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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.

Posted by Collyt2 on ADVFN (she has an open correspondence with CHP)

"Hi Guys

Copy of email from Chaco. I have to say I believe in the company, and I am sure in time patience will be rewarded, but once the first oil flows from Alea then we will be on our way!!

Hi Colleen,

I'm not aware of any bad news around the corner, and I spoke to my colleagues only this morning after the Independent comment came out. We have no clue as to what they are alluding to. As far as we're concerned, we are still on our last reported track.

In Colombia, we have a fully funded programme of appraisial and development drilling at Platanillo / Alea, a fully funded exploration programme at Puerto Lopez (seismic) and a fully funded programme at Primavera, including a drilling programme for two wells; and all scheduled to be completed by the end of quarter 1 of next year, with drilling starting later on this year.

If you look at the Hardman report, which is completely independent and understandably conservative, they point out that
a) oil revenues should start in the first quarter of our next fiscal year (year commencing 1 April 2007), which will obviously positively impact our capacity to do even more
b) their upside valuation of Primavera alone is 1.20 per share, if our strategies are successful and
c) the upside should improve as we acquire more data on Paraguay.

Paraguay is currently about seismic re-interpretation and acquiring our third licence. Again, everything is on track - it is work in progress. I cannot comment on timing on the third application, but there is quite a lot of activity at the moment.

You mentioned my optimism. This centres around a couple of things: the first is the quality of the team, who have demonstrated their ability to build a business of great potential in a very short time (and one reason for commissioning an independent report was to confirm the substance of our endeavours). The other is because we have actually improved our position since the share's high point. When we originally went after Puerto Lopez Oeste, we were looking for a 10m barrel play. It was not there, but the seismic reinterpretation has so far uncovered something at least three times as interesting.

Again, all this is contained within Hardman's document. It is on the website (www.chacoplc.com), or I can have a hard copy sent to you if you give me your address."

I understand from another shareholder who knows the business team at the Independent that they now believe that they were being used by someone who wanted CHP's sp lower. It seems to happen far too often and the LSE never seems to punish perpertrators of false rumours.

Colombia related oil news page 10 of the FT today or here's the link:-
http://www.ft.com/cms/s/dd937c56-1cdb-11db-9780-0000779e2340.html

As we speak, I am 100% cash ..... Not sure if I am getting over-cynical in my dotage or just marginally more prudent ...... However, I remain very distrustful of the markets ...... I see no immediate solutions to the conflict in M/E and there remains the very real danger of Iran and/or Syria getting themselves overtly involved, notwithstanding that Hizbollah and thus by definition Iran and Syria, have little or no support in the rest of the Islamic world ..... From a technical view, Dow is having more than a little problem breaking through the 11150 level, and it may take very little to start it tumbling again with its inevitable effect on the rest of the world's markets.

For all that, I remain a fan of both CHP and VOG and expect to be reinvesting in both when I feel the time is right.

I suspect the soaring energy prices will concern the markets more, especially when inflation starts to bite. Watching from the sidelines is quite nice, though sometimes the buying finger itches. :-) Welcome to the club.

Strawbs.

hi Strawbs .... I see you also made an accurate observation the other day pointing out that it was the producers rather than the explorers who benefit from high energy prices ..... VOG is, I think, much closer to becoming a producer than CHP.

Thanks Cynic. Bit sad about VOG really. I think maybe everyone was pulled along with the promise of a huge gas find, and forgot that you need to prove it with the drill bit before counting your profits. Maybe the same could be said of a number of my former stocks. As to who'll become a producer first, no idea. It's almost a toss of a coin that decides. As more and more money goes to the sidelines, I suspect the foundations of many stocks are quietly being erroded, which doesn't bode well if any shocks appear around the corner. While oil remains high, the producers are making the money, and high energy prices are ultimately bad for the world economy. These things don't happen overnight, and I'm sure the economists all think they have the balance right, but they've been wrong before.....IMO

Strawbs

Confess I badly burnt myself on VOG but remain (foolishly?) convinced that they are sitting on a huge genuine reserve - i.e. not just prospect ..... However, not quite sure what t hey need to do to prove it and to start extracting.

I also foresee a strange anomaly with FTSE purely because it is so energy-overweight ..... While there is unrest in M/E, energy prices rise and so the producers' sp rises in sympathy ..... As and when peace breaks out, as it assuredly will eventually, it is likely that energy prices will also fall etc etc

If I was being cynical, it probably suits some middle eastern countries to keep things tense (Irans nuclear ambitions and general unrest in the region), as coincidently most of them are large oil exporters.

Strawbs.

Too much of a conspiracy theory for me though assuredly the nutters in Iran and Iraq are very happy to see local conflict for whatever real political and alleged religious reasons

been out most of today- i see traded high of 12.75p. encouraging may have been some resistance judging by pull back.

trend line around this level. may take some news to break it? paraguay?>

Up we go again.

Looking good.

agree!- third paraguay block?.

Prefer sustainable steady as she goes rises, rather than flash in the pan rockets, so looking better.

There are a number of different items that will be the subject of news flow over the coming days/weeks/months from new blocks in both Colombia and Paraguay, JV possibilities, possibly new specialist advisors, seismic info leading to upgrades, drilling programmes - that's probably enough. My information says there is going to be plenty for everyone to be happy about over the coming weeks with this stock, even those who bought at 17p+.

Hi sharesure, keep the posts coming my friend i always look forward to your comments. Was getting a little concerned at 9.75pence but held my nerve shame i didn`t have any funds left or would have have bought big style. Hope your info source is as good as your posts.
Regards pisces.

nice 200k buy @full offer!

pisces, you weren't the only one to be concerned/annoyed. Have found out a lot more abut what was behind that - it was a dirty trick. The weight and frequency of news flow in the future should make it difficult for a repeat of that.

Delighted to see CHP back on the move, though it still has manay many hurdles to jump before it can call itself a "serious" company ...... With the grim news from EME, it is not impossible that there will be a knock-on here as positions are forced to close, but that could be a buying opportunity.

A very good week-a gradual rise is beter until real news arrives.