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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.

Robbi, maybe but I would put money on them having another prospect in the wings too. The sp reaction to PLO not proceeding is ridiculous but that's markets for you. I'm already looking fwd to the next RNS which I think will more than compensate for this knee jerk reaction.

Sharesure
Chaco were never going to get all prospects to be successful but are able to find another one as well as two sites for drilling-not bad!

Short term GED must be near to begining drilling on their side of Primavera field by now, so can expect some interest in next 2 months, although you wouldn't beleive it looking at the sp.

Chaco oversold today IMHO, I topped up, great opportunity, thought I wouldn't see another dip this side of easter.

Sorry if it's a stupid question but why didn't CHP drill a target of higher potential first.
2517

George, it is! They didn't drill anything. Read the announcement and also focus on the replacement that we shall hear about in the next few weeks.
CHP is oversold on current worth at Platinillo and the next few news items should show why the sp should be a lot higher if they live up to expectations.

Cheers for that Sharesure (I think), ha!ha! Must learn to read items thoroughly.
2517

The PLO announcement came as a blow to the solar plexus. At least we are looking at more accurate 'spud' dates for Primavera now. Primavera is obviously the one Mr Wardle fancies as a main chance. alea will follow soon thereafter.
More acreage will come to replace PLO. The news on PLO would have been a lot worse if they had waited until started drilling. It is out of the way. Let's get on with the good news.
More news on Alea is to come out soon. Much more.

I just wish they would make their releases a little more shareholder friendly when they put them out. It is hard accepting something is not what it was advertised to be.

A straight RNS saying we have just doubled/trebled the potential at Alea' is all that will satisfy me now.
Oh that and 'we have a minimum 400m barrels in Primavera, perhaps a lot more'

Anything else is not on I'm afraid, for me anyway. I haven't waited this long to get shafted.
They need good news now and lots of it, and I do believe that will be the case.

They have disappointed on one front today. Reality time but any more disappointments and I can see people turning tail.

I await news of the much improved perspective very soon.

you need serious commitment to stick with this share, it's been a very topsy turvy ride, but I'm still on it waiting for the big lift off. An underground sea of high quality columbian crude would make it all worth while. Good times ahead I hope

"if they live up to expectations" ....... and the odds of that? ..... and i say that as a fairly long term holder

Sharesure I respect your opinion and would like to ask a question.

From the RNS released today...

One advantage of reaching this decision at this time is that it enables us to
devote funding which was earmarked for drilling in this block for targets of
higher potential. We are currently in the final stages of negotiating such an
opportunity and expect this to be finalised and announced in a few weeks' time


Do you think there is a strong possibility of the funds buying a greater % stake in Alea?

If so how would Chaco most likely acheive this?

Thanks

Looking forward to more improvement tomorrow.

That sounds like an eminently feasible use for diverted funds Kirk..
"A few weeks time" I'd prefer it to be sooner personally. What does a few constitute? More than a couple and less than half a dozen?

I need a quick antidote to the traumatic disappointment of today's PLO withdrawal.

Kirk, My view is CHP will get both, ie more at Alea and a new area in a proven high potential location. For the moment it is time just to be patient but I would put money on some of this coming out very soon. I am also hoping that by the end of Feb. CHP will have completed at least one drill hole in Primavera and have started the second by the beginning of March.

Have had CHP on my "investment "watchlist for this past 12 months .Have succesfully traded these permitting volatility and ensuing "real" Momentum levels being realised. ......and " bread and butter" style exploting its trading parameters which before today were firmly established at 10-5 suport level and fierce resistance @ 16p .,But as an "investment" i still remain as totally unconvinced as i did in my one past post ........Now with the restrictive cost of magnetic imaging and 3D Seismic survey in a sector notorious for heavy cashburn i ask myself the simple question Why didnt CHP begin a programme of spudding wells in thier most promising acreage . ........And not start with non commercial acreage . Also watch the tight rotary count in which my "Alexanders connections "reports that 90% of oil companies are using to makeuse of thier lawful right to retain rigs foran extended period. ...On the other hand selling seems a bit overdone . @@+ J

TFC, You seem to have overlooked the fact that the operator in the case of CHP's commercial acreage is the State owned company, Ecopetrel, and it has been so far shown itself to be unable to rise to the challenge of acquiring rigs in a difficult market. Now, if it was prepared to hand over operatorship to CHP/Repsol that would be a very different thing. It would seem the obvious thing for CHP to strive for; in the meantime the oil that has already been found about 15 years ago is most likely still there - after all it took a few hundred million years to migrate there in the first place - it would be very bad luck if it had decided to leak away in the last 15 years!
I am anticipating that there will be news on this block very soon and that the impasse could be resolved as a result.

why have people misread the RNS, it is pretty clear that they havent abandoned a well, we werent even that close to drilling PL. After extensive interpretation of seismic it is clear that there is hydrocarbon shows but not in a commercial quantity. Why waste further capital if you have the chance to acquire better prospects? is it so hard to understand?? all these people stating, why didnt they spud the mose promising acreage.........i think you will find they are, Primavera is the most promising IMO and they are spudding it next month!!

rant over!

regards

robbi

robbi, not disagreeing with you but I think it's more the fact that the market doesn't like unexpected surprise and it was only in Q306 that the boundaries were changed with the hope of having a better play with PLO. That said, there was never any value attributed as already mentioned by others and it's a better management decision not to continue now. Certainly the spudding next month has gone largely unnoticed. This is the real news in my opinion along with updates expected as early as "..a few weeks' time".

Nice 100,000 buy.

Sharesure if Primavera has two successful drills. What would your price per share be given market sentiment. Wouldn't Primavera be a Company Maker on its own.

all hypothesis ..... first of all let the company find something that even looks as though it may have commercial viability ..... at the moment, it is just among the myriad of blue sky E&P companies