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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

Thanks for your clarification, at least now we
have some kind of road map and timetable
to follow. Its obviously going to take some
kind of estimate of figures to move the share
price substantially. Even though the Hardman
Report can give estimates I guess it wont be
untill the drill is in the ground that we will be certain
of what we have.

M

Dibbles, re Curuypayty : I don't recall any specific comments on this area; the Presentation I went to was delivered at quite a speed + lunch, and I think it suffered as a result in terms of amount of info. + little time for questions. At the EGM last year, GS's presentation then referred to how oily both of the Paraguayan areas were believed to be even though GS has a reputation for being cautious. I like the fact that in the next two months there may be more progress on collaborative deals being struck since the Paraguayan areas are enormous and will need not just a lot of cash but local mgt. to exploit them. Also at the last Presentation, the decision on the Bohemia block was thought to be due at the end of June.

Sharesure thanks, at least we can expect some newsflow on Paraguay as well, I thought Paraguayan assets were on the backburner so thats another positive.
Just hope current market conditions don't derail us too much in the meantime..

Just in the Primavera block alone 10 leads and structures have been identified as worth further work prior to two being chosen for drilling initially.

Well that RNS didn't impress some, SP falling.

What a rollercoaster this sector is - wish I was only in one stock!! Testing peoples nerve but a dip below that 12p level is now bringing in the bargain hunters.

That drop in sp made no sense at all unless someone was trying to shake out some shares whilst they still could.

Agreed and some orders being worked in the background in my opinion as well.

In my opinion it makes perfect sense. Bulls will have valued a number of speculative oil shares on a 12-18 month time horizon. Now with the possibility of inflation, lower growth, and so less demand for energy and metals down the line, shares in these sectors are being marked down accordingly (in line with bearish sentiment). The more speculative the share, the greater the chance of a severe drop. No doubt people will consider these bargains, and small rallies will occur, but just as the trend is your friend, it can also be your enemy.

Strawbs

12% though, getting concerned.

15% - just had to top up.

Long term these still look good value to me - IMHO of course

chesneya, and short term too. Today's drop in the sp was disproportionate to the difference between the total buys v total sells. There are a string of newsworthy items which could come out in addition to the Hardman Resources report.

Sharesure,just back from a week away,still think the sp has held well,as long as we have reached the bottom,WISH i had funds for more at this price!

Thanks again for all your posts they are NOT taken for granted!

Dow up 70 points already rebound tommorrow?,may try my luck with a T10

Going back up.

More like it!

Some nice buys and a 7.5% spread appears from out of the blue !

Indeed - dropping the bid to entice some weak sellers to fill the order book. Usual MM tactics.

http://www.lse.co.uk/FinanceNews.asp?shareprice=&ArticleRef=2424&ArticleHeadline=UK_small_cap_close_lower_mirroring_the_FTSE_100_Chaco_Resources_disappoints

Wednesday, 14th June 2006 17:26

UK small cap close lower mirroring the FTSE 100; Chaco Resources disappoints

LONDON (AFX) - UK small cap stocks closed lower as the wider market finished the day mixed, with Chaco Resources a key loser following less than impressive drilling updates in Paraguay and Colombia, dealers said.

from lse newsletter, may explain why so far down, who knows.

I saw that yesterday but don't know how they think it was disappointing, it just gave us a timetable and an update on progress which is what I personally wanted?
The "want it now" brigade I suppose.