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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.

sharesure thank you i was not being rude about my thoughts.just that i think theyvery under valued.

sharesure get into afd they are going up to 260p plus.

10% rise breaks me even on this one. Does anyone have a target price for the next 12 months?

Tanker, Thanks, but I cannot afford it. If you have any info to share on it in case I get to sell something else, email me using MAM's facility.One reason I am illiquid is that I just bought more Chaco this morning. Next week is looking good for a comprehensive re-rating of the potential of their Colombian assets.

Tanker - AFD and CHP have nothing in common other than they are both shares! Owning one does not preclude owning the other.

CHP. I Love you

Steady on KD what are you going to be like when this breaks 30p as imo they surely will, I see the higher bid is bringing out more sellers now.
2517

I also topped up yesterday @ 15p, this is one hell of a quality share!
High risk but then thats what gets u the rewards...

Am quite overweight on these now 50% (have been in since 6p)

2517George.

30p = My mum having more spending money in Las Vegas.

KD.

From Oil barrel:

Chaco Raises New Funds To Progress Growing Portfolio In South America
Chaco Resources has raised 4 million through a placing of 26.7 million new ordinary shares priced at 15 pence each. The proceeds will be used to fund the companys exploration and development activities in South America, where the company has recently received the formal grant of the Primavera West Block in the Llanos Basin of Colombia.

Chaco is committed to funding 100 per cent of the phase one exploration programme, which includes reprocessing 300 km of 2D data, the drilling of two shallow wells and the construction of essential infrastructure such as access roads, at an estimated cost of US$2.5 to US$4 million, in return for 55 per cent of the equity in the block. Its partners are Argosy Energy International, which will act as operator with 15 per cent of the equity, and Expet, with 30 per cent.

The 1,400 sq km block, which lies northeast of Bogata in the prolific Llanos Basin, was unsuccessfully explored in the 1980s, although a number of wells found oil shows in the Mirador Sandstone, the principal reservoir in this region. Despite its inauspicious exploration history, Chaco believes there is plenty of scope to make commercial finds on the block. A number of attractive undrilled structures have been identified from previous seismic work and some old wells located immediately to the east of the block, which appear to be off-structure, have had good oil shows.

This is Chacos third E&P project in Colombia. It already holds a 25 per cent interest in the Alea oilfield in the Putumayo Basin, operated by state oil firm Ecopetrol and thought to hold between 21 million and 38 million barrels of oil. The Alea-1 oil well flowed 533 barrels per day and was shut-in back in 1988. Chaco intends to re-enter this well, build an access road and drill a step out to determine the size of this field. The price tag on this work commitment is capped at US$7.4 million.

The company also holds 54 per cent of the Puerto Lopez Oeste E&P Contract in the Llanos Basin, operated by CCSA. The work programme here involves reprocessing existing seismic data and the acquisition of 100 km of new 2D data, at a cost of just over US$1 million. 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. .


Chaco is also a player in Paraguay, where it acquired in an all-paper deal two local firms, Amerisur and Bohemia, which had three acreage applications outstanding covering a total of 47,000 sq km. Two of those applications, covering some 23,000 sq km, have now been granted as E&P concessions.

Chaco is now reprocessing historical seismic data, which it hopes to complete by the end of June. It will then review its options, which may involve investment in further seismic or new drilling, at which point it hopes to bring in farm-in partners to share the costs and risks of exploring in this little-touched region.

This is frontier territory. The country has seen little exploration activity in recent decades and had pretty much fallen off the industrys radar. And while its drilling history is pretty uninspiring, industry watchers say its important to put that track record into context: the well density is very low, the seismic is very old and new investment could really impact the strike rate. Success here would vindicate the managements decision of 2004 to sell its gold mining interests in Sardinia and change its name to Chaco Resources, a nomenclature derived from a region of northern Paraguay.

For now, however, many investors will rightly rank Chacos holdings in Colombia to be of more immediate interest. This is a country that has attracted growing numbers of oil juniors in recent years: it has a licensing system that pro-actively opens dormant acreage to new players and its favourable fiscal terms, recently enhanced by plans to cut by one third the rate of corporation tax from 38.5 per cent to 28.5 per cent, only add to its attractions.

whole market looking pretty frightening at present....

It's time to hold your nerve, notice how quiet this thread is today compared to the euphoria on friday, has anything really changed in CHP's prospects? I beleive the oil price has dropped a bit but not enough to warrant the sp move down, to me this is fear factor driven, like the broader market, a good time for picking up a few more, not only CHP but some value stocks with decent divi's. All imo of course.
2517

All CHP calculations were done on the premise of a $55/barrel. As far as I know oil has not shown signs of testing that level. This sell-off is indiscriminate. When the dust settles the stocks with a real story, like Chaco, will recover very strongly.

Well Sharesure when the dust settles!!!! I'm not waiting for then, its like the sales have come early and I'm risking all picking up the deals on offer!!

explosive, I know I always seem the optimist on this stock but I reckon you have been fortunate. Wish I had some spare cash as I think Puerta Lopez alone is going to be shown that it is worth more than the current mkt. cap. The directors were so positive about it at their Presentation that they must be very sure that they are going to be supported in their view by the independent assessment. When even established oilers like Cairn Energy get dissed you have to realise that this shake-out has nothing to do with individual stocks.

The MM's are lowering the bid to prevent further sales, I just hope by Friday it's all still cheap. Its not often you feel right chasing a falling sp but with the only reason being a 200,000 barrel a day decline in demand and concern over interest rates this doesn't add up to the reductions we've seen. I personaly think that fund managers have created an overhang with sales, this has been multiplied with investor sales forcing MM's to lower the bid to prevent further sales. Clearly this hasn't worked and shares like Dragon Oil have lost a good quarter of there sp. Mining shares like Griffin have fallen some 45% in a little over a week, yet the fall in zinc / gold prices is nothing like that....

we all tend to think (wrongly) that "cheapness" is relative to what the price was some (short) time ago, and this can be a very dangerous trap ..... been there in the past

And no doubt you'll visit that place again in the future.

Explosive, the market is reading more than a rise in interest rates.Today's broad sell off is more on the back of talk of stagflation and maybe not a correction but the start of a bear market. I'm not in that camp currently and would rather ride this volatility, particularly as I, along with many others have been expecting it.

explosive - no doubt you are right, but at least the price will already be lower, thus cushioning the inevitable loss!