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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 - Chaco does the rounds beginning May

billstickers :Thanks, I thought that some were planned in second half April. However, I think there may be some earlier activity on other fronts before then which will provide a bit more market interest. Hope so, because the sp is being pushed around too much even though it's the CGT time for many.

Nice to see the comment in Shares having such a positive effect. :-( Maybe tomorrows IC will have better luck. This low volume seems to be giving the MM's far to much freedom to play around with the price. I'm starting to wonder now just how low we could go! Typically annoying since I've got no spare cash! :-)

Strawbs.

Stwabs,

Yes, I've learned my lesson this year and that is to ensure sufficient spare capital to take advantage of end of financial year drops in SP in order to top up stocks already held.

Lizard fuck off ramping goo and go away, all regular chp holders i think this could go to 12p at current rates.The shareprice is falling on a daily basis since the rns and it will be a brave person who calls the bottom.However i feel once the downward momentum has stopped there will be a marked correction back up to the 15p levels.It`s just too good a company to be dragged down to these levels but that`s what market makers do for a living.

Can that kind of language be kept for ADVFN please.

KEAYDIAN,i apologise but surely using the foul laguage GOO is far worse than the "f" word.

You have a point Pisces.

KD.

I guess the 1M sold at 16:13 hasn't helped the price any. Don't like the idea of a drop to 12. Let's hope the MM's decide to stimulate some buying interest by pushing the price back up, rather than killing it further with more moves down.

Strawbs.

strawbs get some sleep, if the price does float down to 12p and the long term prospects are as posted, then time to go car booting and get some cash in to take advantage.

watcher

FWIW, one view of the current chart might be as follows:-

In 3rd week of Feb we have a nice break north forming a 2-day flagpole from 12.25 to 18.5 - height 6.25p.

Since then we have been witnessing a classic flag sloping very gently in the opposite direction - a continuation formation typically from where we should expect to break north from say 16p to somewhere near 22.25p as the next flagpole/peak.

The current flag has been distorted by the Primavera announcement. This was, in retrospect, pretty much in the price prior to the RNS (we all got a little over-excited on that one, I think), but on the day itself caused a short-lived kick in the first half of Monday morning, before the flag resumed its gentle downward slope.

Take out the knee-jerk Monday am kick and you'll see that on relatively modest volume (compared to that for the flagppole itself) we are undergoing a prelude to the next leg up to 22.5p or thereabouts.

Not really worried. Even Fidelity's sell, I believe, was merely a technical correction to its holding to bring it back under the 3% parapet where it can act unnoticed in its normally quite opportunistic way.

If we do fall back as far as 12.25p, then the 6.25p will take us back to 18.5p where a resistance line will form until kicked through by some event, or simply a build up of sentiment which gives vent one morning. We all know there are lots of RNS opportunities that would cause this - a shallow well showing good HC flow, publishing re-interpreted 2D seismic, you know the kind of thing.

I love KJ's figures, even though I think their gross result totally ignores the risk of dry wells, bad luck, god knows what - but then when he knocks of 90% for risk and we still get to 30p, you go all sort of warm and fuzzy inside knowing just how many of the buggers you've got tucked away in your long-term share trunk. 5-baggers over 3 years are so much less work and risk than hard trading.

WDIK

sd

Stockdog,

A very sensible and pragmatic post.

Talk of current values of 250-300p seems to be up in the ether somewhere. This share is surely going to trade, as you say, in a range below/above 15p or so until the company produces some hard evidence of its ability to extract and sell oil.

As most sensible investors seem to agree, this is a long term proposition and, for the patient, the rewards could be significant.

Good post sd - I agree with your pragmatic approach - I would like to beleive KJ's figures and others - and I am sure it will happen - in time - but for now pragmatism prevails.

Baza

Stockdog, I thought you had a trailing stop loss at 15.50? Not having a go, just curious, good post BTW
Frampton

Any thoughts on what the floor will be for this? Tempted to top up levels, but have a feeling we could lose another 10% on this before it firms.

I'm starting to wonder about that myself. Both my holdings are in the mid 12's. I'm very tempted to sell the second (and larger) block of shares and try to buy back again when things settle down.

Strawbs.

Similar feelings Strawbs, last top up was at the heady heights of 16 (previous buys at 7 and 10) but do have a lot of confidence in this stock though, so may just hold long term.

Decisions decisions!

Frampton - yes, it's still there, but what can you do - lol!

Try not to get caught up in the intra-days trading, if you came back here in 1 month then I reckon you wouldnt even notice this last weeks minor wobble.

If you are in for the long term 12 or 14 or 16 will seem pretty irrelevant in 12 months time.

I have the majority of my holding at 6-8p - but admit to getting carried away with the euphoria and bought some more yesterday at 15.5, hoping that this had bottomed.

Not sure it is worth taking the risk of selling and hoping to buy back cheaper - but each to their own.

I will continue to hold