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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.

200 dma often has a strong psychological effect as does all time high ..... but will rely on you to keep us posted on trend line ...... Fully concur that a strong break - i.e. reversal of trend - can be very potent

Everything's possible, especially if there is no follow through with anticipated news during Q1. The older I get the happier I am to acknowledge the less I know, largely due to the increasingly evident unknowability of life rather than any failing faculties.

As for Eldorado - we just need to discover half of the top bar of the first 'E' to perk the SP up no end.

Sharesure,
You can tell me if I'm wrong here, but I think what you are saying in post 1855 is that GED are going to the extra expense of drilling production wells rather than bog standard exploration wells, because they are so confident of striking oil.....Just wanted to clarify this as it re-enforces Chaco's confidence in the area.

Lincoln, Yes, exactly.

Sharesure. I read this board often and find your comments informative. Would you kindly point me to the source of news that states GED are to drill production wells instead of exploration wells.

Thanks

kirk,,their rns from 16/11/06,says 3 delination well will be drilled starting in early jan,the first of which will be completed in early feb,,the company says they expect all 3 wells to have a posotive impact on their production levels in the first half of 07,i eagerly await a rns saying the rig has moved on site,which should come next week,if there is no further delays.

trotting12 thanks for you reply.

Hardman update out
http://www.hardmanandco.com/Research/monthly/Monthly_Jan07.pdf

A nice steady week would be welcome.

uponthelowdown - regarding alea, is it possible that we could acquire Expet, therefore giving us an increased stake in alea? or is there another way in which we will increasing our stake?

thanks in advance

robbi

Robbi, re Expet, it's possible as they have such close links but that wouldn't affect the % at Alea. Acquiring Repsol's stake would, though. Alea is such a small field by Repsol's standards that it might easily be an interest which they would be happy to trade. If they did CHP would have 60% and then become the majority holder and able to call the shots. It's all very possible but until there is an RNS to that effect a possibility is all it remains.
I would bet on both events happening because the moves could make sense for both parties in each of the above provided the figures are right.

cheers sharesure - i stand corrected, re Expet, that would affect the Puerto Lopez stake, which would also be a positive move! My only concern (if it is a concern) is how will this be funded? I would much rather see some kind of debt solution rather than an fund raising via a placing again. Either way, it will be a very positive move for Chaco. I emailed you a week or so back at you onetel address, it was nothing overly interesting, just that EK was not so sure he made the correct decision when he sold his Chaco. Would be quite humiliating for TW et al to admit they made a mistake but I found it quite funny and also reassuring that we all make mistakes:)

With Venezuela talking about nationalising key industries with oil being one of them, should oil minnows around the globe and their investors have anything (more)to be concerned about ?
2517

Venezuela has long been a dangerous area in which to work for all sorts of reasons, and have always had tendencies towards nationalisation and similar ...... Several other SA couintries are like-minded but certainly not all

Robbi, my ISP was having trouble with excessive spam over the New Year so I didn't receive that email as they were blocking out all incoming whilst they looked into how to sort it out.Their problems have now been fixed.
I had heard from Stewart that the TW/EK et al band had suspected that they had got it wrong with CHP. Tough, and although it would not be too late for them to re-buy their stake at a higher price, I think that we are better off without them. As far as funding is concerned I am pretty sure that CHP's mgt. regard future financing to be by means of borrowing rather than share issues but first they need to show an income stream from a block like Alea.
2517George, I view what is happening in Venezuela as not unhelpful since their social experiment is likely to show quite quickly that they will lose out on foreign investment and will suffer as a result. Meanwhile that should help a greater focus to be given to other countries in South America where the politics are more helpful or at the least benign.

Sharesure, that was exactly the view expressed by an analyst on Bloomberg this morning, he reckoned that in the global market they would soon get frozen out. Perhaps we should hope they do nationalise their oil co's then. Thanks for your reply, you too cynic (you an optimist--yeah ok).
2517

2517 - Colombia is enjoying economic growth, political stability. More info here: http://www.miami.com/mld/miamiherald/business/special_packages/business_monday/16394137.htm
There's no way the Colombians are going to follow Chavez. They know which side their bread is buttered.

Can anyone advise if the planned changes for a reduced business tax rate have been approved or are we still waiting on this. I haven't seen anything to indicate the legislation was passed, but perhaps I missed something? Thanks

Agree with all SS has said.
Repsol stake is what I meant. there is more oil in Alea than they know about afaik.
Then they are a major player in Maranon area, with Ecopetrel, in Peru across border and that may attract/interest them more.
Maranon stretches over the border into Colombia and it would not surprise me to hear that CHP have a bit of this action as well. I await the next RNS! or RNS's

Repsol-YPF makes heavy oil discovery in Maranon Basin - Peru
In an effort to prove up enough reserves to make development economical, Repsol-YPF has completed another heavy oil discovery in the Maranon Basin. Raya 1-X tested two zones, one in the Upper Chonta and one in the Vivian Formation with each flowing about 1,000 b/d of 12 API crude. It was drilled to a total depth of 1,789m, targeting the Chonta (Cetico), Vivian and Casa Blanca formations. Repsol-YPF's Paiche 1-X discovery is about 27km to the north-west. That 1998 discovery on Block 67 has proven and probable recoverable heavy oil reserves of 60 MMbo but has not been developed to date due to its remote jungle location. Another 10.5km to the west is Repsol-YPF's Buena Vista 1-X. Drilled in 2005, that well produced 2,830 b/d of 13.7 API crude from the Chonta and Casablanca formations during a 48-hour flow test to make it the fourth heavy oil discovery in the area. The Vice Minister of Energy cited reserves on the order of 70 MMbo. The nearest pipeline is about 145km away.

http://energy.ihs.com/News/WW-News/Repsol.htm