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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, Agree that we have been told 'news soon' too often only for it to either not materialise or arrive weeks later. Barring something catastrophic think that we should be able to believe that in February there will be some drilling at Primavera and that the chances of each drill being successful should be better than evens by quite a margin. Apart from that my contacts seem to be suggesting that there is much more that may be ready to announce around the same time. This time I hope that they are right because it is easy to see why some are getting bored.

now is definitely not the time to give up on Chaco, too much going on around Primavera field, will need to have wiits about you should it not be better than evens. Still management seem sensible in their appraoch to all this, only time will tell if its all been worth the long wait.

Cynic, dawn in spring is a wonderful time, birds singing etc, are you still in or have you taken a step back for now after all your derogatory remarks about little oilers?

i still hold CHP (and GOO and VOG for my sins), but my "derogatory comments" about minnow E&P companies still hold good ..... i really do not subscribe to the view that the odds of CHP hitting commercial oil at all in Primavera are remotely as good as "better than evens", let alone on every drilling, as has been suggested ..... A good strike rate is prob about 4:1

Cynic, suit yourself - I think that we have a conservative mgt. team.

well (sorry about the pun) my dosh is on the line too!

A good strike rate is prob about 4:1 - now that would be something! I think you may mean 1:4!

i am no racing man! ..... but 1 to 4 is what i wrote = 1 chance in four (surely?)

l see your point Cynic. For in placing odds of 4-i implies 4 strikes in one well; but as that would be rather bizzarre, if not absurd, its not difficult to see what you really meant, which is, as SD correctly observed odds of 1-4 . ... ..As for CHP l think both your estimates are stuff of which dreams are made. l have no desire to be contrarian nor confrontational - and only wish for a balanced debate-trarian, but the odds of CHP even bringing one of thier acreages from pure expo to production; or even expo/producers on a sidewind as a susequent j/v is still pretty remote ........Let me put it this way . Perhaps i am being unfair , and CHP are not as unconvincing as i have previously stated.. BUT in saying that i can think of a plethora of pure junior expos that have run rings around this lot. .... ln another age, and place , CHP traded as something like Sardinia Gold , which was AIM listed , full of optimistic plans and even more optimist forecasts..................... What a bloody farce. , and acieved their only success in leading their shareholders a right merrry dance. lt was an utter nonsense . So they simply hitched their wagons to the very specialist "family "of oilees , and simply, on the back of the global increase in the price of a 42 gallon blue barrel , Did they imagine this would be easiare..lol ...But when management have f*** up one listed company. l NEVER and i mean f*** g nevergive them a second chance . NEVER !! ..; a sentiment shared by 80/ 90% of the city .And thata very coervative statement too. Probably 90 t0 99% . ... Now SS, like Cynic and SD - You seem a decent , honest rational ,stable,logical gentleman who at times has posted some quite errudite and interesting postings. Now can i ask you something ??? { sorry to give such a weak and simplistic edge to it. But. ! lf you lent a friend 50k -and he renaged - Would you throw caution to the wind and lend if asked again ....l strongly doubt it . .....................Well thats what your being asked to do here ...........Good luck to you . @+ J ..

thanks FC ..... not in for a huge sum anyway so will just let it run

TFC, to answer your question, the 'friends' are not all the same ones as GMS. I may know a little more than you have found out about why GMS never got anywhere; those on the Board at that time were guilty of being strung along for longer than they should have been but, as far as I am aware, that was their only 'crime'. Everyone is right to be cautious about what they are told by directors and for me the integrity of the Board probably counts for the most when I make my investment decisions. Granted we can all make mistakes but I have seen nothing here so far that makes me think I should revise my view. I look forward to the next 4-6 weeks to see how this investment performs.
I'll keep your cautionary words at the back of my mind (and I hope that is where they stay!) just to act as a counter to my optimism.

If CHP finds commercially exploitable quantities of oil in Alea & Primavera - comments noted above re probability, but at least there is some (earlier) research available to the company re the geology in these areas - then this will put a floor under this share. In addition, it will enable CHP to invest in further projects in Colombia and Paraguay.

I think projections of an imminent rise to 100p + are misplaced, but I am quietly confident of 50-75p by this summer; coupled with a much improved investment position for the company which will bode well for the future. There will also be the added spice of a possible takeover.

Having said all this, I am aware of the risks and the downside if the two potential fields turn out to be duffers.

Steady stream of purchases coming through. Also seeing elsewhere that apparently stockbrokers Redmayne Bentley are advising this as high risk buy.

Greyhound, Redmayne are very close to CHP ( and have been from very early in the process) and from what they have told some of their clients who I speak to they do not have too many doubts about the outcome of CHP's Colombian activity, even though they have placed CHP in their speculative portfolio.
Highly likely that there will be a little market shake-out on CHP, like this morning's drop, before some of their clients and others decide to join for the run-up to drilling.

Thanks as always for the update Sharesure

Apologies just off-topic, sharesure have a look at MYH, great business model in my opinion.

Sharesure
Why should there be a shake-out so close to drilling?

there'll be a much bigger shake out if CHP don't come up with something positive PDQ!

Maybe you should sell your shares now then Cynic, as you have nothing good to say so why your holding on I really don't know. Win or lose never any guarantees in anything we do in life.

CHP is one of three total spivvy shares that i hold (CHP, GOO, VOG) ...... i live in hope rather than expectation that one of them will bring home the bacon, so to speak ...... but combined, they are a small proportion of my portfolio so worth staying put, i reckoned

could almost have added SOLA to that list, but that is arguably more soundly based

Cynic, You obviously know zilch about CHP. It may have been slow - and still is - in proving the value of its assets but how much humble pie do you wish to choke on over the next couple of months by calling it a spivvy stock. Sell up if you feel that way - there are a few who'll happily take your shares this week and next.