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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.

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.

anyone in the know on oil terminology?. i hold goo and they have confirmed from drilling. two hydrocarbon bearing sand zones of 250ft gross and 315ft gross (565ft). they are due to production test in next few weeks. where vog drilling report shows three zones of hydrocarbons totalling 55ft net pay.

is this a size thing or makes no difference?. early days but surely an encouraging sign.
like chp waiting to buy.

Lizard, I believe it is far more complicated than just length of zones, as the % of hydrocarbon saturation and the zones porosity come in to play as per VOG's RNS today. BWDIK. As you say need an expert. :-)

.

dandruff....

Good start to the day.

I think we will see a little tick up soon .

.

You could see it on Monday, it its listed in today's Moneyweek roundup listing.

rpaco

see what?

silvermede.- got this posted on advfn.if nothing else its an education in oil language.
maybe helpful to you chp holders next year when drilling commences.

hydrocarbon bearing sands zones.

gross= total amount of sand
net= sand that contains hydrocarbons

usually 50% or so, maybe down to 10% or as high as 80%.

vog totalled 55ft net pay in three zones.(his verdict good)
so put that into goo.
drilling results confirmed two hydrocarbon bearing sands zones in the palaeozoic and verdun reservoirs of 250ft and 315ft gross (565ft gross hydrocarbon sands zones), so if you take the low case scenario of 10%.

565ft gross:10%= 56.5ft net pay. anything over this excellent.

goo due to start production testing in a few weeks so could be interesting.

Lizard, thanks. If we then put net pay alongside the % of hydrocarbon saturation and the zones porosity we should then be able to make some judgement over whether good or not, when news comes.

Good article in the Independent today -reported on the other BB.

From today's 'Independent'

http://news.independent.co.uk/business/analysis_and_features/article1876763.ece

Small Talk: South American oil minnow Chaco is worth exploring
By Michael Jivkov
Published: 16 October 2006

The South American oil and gas explorer Chaco Resources may well be worth keeping an eye on in the weeks ahead. Recent news from the AIM group has focused on its operations in Colombia, but word has it that an important announcement is on the way regarding its interests in Paraguay.

Chaco is said to be close to a deal with the government of the landlocked South American country which would double the size of its acreage there. News of the coup for the company could come as early as this week. The bloc Chaco hopes to win sits on a geological structure that runs into Brazil, where it is already producing oil. Given this fact, it is very likely that the Paraguayan side will also prove to be a success for explorers.

Following the acquisition of two companies in September 2004, the group is thought to currently control about 10 per cent of Paraguay's hydrocarbon bearing areas. Chaco has since been in talks with the government to extend this. Although Paraguay does not produce any oil or gas at present, Petrobras, Brazil's state oil company, has recently intensified its activities in the country in the belief that it is resource rich.

Earlier this month, Chaco received an extension of the boundaries to its Puerto Lopez Oeste block in Colombia from the government. It plans to conduct additional seismic studies on the site later this month in order to be able to start drilling there in early 2007. Shares in the group closed at 13p on Friday. They hit an all-time high of 18p earlier this year.

Sharesure,

What's the situation re the availability of drilling rigs in Paraguay?