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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.

Clearly the new chairman thinks the lack of news is good for investors?,NOT.

beyond belief.

The new Chairman may have his own views about what warrants being RNS'd and what doesn't, but he has not been a shareholder for the same length of time as most on here and, at 2.9m shares, he doesn't even own that many; his predecessor announced intended spudding dates and there is 'informal' confirmation that Primavera was spudded earlier this week. So somebody seems prepared to confirm that CHP is drilling. Maybe he views the current uncertainty as being a way of shaking out a few PI's so that he can get some friends/institutions in at current levels - I hope that that is not the tactic.

Sharesure,a very good point.

very disapointed with new ceo we should now of had some news of progress,or lack of it,

There is no point in being told that CHP is drilling a hole - we want to know what's in it!

No point wasting money on trivia, patience still required. Take up gardening.
2517

2517,i have.

Spudding?

Very good blackdown.
2517

I hope this current weakness is down to investors realising losses ahead of the end of tax year and not something more ominous, there's alot of red out there lately.

My take on it, fwiw is that the recent negative result from GED is just weighing on sentiment, instead of CHP rising on news of drilling, the opposite is taking effect, ie its still dropping in anticipation of a negative result, at least if its already factored in, it should slow down the drop in sp, in the event of a duster...

agreed- only positive results will get this in reverse.

I am begining to smell a rat here,large sells this last few days including the 750k at close,

I have a suspicion that the delaying of an RNS re announcing that the first or both wells have been spudded is causing most of this nervous selling and that, if there is a strategy of trying to reduce the number of PI's in favour of getting shares available for institutions + others, then it is working. If this thought is correct it is very unfair to those who have held for so long through earlier missed promises and could now justifiably have expected their patience to be rewarded.

Shareshure good morning,could it be that they still have not started drilling,and that it may well be further delayed,and those in the know are selling in anticipation of further news of more delays?

I don't think drilling has commenced and I don't think a changing oil company would fail to announce the spudding of their first well. That's not to say it's round the corner.

look at aim rules .

I have heard that other clients of one broking house has said spudding did take place which tied in with another source. Guess it's just a case of yet more patience being required.

Thanks Sharesure, I'm sure your sources are better than mine.