

This is not one to worry about day to day share movements. I am taking a two year view, but it is conceivable - if the drilling produces some intersting results - that a bigger player will snap it up.