LONDON (AFX) - Chaco Resources PLC said it is proposing the reverse takeover
of two Paraguayan companies -- Amerisur SA and Bohemia SA -- from Candey SA and
Daniel Sztern in exchange for 27,322,404 new ordinary shares in the company.
It also plans to raise up to 750,000 stg before expenses in a placing of
36,585,365 new ordinary shares.
The company's shares were suspended on Sept 3 and it said it expects this to
be lifted today. It has called an EGM for Nov 15 to approve the acquisition and
placing plans.
Amerisur holds two oil and gas prospecting permits in Paraguay and is the
registered applicant for exploration and exploitation concession contracts over
the same permit areas. Bohemia holds registered applications for an oil and gas
prospecting permit in Paraguay and for an exploration and exploitation
concession contract over the same area.
The exploration areas covered by these three applications comprise a total of
approximately 48,000 square kilometres of the Curypayty and Parana Basins.
Chaco said these basins extend respectively into Bolivia and Brazil, where
commercial oil and gas production has been established for many years from
similar geological sections.

Stewart, Short termers getting bored. I agree nothing has changed as far as potential is concerned. If anything I came away from the AGM feeling more optimistic about CHP's future because deal 1 is so much better than appeared to be the case in that bland RNS they issued 2 days before the AGM. It would have been helpful to have been told at that AGM that deals 2 & 3 were signed up; obviously the timescale for information has been slower than I thought/was led to believe, but I reckon they are quite confident they will get the two further deals in Colombia.

Sharesure,what if the other 2 deals don`t come off,will we see a rapid fall in the shareprice or will the price consolidate at the 5p level,which is where we are going fast.

I would be getting very nervous if I was short Chaco right now. This news could pop out at any time and take ones head right off. It would not surprise me to see this spike 100%+ over the space of a few weeks with good news flow. At which point it will be impossible to buy any stock to cover the short positions. They could find themselves in a VERY nasty position. Don't forget the maximum you can make by going short is 100% of your investment. The maximum you can lose is uncapped.....

Roll on the first RNS, the shorters will be so desperate to cover their positions at any price for fear of a nasty margin call that a 1p+ spike is quite likely.

Lets be honest the story hasn't changed, just the timescale.

MPH

It seems to be strengthening, is that the case

Have you got my email ?

Stewart, I don't expect them not to win deals 2 & 3 but as I said before deal 1 has enough in it to support CHP. Deals2 & 3 would just make this sp take off. Then there is always Paraguay being worked on at the same time. As MPH says, going short could prove to be a very difficult and costly position to cover. CHP has masses of extra potential - the current weakness just gives a bonus buying opportunity. I am not trying to ramp CHP, I actually don't really care about the immediate sp because I just don't think that this situation will last at all long. It isn't justified now so when the mkt. wakes up to that it will probably over-react the other way. Confirmatory news is what is needed so that an evaluation can be made.

WDBM high bid again @ 60.5

Oops I meant 6.05p not 60.5p........maybe next week!!! :-)

MPH,

Got it thanks

Good to see some stronger buying return - presumably WDBM clients again. Would be good PR on CHP's part to beat their timetable for the next news. That would be concistent with their cautious approach on deal 1; I reckon that they have felt the need to build back credibility into their current negotiations so an earlier announcement would seem more likely than an overrun.

Thats better buying 4 x 250,000 and a 500,000, surprised we have not moved up, whats level 2 like, we need to get to a daily posative figure, that will show the corner has turned

merrill and scap high bid @ 6.1
wdbm a tad under @ 6.05

Stewart, You asked a question re value to of CHP with only Deal 1 :

Oct. 2005 :Deal 1 : Estimated recoverable oil : 20m - 70m barrels.

Value in the ground at $5/barrel = $100 - $350m of which CHP get 25%,
CHP share = $25m - $87.5m or 14.3m - 50m
390m shares in issue = 3.67p - 12.8p / share.
CHP value oil in the ground at $10/barrel; that would double these sp figures.

Mar. 2006 : Deal 1 : Assuming oil being extracted.
Value of CHP's 25% share of oil at wellhead : $175m - $612m. (Based on $35/barrel)
100m - 350m
490m shares in issue (assumes 100m placing at 6p to raise 6.0m?)
= 20.4p - 71.4p/ share

BUT this is only Deal 1 (of hopefully 3 deals) and doesn't take into account any potential for finds in Paraguay.

I think CHP missed a trick not doing some calculations for everyone, even if they req'd a range. Interested in anyone else's take on just that one deal.

Interesting figures Sharesure.

Even taking a conservative middle of those estimates at say 40m barrels the calculations look encouraging:

40m x $5pb = $200 = 114.3m
25% of 114.3 = 28.57m
28.57m/390m shares = 7.3p per share

So 40m barrels would be a share price of about 7.3p

Thats JUST in the ground, JUST this deal and JUST Colombia.

When you start factoring the other 55% deals, prices at the wellhead and Paraguay you can see how much potential their really is.

Another quick calculation shows that for just this 25% deal the share price when the oil is at the well head equates to 51p with 390m shares in issue and 40p with 490m shares in issue.

I do not wish to post my figures that take into account the other deals as I expect I'll be accused of ramping which I am not.

