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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.

Decided not to post anything much for now; I think that the Board are more confident that the current drilling will be successful, apart from which there are still other positive news items on Alea and the other new block in Colombia. Maybe those will be announced at the same time as the drilling result; certainly seems to be support from those very close to the company at the current sp. It also wouldn't surprise me to find that the new directors will have been acquiring some of the shares coming onto the market.

blanche - I thought that blanche 2 years ago when I went into Stanelco - day trip to Brighton this year !!!!!

Dave

cheers SS, the 1million buy again today would probably back up your post. Someone is confident, but who, we dont know....

.

FG - i cnt read the morse code over here :)

3 million plus buys on 3 of the last 5 trading days. Somebody out there possiblily knows something.

blanche ..... never forget a buy can merely be bear covering - i.e. taking a tasty profit

lol

lol all the way to the bank

Cynic,

I have been telling them that , but they only see what they want to see.

TFC - has mr channel islander had anything to say about the 1mil last night?

TIA

cynic is of course correct that puchases can be short coverings but in such cases you mustn't forget that it's the same "fear and greed" driving the decision making. Greed cashing in profits or fear that there could be sharp move higher.

or just, as in my case with UMN and VML yesterday, that there was a decent profit there for the banking

pardon my ignorance but I have always bought and held my shares and have never really done any shorting. Can someone explain to me how shorting works when you say the market have bought the 1 mill as a position has closed. I'm a little bewildered by that. thanks in advance.

it means you sell shares you do not own in the hope of buying back cheaper in due course ..... generally this has to be done through derivatives - e.g. CFDs, spread betting or traded options

Thanks cynic, yes but how can you trade something if you dont own it and at the end of the day it is bought by someone as a buy does go through the system, who will be left either holding the baby or making a profit on the price they were bought at. Do you see my point. I know you are right but I just can't get my head round it.

As far as I'm aware. Typically the shares will be borrowed from someone (either from the providers pool or from someone else). The other party earns a fee for loaning the stock, and retains all rights and privillages of the stock. They can also request it back at anytime. I would guess a spreadbetter/CFD provider will have clients holding long and short positions, so they can sell one clients shares as a short. The person going short/long pays or gains depending on the direction the price goes, so the provider has no risk in the middle.

In my opinion. Do your own research....

Strawbs.

Another thing to remember, is market makers can sell short too. E.g. They can sell lots of stock to you that they don't own, as long as they cover their position at some point in the future. This means that if they think the odds are that a price will fall, they may sell loads of stock they don't own, then when (if) the price falls, they can soak up the selling for days without going lower.

Again....Do your own research, in my opinion....etc etc.

Strawbs.

if you short, even through derivatives, there has to be someone as counterpart who owns stock and is also willing to lend it (for a fee of course!) because he wants to hedge or has a different view ..... thus, there are occasions when stock cannot be shorted - e.g. BFC a few weeks ago and Eurotunnel last year - because the whole world thinks it one-way traffic

Shares with very little liquidity and small market caps are also difficult to short I believe.

Strawbs.