LONDON (AFX) - Chaco Resources PLC said it is proposing the reverse takeover
of two Paraguayan companies -- Amerisur SA and Bohemia SA -- from Candey SA and
Daniel Sztern in exchange for 27,322,404 new ordinary shares in the company.
It also plans to raise up to 750,000 stg before expenses in a placing of
36,585,365 new ordinary shares.
The company's shares were suspended on Sept 3 and it said it expects this to
be lifted today. It has called an EGM for Nov 15 to approve the acquisition and
placing plans.
Amerisur holds two oil and gas prospecting permits in Paraguay and is the
registered applicant for exploration and exploitation concession contracts over
the same permit areas. Bohemia holds registered applications for an oil and gas
prospecting permit in Paraguay and for an exploration and exploitation
concession contract over the same area.
The exploration areas covered by these three applications comprise a total of
approximately 48,000 square kilometres of the Curypayty and Parana Basins.
Chaco said these basins extend respectively into Bolivia and Brazil, where
commercial oil and gas production has been established for many years from
similar geological sections.

News today would be great but a steady day ahead of news a close second.

Sharesure, after your comments regarding Chaco potentially being the next Cairn Energy I decided to take a look back at the Cairn Energy news flow from 2003/2004 to see how they developed into a FTSE 100 company.

The first real sp moving news in that year was the oil discovery in Rajasthan:

News flow on 19/1/04

Oil exploration group Cairn Energy PLC announced a
"significant" onshore oil discovery in Rajasthan that initial estimates suggest
has reserves of 50-200 mln barrels.

Cairn Energy PLC's shares soared 41 pct, adding almost 230
mln stg to its market value, as the exploration and production group revealed it
had made a significant oil strike in western India.

Cairn estimates that its desert exploration well N-B-1, which is 60 km north
of Saraswati, Rajasthan, has reserves of 50-200 mln barrels, which could make it
one of the biggest discoveries of the year.
"Whilst further evaluation and appraisal is required I am confident that
this discovery in isolation has the potential to transform the value of Cairn's
portfolio," said chief executive Bill Gammell.
Analysts said the figure quoted by the company is quite conservative, though
nevertheless it has had a dramatic effect on valuations of the company, which
have shot up. The group owns 70 pct of the field
___________________________________________________________________

So back in 2004 when the oil price was around $40-50pb the market added 230mln to the market cap value of Cairn that day due to a 50-200mln barrel oil find of which Cairn had 70%. (35-140m Barrels)

So doing some calculations we see that the market added between 1.60 and 6.50 per barrel of oil to Cairns Market cap. (Using those find values of between 35-140m)

How does this compare to Chaco?

It is look more and more likely that Chaco have been successful in obtaining 55% of the Primavera field rumoured to contain 400mln barrels (55% of 400 = 220mln for Chaco)

Using market reaction to Cairn's find as a guide for Chaco. We could get a Chaco market revaluation due to Primavera of between 352m(1.6x220m) and 1430m (6.5x220m) 73p-300p.

The Cairn find was at a more advanced stage at that point than Chaco is now with Primavera and the figures they released were initial estimates based on tests. But it gives us some idea of the value placed on oil reserves and once Chaco secures Primavera we can look forward to the results of tests on that block.

Cairn also were famed for understating their reserves. Later that year Rajasthan was found to contain over 2bln barrels of oil. The price was adjusted accordingly. With other fields and finds Cairns market cap grew to where it stands today which is 3,003m

Chaco have already admitted on their website that Alea may well be very understated.
"In summary, there is excellent upside possibilty for substantially higher reserves"

Perhaps now others can see the potential that people like Sharesure, Stewart, Alfred and I see in this share.
I am not suggesting that we will see those superb price lifts immediately. But when we start to get some drilling reports and seisemic data from Alea and RNS permitting Primavera, then if past market reaction to similar information is anything to go by then those invested in Chaco now are looking to be in a very powerful position indeed.

Here's the chart for Cairn showing how the market reacts as Oil fields are found, tested and subsequently drilled.

Very interesting, might be tempted to top up again although i must admit i`m slightly nervous at the moment about doing anything.

MPH
Very interesting post I am holding for the long term as well!

sharesure

If it was that much of a done deal why do you feel that Chaco is currently only 16p.
Don't get me wrong I have just recently bought but am considering buying more due to many of the reasons you have mentioned, but if we can see it why doesn't the market?

MPH, I came to a similar conclusion using a different route, with a share price of 298p.

***VALUATION OF CHACO WITH PRIMAVERA***

The current share price is 16p and my realistic valuation per share, discounted to present day values is 298p, based on 400m bls.

This increases to a share price of 341p once Colombia introduces the reduced rate of corporation tax at 28.5%.