ShareSure/MPH,

sorry to disagree with your calculations - but at least we can do so reasonably and understand each others positions :-)

CHP do not have the money available to make Deal 1 happen. Therefore in doing the suggested calculations, we would have to assume that the additional 125M shares had been placed to get the necessary funds. I also believe that the current position (before any new placement) is roughly 405M shares. Therefore I would suggest any workings should use 530M as the divisor to arrive at the share price.

The other factor we could take into account is Paraguay (well at least the 2 former Ameriseur areas) because the rights already belong to CHP - done deal. Also, there will be no placement or capital funding for Paraguay because the company has already said it will do a farm-in deal with an operator and take a net profit interest.

all IMHO. WDIK, PDYOR.

camlad

Check this out - Paraguay oil pipeline project to Uraguay port

http://www.rigzone.com/news/article.asp?a_id=25922

Are you assuming camlad that the placing is at 6pence then?

Also what are you basing your assumption their are an extra 15m shares in circulation on?

Camlad, Unless I am missing something we are all in the same area on this, except you say that the no. of shares in issue will be 40m greater than my estimate. We'll have to differ on that.
I didn't include any hope value for Deals 2 & 3 in Colombia or for Paraguay because I was trying to assess the impact on sp of Deal 1 in Colombia on its own. I agree that that is being unduly conservative since from the comments made by GS on behalf of the local 45% trio in the region, either they are going to have very red faces or more likely are going to end up very rich out of this. I hope they do get very rich because the other 55% is CHP's share.
Whatever figures you take of yours, MPH's or mine, you reach the same conclusion - this stock is not priced to include its real potential.

Sharesure/MPH,

on page 25 of the annual report to 31 March 2005, there's a list of the major shareholders with the number of shares they own and the % of the issued shares that represents. If you use any of them (e.g. Candley have 18,214,936 shares = 4.5%) you can work out that 100% is roughly 405M [there are variations caused by the % being rounded to 1 dp]. I wouldn't swear to it, but I think the extra 15M has been caused by directors options.

I haven't assumed a placement at 6p - I just don't know the placement price. I am assuming that the Board will now raise enough to cover all their requirements and therefore will use the full 125M at this stage. [If they only wanted to cover the Repsol deal, then they wouldn't place anything like 125M (IMHO) since they only need $7.5M (plus some leeway, so maybe 5M?).] But in my own calc of NAV and SP I've assumed 530M shares and no further fund-raising required.

If I wasn't clear enough in my last post I apologise. I do agree with you that the SP now undervalues the company based even on NAV only.

WDIK, PDYOR.

camlad

CHACO RESOURCES PLC


Chaco Colombian Joint Venture Update


*Alea Field: Total Mean Truncated Resources of 38.1 million barrels of oil

Chaco Resources Plc ('Chaco' or 'the Company') announced on the 3rd and 5th
October 2005 that it had entered into a farm-in agreement to earn a 25% interest
in the Alea Field in Colombia's Putumayo Basin from Repsol SA ("Repsol") by
funding certain appraisal operations.
Further to those announcements, Chaco advises that the Mean Truncated Resources
calculated by Repsol for the field's Lower U Sand are 20.8 million barrels of
oil recoverable and for the Upper U Sand are 17.3 million barrels of oil
recoverable.
The field has currently one discovery well drilled on the structure which tested
a stabilised flow-rate of 533 barrels per day on a 1/2 inch choke from the Lower
U Sand. The Upper U Sand was not tested in the well, but is indicated by
Repsol's log analysis to be oil-bearing.

Mean Truncated Resources are probable recoverable oil reserves arrived at by a
volumetric statistical analysis which assumes certain parameters from the known
data and which applies a probability analysis to the likely degree of oil-fill
of the field down-dip from the discovery well. Conversion of Mean Truncated
Resources to proven reserves will require confirmation data from at least one
step-out well drilled down-dip from the discovery well, and ultimate proven oil
reserves may be higher or lower than the stated Mean Truncated Resources


Background

Chaco Resources Plc is the successor company to Gold Mines of Sardinia Plc. In
2004, the Company changed its name and its strategy to one of pursuing
hydrocarbon exploration and development opportunities in South America, focusing
initially on Paraguay. Two local companies, Amerisur SA and Bohemia SA, were
acquired for shares whereby Chaco obtained preliminary rights to approximately
4.7 million hectares they together held under three applications. Two of the
three applications covering approximately 2.3 million hectares were
subsequently granted as Exploration and Production concessions and the third is
still in process. For various reasons, the country has seen comparatively little
exploration activity to date, but it is of interest due to commercial extraction
of hydrocarbons having been made in adjoining countries from hydrocarbon basins
which extend into Paraguay. All the historical seismic data relative to the
applications was purchased at the time of the acquisitions and is currently
being re-processed using modern computers and analytical programs. On
completion of this first phase, the Company plans to review its strategic
options in terms of doing further seismic work and/or initiating a drilling
program. The Company's stated intention is to bring in farm-in partners for
this second phase.

Chaco was subsequently introduced to opportunities in Colombia, where a
fundamental change in the fiscal laws and an overhaul of the state's management
of hydrocarbon exploration and production permits created a very favourable
investment environment. Chaco teamed up with strategic joint-venture partners
who have many years of experience operating in Colombia and through whom it has
been seeking to participate in exploration and production (E&P) concessions.

Chaco Resources Plc (AIM Trading Symbol: CHP) has offices in the UK, Western
Australia and Paraguay and intends to open an office in Colombia shortly.

Caught the MM's napping and added a small topup to my holding.