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.

Just started a new thread in order to keep the assets at the start of the discussion and as and when I get further news I will amend the information. Feel free to offer any comments you would like included or migrate to that one. Thanks to grevis2 for starting this thread all that time ago - is he/she still out there?

Possibly Shares magazine or the IC will comment favourably on CHP's Primavera deal; typically none of the Press has noted the award, to my knowledge.

I`m more than a little surprised at the markets reaction to CHP but i for one am more than happy to hold.

28.3.06 ***VALUATION OF CHACO WITH PRIMAVERA***

The current share price is 15p and my realistic valuation per share, discounted to present day values is 264p, based on 350m bls for Primavera. However, I believe this is highly conservative for reasons that I will explain below.

This valuation increases to a share price of 301p 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 assumption 350m 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 35 we can get an estimate of the potential of the Primavera field. This value of Primavera is $2205m or 1260m in our money. This equates to a net present value share price of 242p for Primavera alone.

Chaco has to drill 2 shallow holes to test Mirador to validate their resource assumptions. However, past holes have all showed oil and one flowed oil. All of these were drilled substantially off structure. Modern seismic also indicates a number of 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 242p (Primavera based on 350m bls) giving 264p.

The 350m bls comes from Chacos management who have always acted with caution and integrity. I regard the 350m bls as the minimum level. My view is that we can discard the 1.8m bls mentioned by someone as this was a figure relating to an adjacent field. I would not be surprised to see an eventual figure nearer to 1bn bls as the upper scenario.

All of 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 301p.

The current share price is 15p!

Tomorrow I will show the effect of making different assumptions and their effect on Chacos valuation.

Any comments, questions or challenges all most welcome. Sorry but I will only be able to respond twice daily at present.

Yeserday, I believed that today Chaco might suffer today and so far it has. But I think the above valuation of Chaco's assets indicates a very favourable risk/reward ratio. A downside of maybe 25% and an upside of 500%/600% in the short term, ie 12 months.

Any intending investor, including institutions, will expose themselves to huge regret IMO if they wait for another 1p or 2p before buying. This share could easily jump 5p or 10p in a day once sellers have left and sentiment changes.

Regards,
KJ

KJ
When do think we might see the 5 to 10p jump-this week?

Lots of big T trades during the day, and then again at the end. Plenty of selling too. Maybe the MM's will push the price up tomorrow and get a few buyers interested. :-) Not sure we'll see a 10p jump this week, but in my opinion we'll be heading back towards 18p before too long.

Strawbs.

Interesting post KJK...I'm no expert on this, but isn't there a different (lower) USD valuation for oil still in the ground???

Still a long holder of these and looking forward to a steady rise.

Mr Mole, yes there is but as far as I understand it is more a rule of thumb approach. The approach I have used is incorporating Chaco management's own detailed figures and calculations. It is therefore much more accurate than the dollar figure for oil in the ground.

Once you have a net asset figure of 301p per share you can then discount it for your perception of the risk that:
1. oil may not be discovered in the quantities assumed and projected.
2. the change in the rate of corporation tax in Columbia may not happen.

If you took a view the the combined risk of the both 1 and 2 above disappointing is, say, 80% then discount the projected share price by 80% to give a share price today of 60p. Discount it at 90% and you get 30p!

This is another way of illustrating what I meant by saying the risk reward ratio is hugely attractive at a share price of 15.75p.

Regards,
KJ

Chaco Resources Picks A Third Asset In Colombia
AIM-listed Chaco Resources is the successor company to Gold Mines of Sardinia. The company changed both its name and strategy in 2004 as it switched its focus to the hydrocarbons possibilities in South America, primarily the Chaco region of northern Paraguay.

But it is Colombia that is exciting investors. Chacos shares have risen sharply this year on the basis of its two blocks in Colombia, where changes in the fiscal regime plus the prospectivity of the available acreage makes the country a highly attractive proposition for oil juniors.

Chaco has now announced it has been awarded a 55 per cent interest in a third block in the country. The Primavera West Block covers 146,100 hectares in the Llanos Basin to the northeast of Bogot The block was unsuccessfully explored in the 1980s, with a number of wells finding oil shows in the Mirador Sandstone, the principal reservoir in the Llanos Basin.

