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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.

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.

ditto

i shall be delighted to choke, but still stand by my description of CHP as an out and out spivvy stock ..... as and when (or even if) it ever comes up with some genuinely productive wells, then it may upgrade ..... at the moment CHP has bugger all except some licences to drill holes in the ground ..... that is the terrestial equivalent of pie in the sky, until or unless it becomes manna from heaven!

I think cynic wants to call it both ways. If the sp goes down he can say: "Look, I always told you it was 'spivvy' stock". If it goes up, he can say: "Look, I always had in my portfolio." Clever that.

so just because i hold the share you think i should say it's wonderful and of course it's going to come good? ..... well i wish i was so prescient as to know ...... as i said a few posts ago, i have 3 spivvy stocks in my portfolio, and if one brings home the bacon, it should carry the other two even if they go to zero ...... the chances of all 3 coming good must surely be pretty long.

if you want to play at semantics, you could interchange spivvy with speculative, but they really are synonymous.

surely none of you think CHP (and GOO and VOG) are any better than speculative (aka spivvy!)

cynic. No, I would not expect you to call it wonderful if you did not believe it to be so.

However, you are a unique investor in my experience in that you (publicly) dismiss anything positive which is said about one of your shares.

It's the investors' bb equivalent of cr*pping on your own doorstep.

"A cynic is a man who knows the price of everything and the value of nothing" (Oscar Wilde)

i just refuse to subscribe to the hype that so often surrounds stocks that go up like a rocket (and then almost invariably down like a stick) ...... a sense of proportion and acceptance of reality would not harm many "friends" here, present company excluded of course!

perhaps SD, some of my holdings will have a "value of nothing", so the cynicism will have been well-founded .... lol!

out of curiosity, are any of you guys arguing that CHP is better than speculative?

No

thank you ..... and as i said, spivvy and speculative are synonymous