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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.

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!

4 million shares traded and 50:50 buys:sells looks very tame. As explosive says, market makers acting tactically.

By my calculations CHP's current 15p sp assumes they have 15m barrels of oil (using $60/barrel, an NPV of 10% and 550m shares in issue). Currently they have 10m barrels in Alea and an old prediction of 5m barrels in Puerta Lopez Oueste. We can be pretty sure that shortly the asessment for PLO will go up several fold (from what was said at the Presentations) and Alea too may be re-assessed at 20m barrels. That leaves Primavera and Paraguay in for nothing. It doesn't take much thinking to realise that this stock is unlikely to be a casualty in any future stock market turmoil, particularly as they have just raised the cash they needed at 15p/share.

sureshare are you sure rns this week.

Tanker, I'd be very surprised if there isn't one even though I expect it to be only the start of a series on various of their assets.

thanks

Sharesure - Do you have any idea how long the reinterpretation of the 2D seismic data on Primavera will take. 300KM is a fair distance, also any idea whos doing the reinterpretation as I would have thought a 3rd party would be sourced with the task.

explosive, I don't know. In the short term I think you may find that they focus on Puerta Lopez Oueste where they are very excited about something they have seen in the seismic and also because others, like GED, are about to drill the next door block around Primavera and that might have a spin-off value to CHP.
We really need to have Graeme Stevens' update which I think is imminent since that will help fill in a number of gaps in what is currently known by the market.

Sharesure
An RNS today would make sense with the market recovering-but Chaco may want to make sure the time is right by waiting a couple of days.

Apologies for straying, but does anyone know anything about Barrick Gold Corp'n ?
Not exactly an environmentally friendly company, but then again, which mining companies are.

Barrick are a very big Canadian outfit with lots of tentacles (and maybe even testicles)