Despite its inauspicious exploration history, Chaco believes there is plenty of scope to make commercial finds on the block. It has committed to reprocess 300 km of 2D seismic and drill two shallow wells to approximately 3,500 ft in order to penetrate the Mirador formation. Other productive formations, such as the Carbonera, are present within the block.

Its partners here are Expet SA and Argosy Energy International (operator). Chaco will fund 100 per cent of the first years work programme, reckoned to cost around US$2 million, to earn its 55 per cent interest.

This project follows Chacos other investments in the country. The company is set to earn a 54 per cent interest in an exploration and production contract in the Puerto Lopez Oeste Block, also in the Llanos Basin, by spending US$1 on seismic work during the first year. The objective here is to find a look-alike structure to the 10 million Valdivia oilfield which lies immediately to the south and is currently producing over 3,000 barrels of oil a day. .

Elsewhere in the country, it is due to earn a 25 per cent stake in the Alea discovery by funding the first phase of a work programme capped at US$7.4 million. The appraisal project is based in the Plananillo Block in the Putumayo Basin in the south of the country. The field was discovered in 1988 when a discovery well flowed 533 barrels of oil a day, which led operator Repsol to put the recoverable reserve base at 21-38 million barrels of oil.

The initial work programme involves re-working existing seismic coverage, re-entering and testing the original discovery well and the drilling of a new stepout well to determine the possible lateral extent of the field. State oil firm Ecopetrel will operate the programme and it is expected that the re-entry of the Alea-1 will commence this year.


This may not be the last of Chacos forays into Colombia. Enthusiasm for the country has been helped the governments plans to cut by one third the rate of corporation tax from 38.5 per cent to 28.5 per cent. Other oil juniors to gravitate there include Emerald Energy, Black Rock and Global Energy Development.

Chaco Resources PLC
28 March 2006


Chaco Resources plc ('the Company')

Holdings in Company

Chaco Resources Plc was notified on 24 March 2006 that, following the disposal
of 4,188,900 ordinary shares, Fidelity International Limited and FMR Corp no
longer hold notifiable interests in the Company.

The 24th was last Friday, so they must've been sold last Thursday. Two days when the price went up! Doesn't explain the current falls. In my opinion. :-)

Strawbs

end of tax year it happens ever year .they will reload after 6th

Tanker

Spot on. A lot of private investors using up their CGT allowances.

***OTHER ASSUMPTIONS FOR CHACO VALUATION***

The current share price is 15.25p and the base case for net present day value per share of Chacos oil assets is 264p, excluding the potential benefit from a change in the rate of corporation tax in Colombia.

Lets have a look at the effect on Chaco of some other assumptions for the oil price and exchange rate. Remember the base valuation per share is 264p.

Upside:
US$75 oil price share price valuation for Chaco 321p
US$/ exchange rate 1.60 valuation 286p
Primavera resource at 600m barrels valuation 436p
Colombian corporation tax rate being reduced from 38.5% to 28.5%, which is being put forward this year valuation 301p
Combination of the four above valuation 666p

Downside:
US$55 oil price valuation 206p
US$/ exchange rate 1.85 valuation 250p
Primavera resource at 200m barrels valuation 160p
Colombian corporation tax rate not reduced from 38.5% to 28.5%.
Combination of the four above valuation 119p

My Best View:
US$65 oil price.
US$/ exchange rate 1.75
Primavera resource at 400m barrels
Colombian corporation tax rate being reduced from 38.5% to 28.5%,

Combination of the above valuation 341p per share.

Too high? I dont think so. Chacos management is highly competent and cautious, which is why I believe they have been conservative in their 350m bls figure. Most probably I am also too cautious in my 400m bls figure

In two years time Paraguayian oil/gas assets will have been explored and developed and additional Colombian assets will (IMO) have been acquired. I have only included the Paraguay assets at 4p per share or 18m in total.

If you want any other assumptions used do let me know and I will run them through for you.

KJ

Then why is CHP not moving up?

KJ,

Even at 119p it still looks very good! Happy to wait for confirmation that the Contract has been signed.

Maybe we should close this thread and stick to Sharesures .

Aldwickk, Although I am biased, I agree. It wasn't my intention to hijack this thread, merely have as its header the events which should unfold, even though I suspect they are not going to be in that chronological order!

This thread as now been closed, please go to new one, on link below.

http://www.moneyam.com/InvestorsRoom/posts.php?tid=9730#lastread

goo worth a look!.