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.

My reading is that short-term speculative holders (like me) hoped that the good news would cause a decent positive movement in the SP, in which case they would hold, but given there was no reaction they have sold out and moved on (unlike me) - a variation on buy on rumour, sell on fact. So quite happy that the price held up and will hold for more news on the Third Licence (da- da- da- da daah, da-daah, The Harry Llanos theme), but I have a very tight stop loss at break even on what I paid.

sd (BTW - that's Stupid Dog, Master RSI (rye sense of inhumour?)

Sold all my holding this morning, didn`t want to ,but lets get one thing straight there can be no sentiment whatsoever when the money is there to be banked.Potential and delivering the goods are worlds apart with a company like this and when estimates for getting oil out of the ground are banded about you have to sit down and think that they could be grossly undercosted.How many property programmes have you watched where a developer budjets for a certain price but ends up paying double, a similar scenario could apply to chaco.I will buy back in a few days when things have settled down and hopefully at a lower price ,the main reason for banking a nice profit this morning was because of no market reaction to the news out today.

I wonder if the ghost of GMs of Sardinia is lurking in peoples' minds? They had pots of cash and real expectations but it all went wrong and shareholders of 5 years ago are nursing 50% losses.

In the presentation Chaco estimated the Puerto Lopez well contains 9.79mbo of which 50% is recoverable.

This gives us 4,895,000 barrels of recoverable oil in the ground.
CHP has negotiated a 54% stake in this which is = 2,643,300 barrels.
@ $10 per barrel in the ground that gives revenue of $26,433,000 less $1m in costs which gives us $25,433,000 or 14,960,588
At 475.44m shares in issue this is equal to 3.1p per share

Moving to the well head, at $35 per barrel the figures give us an asset valuation of 54,420,882 or 11p per share.

ADDED TO

The Alea field:
All figures were given as recoverable oil so no need to discount

38.1m recoverable barrels x $10bp (in the ground value) = $381m
25% for chaco = $95.25m = 56m
56m/475.44m = 11.8p per share.

At the wellhead based on $35 per barrel the figures give a 70pence share price.

This gives a combined share price of 14.9pence based on in the ground valuations (11.8p + 3.1p) of secured assets. When the oil starts moving to the well head we should be looking at 81p+

Of course these are all estimates based on the oil reserves claimed and current known costs. There may well be other costs but equally there may be more reserves.
However it gives us a good idea of the sort of potential there is and the sort of prices predators would have to pay if they wanted to take over Chaco.

M_P_H

Very good analysis, I think you have said it all except we must not forget Paraguay even before we started Colombia it was valued @ 4p so we should add that to the valuation.

Plus there is the next application where an announcement is due shortly and we all know that field could be very significant. This company has considerable upside in the weeks and months to come and the SP will relect its worth.

Anything in the papers?

MPH - good analysis. CHP's website is being updated with their view of value on a cashflow basis, After the problems of other oil explorers it is certain that what they post on their website will be prudent. The 3rd Colombian asset (reputedly enormous by comparison with what has already been announced but which is likely to involve CHP in having a minority share, 25%?) is nearing completion so the current sp is in my view likely to strengthen over the coming week as we near that announcement.

MPH - many thanks for the update on the valuation. It helps to clear the muddied waters. PS hope you dont mind - but I copied it across to another BB because I thought it was so good

Baza

Interesting comment from a contact very close to CHP was that Repsol, CHP's partner on Alea 1, reckon that the announced 38.1m barrels of recoverable oil could be understated by 40%?

Sharesure
I thought the 3rd Colombian asset was to be at 55%.Thanks for the note on Alea1.

Bodeng, Because of its size (believed to be several hundred million barrels) it is more likely that a partnering deal will have to be put in place; that has the advantage of getting it into production quicker. News on the outcome of that is expected in early December.
Re post 964, does anyone have any connections with Repsol to sound them out to see if they really do think that there is 40% more oil in Alea 1?

MPH - a comment from another board
"Graeme Stevens always qoutes the possible reserve as already in the recoverable status, he said so at the AGM.
."

How does that effect your calcs ?

bhunt,

I have been going from the presentation figures. On slide 32 it says:

>Oil In Place estimated at 9.79 MMBO
>Recovery Factor estimated at 50%

Hence I assumed that 4.895 MMBO are recoverable (50% of Oil in place)

However using 9.79 MMBO recoverable:

54% stake of 9,790,000 Barrels = 5,286,600 Barrels for Chaco
@$10 per barrel in the ground = $52,866,000
Minus the $1m estimated costs gives us $51,866,000 or 30,509,411

475.44m shares in issues is equal to 6.4p per share in the ground.

Moving to the well head, at $35 per barrel the asset valuation is 108,253,529 or 22.7p

The calculations for Alea are unchanged as all figures were stated as recoverable.

Sharesure, if indeed that is the case and perhaps we are looking at 63m barrels in Alea (40% understatement of reserves) then on the Alea field alone we are looking at an in the ground share price of 19.5p

63m recoverable x $10pb = $630m
25% for chaco = $157.5m =92.6m
92.6m/475.44m = 19.5p per share

Not forgetting Stewarts valid point that Paraguay was worth 4p before Colombia even got rolling.

So in summary:

4p for Paraguay
14.9-19.5p for Alea
3.1p for Puerto Lopez

22p-26.6p share price valuation for oil in the ground rising to 85p as the oil approaches the well head.

Those are all SECURED assets, not hopes or potentials. In addition to this if chaco are successful in their application for the larger 2nd field then things start looking very rosy indeed.

DYOR IMO

I wish someone would start to buy-bargain at the current price!

M_P_H, your last post (970), I would disagree with the statement that these are secured assets. I still see these all as potential not actual. The rights are real but the oil is only potential until CHP have drilled and there is flow and a pipeline connection i.e. there is oil revenue coming in. I know that you have differentiated via price between oil inthe gorund and oil at the well head - and I agree with that. I still see potential not secured assets right now.

By the way, I appreciate your work and calculations tx for that. I have posted extracts elsewhere to illustrate the point that CHP is considerably undervalued - so I'm not disputing that. I simply believe that the market will not fully react until the potential is transformed into tangible actuals.

BWDIK, PDYOR.

camlad

MPH = thanks for that - and I also appreciate your efforts to show a noddy how to make some sense of the figures and translate them into an SP estimate.

Now - can you please tell everyone else what a bargain they are missing - preferably before Xmas so that I can buy the wife a pressie.

Well done - thanks again

Baza

Baza, thanks a very informative post.(ie the copy of MPH's analysis above)

It appears that another application is emerging, in addition to Llanos Primavera. It's another "small" one of the size of Puerto Lopez and it appears to be a done deal.

Llanos Primavera application has now completed its 30 day period and if its positive this is likely to be the big one.

copied from From KJKelley

MPH - thanks for your efforts on price analysis - good reading!