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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.

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

What worries me is we should've gone up after the announcement, or at least stayed in the 16's. The recommendations on the back of Primavera were in the low 12's, so given the downward response, and the time of year (CGT), could it drop back to those levels and drift until further news? All just my opinion. Thanks for the advice everyone.

Strawbs.

Time to just stick firm in my view; I think the reaction is overdone.

I think the reaction is overdone, but decided to sell some now and with any luck buy back later. If the price takes off in the meantime then I might loose out, but at the moment the "crowd" is dictating the price, rather than the fundamentals. Something I haven't seen since the bad old days of the tech boom. Thanks again to everyone for the advice. As ever, all just my opinion. Good luck to those braver than me.

Strawbs.

Can't see anyone but PI's selling out there, looking at the individual trade sizes. I'm currently 15% down on my last top up at 15.75, but up overall still.

Had intended that as a quick trade with a stop loss at 15.50, but can't see anything to do now but grin and bear it, since I am now a believer - probably until 6th April before any reliable move back up to safer ground.

I'm with Sharesure on the over-reaction.

C'est la vie! C'est l'huile! C'est logique!

sd

Oh dear oh dear! signs of panic setting in here m'thinks. Primavera wasn't a licence to produce money, merely to carry out exploration and this was factored into the price at around the 14/15p mark IMO. Whilst there could still be a quick upward move in the price, particularly after Tax Year end, this is surely a long term hold. Chaco have a great team, are in the right place for exploration and have just what is needed for eventual major success. BUT for now, just sit tight folks!
kim

Looking very much like a good buy at these levels and now considering a further holding.

Kim - on the other hand, no bad thing to lose the weak holders now. Don't forget for all their sells someone has or will soon buy the other side as a stronger holder.

Time to chill, and leave to the management. Market has not reacted as many thought, but with a steady newsflow, we will creep up and up and up! Dont think Primavera was priced in , i think people got excited about a quick buck, now is the time for the market to put a value on the company...

PS Keep up the posts to this great board. refrain from swearing, and insult throwing and stick to the argument.

PPS My kids are into Chaco, so keep it clean, otherwise they have the vocabulary to add colour to the thread!!!!

sd Yes, good point.

Vistauk, your kids should be into ERT, not the seedy world of oil!!
kim

Only 6 trades 100k + and they are in favour of buyers @ 650k to 470k, so mainly smaller holders off loading, my get out was 13p, but I have changed my mind and shall continue to hold, maybe pick up some more if 13 is reached. I agree with vistauk's PS. Good luck to all holders, stay firm.
2517

I've been increasing my holding and speaking to my broker looks like private investors selling out who were expecting explosive upward movement on annoucement. For us longer term holders I believe this is looking very good value. A fall of 25% on the week so far but with weekend papers round the corner.

Anyone who was around for the Alea announcement will remember a similar situation. We waited what seemed an eternity for news; lots of people, including myself, had T trades intending to sell after the 'great' news. What I learned from that experience, which cost me a lot of money, is that the MM's know how many
T trades are outstanding so make good money letting people load up before big news then close ranks after the RNS, drop the price to force people to sell at a loss.

I guess there will have been millions of shares on T trades at about 15,16,17p leading into Primavera news. If the price had rocketed to 25p+ the mm's are 10's of thousands out of pocket. Instead they are now handsomely in profit.

I learned this lesson the hard way, but learn it I did!

Once this situation clears, the bottom is found, I believe the sp will race up quicker than it came down so the mm's don't sell many at these levels.

Good luck,


cc.

spot on cc
if you can, just sit and wait...

Absolutely cc and I'm happy to be buying against the current trend because that's just what the mm's are doing!

Ive been holding chaco from 10p and will be keeping them as a long term investment, the recent decline in spread does not bother me as it is just a short term fluctuation as what some one else stated it will be good to get rid of weak holders who wanted to make a quick buck, also with it being the end of tax year,

Give it a month or so the price will be at 20p or more, just my opinion

Over the next 12 months there could be potienaly massive news flow, and i for one are totaly excited about this stock,

For example look at EME and ELP leading up to there drills the spread rocketed i thick chaco will do the same.

It wont be long before market wakes up to the potienal of this company, and we will see peope pillig in, i think this stock is going to be very lucritive.

Thanks for the reply stockdog, I've always found your comments on charts interesting, and you've seemed quite disciplined: selling when shares fall through certain key levels (BFC for example), which is why I was wondering why you didn't sell these? Was it a mental stop loss and you couldn't bring yourself to do it? (I haven't sold any of my Chaco holding and don't intend to, but the fall through 15p which I had seen as support is making me feel uncomfortable.)
Frampton

The drop has been overdone