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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.

Alex,
just a slightly diffrent thought from these guys.I have every confidence in CHP the only question is when.If its a hobby theres no fun in waiting for the rise which could be a while off as the sp here is not logic !, I have a big stake in CHP but would not enjoy my days too much just watching one stock.

Steve

Steve,

I agree with that. Definetly another good reason to have some variety. It's good for your health too, as even on bad days, something in the portfolio is normally rising (unless of course you stick to just one sector).

Strawbs.

I imagine Fidelity sold so as to ensure they are able to show a good return/performance figures in their quarter end report. Looking to me that we could now start to see a turnaround and head higher before too long.

WDBM has been buying again, but only hoovering, up hence the -0.25p to - 0.5p movements. I know that they regard this stock as cheap at these levels but the end of the tax year is always a good time for bargain hunting.

Fidelity were not intending to be a long term holder - this is consistent with their policy in other shares I have seen. I have watched them quickly get in and out of a number of stocks to make short term profits. So I don't regard their sale as significant in the overall scheme of things. As Greyhound says could just be a menas to boost returns heading up to tax year end.

I'm happy to continue to hold medium to long term and would look to top-up once we have some stability (and when I can find some spare money).

WDIK, PDYOR.

camlad

The best time for them to sell would have been when the price was 18 + . One or two posters on here said "The French connection" was a clown when he sold out at 18 p , whose laughing now.

it strikes me that if you got into this share at 6p or there abouts and withdrew you stake at 15p or there abouts you could leave the profit in and wait thereafter for things to kick in at any later stage. This I don't doubt is what is happening with some lemmings falling over the cliff with shorters. I am happy to wait for the full picture to unfold over the next 6/12 months.

watcher

On another BB one poster queried my summary of events and suggested that I may be assuming too much. I had already cross-checked my brief summary of what I posted with the company; Re Mirador, it is the Cana Limon field within that structure which has the 1.8b barrel find. Of the two wells Chaco plan to drill in their block I am not aware that they are thinking that they will pump oil from the block to the east; I understand that it is their geologist's view that they potentially have 300m barrels of their own in a structure below where they intend to drill their first of two shallow wells. The second well to be drilled is further to the west from this and will test another structure that they believe looks promising.
As I said earlier, I think that their priority may be to now tie up a corporate deal to speed up the work over the summer on all of their blocks (ie with a company with spare rigs which are in short supply at the moment)even if that means sharing some of the spoils but gaining an earlier lift in the sp.Don't forget these blocks have concessions which only last one year and so a holder cannot afford to delay their obligations under the Licence. The company had already been approached by Sth. American companies last year because of their Paraguayan interests (ie possible gas assets). The involvement of a major might be in everyone's interest since it would provide rigs, cash and extra mgt. plus lend credibility if it is one of the bigger players in the area.

I've just realised that we go up & down in round figures now instead of those silly ticks...

Does that mean we're in with the big boys now? lol

Sharesure hi, great thread buy the way, reading your posts give me great assurance for the future although was tempted to sell some of my 12.3p holding but no i am hanging on for the good times.Have bought at 6p and 8p in the past few months and made good money but this time despite the dissapointment of the markets reaction to Primavera i just get that feeling that this really is the start of an exciting 12 months for Chaco.Having woken at 7am on monday and seen the rns come through boy was i excited and initially when the price hit 19p i thought it would continue rising but bollocks it didn`t.It`s strange how this company is so undervalued but a lot have investors have been stung in the past buying on speculation although i know you rate Chaco very highly indeed.Do you have any more info on circle oil as it seems to have gone quiet over there.
Cheers, pisces.

Pisces, Thanks. Yes, I do rate Chaco! I believe that it will become one of those legendary stocks. It has started well if you look at the sp increase in the last 15 months. I do think that progress will be speeded up on realising the potential of the Colombian assets. Apart from the obvious, rapid progress will also earn them kudos with the ANH in Colombia. They were offered a fourth block recently but decided against it but that will not be the last time that happens too.
Re Circle Oil : All I hear is that the deal in northern Iraq is progressing and as soon as they can announce it, they will. I'm holding my shares in it as part of keeping a spread but wouldn't like to guess which of these two oilers will rise first. Shares magazine is likely to comment on Chaco tomorrow since it was in their recent list of 'best small oil companies'.

Courtesy of KJ Kelly

***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

hlyeo98 - 29 Mar 2006 15:44 - 2222 of 2223
Then why is CHP not moving up?
silvermede - 29 Mar 2006 15:47 - 2223 of 2223
KJ,

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

If anyone has any suggestions for info. which could be included in the header to make it more useful, let me know. KJK's financial estimates are near the start of the posts and maybe projected impacts on the sp of each area would be a useful way of reminding us why we are CHP shareholders.

Sharesure,

I have closed the other thread and posted a link to this one.

Primavera Region (in red):

Comment in the prospector section of Shares magazine this week. Apparently we had plenty to smile about, as the share price shot to within a fraction of the all time high of 18.5p. Made me smile anyway. The comment, that is. :-) Hopefully the newer lower price will encourage some late comers. Also features on the letters page.

Strawbs.

This is the sort of stock that many who take Shares magazine wish it would write more about. Plenty of letters to the editor and no doubt he'll respond as he has intimated in his postscript to that letter.

Another appreciated post sharesure

Thanyou

goo worth a look!.

Capetown, I did respond to an email you sent via MAM; did you receive it?