Im using the same approach as previously, based on Chacos own figures as included in their AGM Presentation (see Updated AGM Columbia Presentation http://www.chacoplc.com/index.html ) and provided at the AGM.

Shares in issue - at 31.3.05 390m, plus shares issued re Paraguay 19m, placing 85m, placing on 17th Feb 13.6m and options 13m. TOTAL 521M shares in isuue.

Oil price assumed $65 at an exchange rate of US$/ of 1.75.

Net assets:
1. Per balance sheet 31.3.05 - 1.3m
2. Cash from 17th Feb placing - 1.5m
3. Future cash from exercise of options - 0.5m
4. Columbia, Alea, net present value end 2006 $100m - 57m
5. Columbia, Puerto Lopez, 2006 NPV could be worth $63m - 36m
6. Paraguay, my estimated value of Chaco in Paraguay - 18m.

Therefore, the current 2006 net present value of Chaco's current assets is 114m.

The value per share of Chaco's assets is therefore 114m divided by 521m shares, giving 22p.

Primavera:

Chaco has a 55% stake
Resource assupmtion 400m barrels
Oil price is currently around $65
vs $ rate is currently around 1.75
Future values are discounted at 10% pa.

Puerto Lopez has a Net Present Value of $63m for a 55% share based on a 10m resource estimate at $65 per barrel.

By multiplying the Puerto Lopez value of $63m by 40 we can get an estimate of the potential of the Primavera field. This value of Primavera is $2520m or 1440m in our money. This equates to a net present value share price of 276p for Primavera alone.

Chaco has to drill 3 shallow holes to test Mirador to validate their resource assumptions. Their licence probably commits them to do this within 12 months of getting the licence. However, past holes have all showed oil and one flowed oil. All of these were drilled substantially off structure. Modern seismic also indicates more than ten untested structural closures, some of which are very large in areal extent.

Adding Primavera, to the other assets gives a net present value per share of 22p (other assets) plus 276p (Primavera) giving 298p.

The above is based on a corporation tax rate of 38.5% in Colombia. The government there is proposing to reduce it to 28.5%, which would increase the valuation per share to 341p.

The current share price is 16p!

yuff, I think the anwer has to do with uncertainty. Basically, most people don't like uncertainty and don't trust the work and motives of others. Also, many investors/traders don't do the fundamental research and operate in different ways. The share price will, IMHO, depend upon the RNS and what it contains. We are merely showing the potential if, if........

Regards,
KJ

Will we get an RNS at 12.00 or will it be tomorrow or next week? Any views?

Last 10 minutes has doubled the morning buys and @ a higher price.
2517

Thought it may be interesting for you chaco regulars on this board to predict a price on good news and not so good news. If i may im`e going to start the ball rolling with good news=22p-28p, not so good news 10p-12p. Come on lads join in and give us your predictions.

KJK, I have done similar calculations to yourself a few months ago (post#1211 and 970) and also came to a similar conclusion. The ambiguity came over what price to value oil at in the ground.

My current figures are not really a calculation on asset value as such, but a calculation based on how the market valued oil in the ground on another share (CNE) in a similar situation and extrapolating that to Chaco's current status.

It is good to see that ultimately the conlusion is still the same regardless of the approach.

Pisces,my predictions[with no scientific basis i.e. a total guess] good news 20-24p not so good [bad!!] news 8-12p

I've topped up again today :O

30-32p Good
8-10p Bad

Well I hope you are wrong if we have bad news as that will be quite a knock for me and I guess a few others

Peter

Well, if unproven oil in the ground is worth $5 rather than $65, this reduces KJK's value to 23p. Given the history of these assets and the higher than average indication of oil in the ground, you might go for $10 a barrel, which gives you a fair value of 46p.

So
good news 35p within a week of the RNS, not all in one day
indeterminate news 12p
bad news - who cares, I'm gone

sd

stockdog, $65 is not the value of oil in the ground it is an assumed oil price (based on the approximate price currently) before deducting all costs of exrtacting and selling it. See Chaco's figures in their presentation.

Last chance to get in today-news may come early Friday!I have seen news is imminent several times which to me means this week!

where the hell is this news, its driving me crazy!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

KJK - I know, so I was taking a deeply conservative view of only valuing oil in the ground - and it still works for me to more than double my investment within a few weeks. As wells are drilled and oil is finally pumped to the surface I can allow an ever increasing "risked" oil price until I too arrive at your figures over a few years, although I would not use $65 just yet, but $55 as the mid-long-term price - who cares about that difference from where we are standing. Just my way of acounting for the risk that the oil is not there in the shape or form predicted, may need more wells than planned, and any other difficulties of getting it to the surface.

sd