AMER.L Regulatory News (AMER)

2 Nov 2006 07:02

Chaco Resources PLC02 November 2006 AIM: CHP 2 November 2006 CHACO RESOURCES PLC ("Chaco" or"'the Company") THIRD AREA in PARAGUAY (CANINDEYU) AWARDED Chaco Resources Plc (AIM : CHP), the oil and gas explorer and developer focusedin South America, announces that its subsidiary, Bohemia S.A.("Bohemia"), hasreceived approval of its hydrocarbons application. The Paraguayan Governmenthas approved the Company's application for an exploration block over an area of1,798,000 hectares in the Parana basin in the south east of Paraguay, known asthe Canindeyu block, and issued an Evaluation (Prospecting) permit for one year. The approval states that Bohemia's application meets current legal and economicrequirements and that the Government Executive has adjudged them to be in order. The Evaluation permit granted gives the company the right to initiate theevaluation of the area for a period of one year. This work will comprise thegathering, and reprocessing of the historical data related to the block and theenvironmental licensing required for field work, after which the Company willenter the exploration period that covers the following four years. Further to the application the process for the concession of the Exploration andProduction contract ("E&P") has been approved. According to the ParaguayanHydrocarbons law, the E&P contract shall be submitted for ratification to theParaguayan Congress once executed by the Government Executive and Bohemia S.A. Once the E&P contract is executed, the Company will allocate approximately 0.9million ordinary shares to the vendors of Bohemia, in accordance with the ShareSale Agreement dated 27 September 2004. A further 8.2 million shares will beallocated once the Congressional ratification takes place. It is hoped that theentire process with respect to this block will be completed before the end ofthe second quarter of 2007. A map of the block can be found on page 16 of the Company's Annual Report &Accounts for the year ended 31 March 2006 and in the Company's presentationgiven at the Annual General Meeting held on 10 October 2006. Both the AnnualReport and presentation, together with further details of the Company and itsprojects, are available on the Company's website, www.chacoplc.com. Technical Director, Graeme Stephens, said today: "It is exciting finally toacquire this block in an atmosphere of increasing industry interest inhydrocarbon exploration in Paraguay. The block sits adjacent to the gasproductive Brazilian side of the Parana Basin and contains the samestratigraphy. We look forward to evaluating this very large area which, at 4.5million acres, covers an area equivalent to over 200 average North Sea Blocks". Competent person: Technical information in this announcement has been suppliedor verified by Graeme Stephens, the Company's Technical Director. Mr Stephensis a qualified geologist and has been a member of the American Association ofPetroleum Geologists since 1970. For further information contact: Nicola Brookes, Finance DirectorChaco Resources plcTel: 01494 431195 Marc Young Simon Robinson / Ana RibeiroDaniel Stewart & Company plc Parkgreen CommunicationsTel No: 0207 776 6550 Tel: 020 7493 3713 Notes to Editors Background Chaco Resources Plc is the successor company to Gold Mines of Sardinia Plc. In2004, the Company changed its name and its strategy to one of pursuinghydrocarbon exploration and development opportunities in South America,currently in Paraguay and Colombia. Paraguay The Company focused initially on Paraguay. Two local companies, Amerisur SA andBohemia SA, were acquired for shares whereby Chaco sought rights to a total ofapproximately 4.7 million hectares to be held under three applications. Two ofthe three applications covering approximately 2.3 million hectares weresubsequently granted as Exploration and Production concessions and the third(Canindeyu) has now been awarded. Under Paraguayan legislation, with respect tothe two established concessions, the Company must now select an area of no morethan 800,000 hectares per block to enter the four year exploration phase. For various reasons, the country has seen comparatively little explorationactivity to date, but it is of interest due to commercial extraction ofhydrocarbons having been made in adjoining countries from hydrocarbon basinswhich extend into Paraguay. All the historical seismic data relative to theconcessions has now been obtained and is currently being re-processed usingmodern computers and analytical programmes. On completion of this first phase,the Company plans to review its strategic options in terms of doing furtherseismic work and/or initiating a drilling programme. The Company's statedintention is to bring in farm-in partners for this second phase. Colombia Chaco was subsequently introduced to opportunities in Colombia, where afundamental change in the fiscal laws and an overhaul of the state's managementof hydrocarbon exploration and production permits created a very favourableinvestment environment. Chaco teamed up with strategic joint-venture partners(Expet S.A.) who have many years of experience operating in Colombia and throughwhom it has been seeking to participate in exploration and production (E&P)concessions. Interests in the following three concessions have been negotiated. Platanillo / Alea On 3 October 2005, the Company announced a joint venture with Repsol to exploitthe Platanillo block in the Putumayo Basin (on the Ecuadorian border) wherebythe Company could earn a 25% equity share by farming into a project containing adiscovery well (Alea 1) which had been capped in 1988, but which had flowed at533 barrels per day. Chaco's 100% carrying commitment was capped at $7.4 m inorder to earn its equity share (thereafter any additional expenditure is sharedby the partners pro-rata to their holding) and involves re-entering the firstwell, building an access road and drilling a step-out well to determine the sizeof the field. The Company is using a calculation of Mean Resources ofapproximately 20.6 million barrels in the Lower U Sand and a conservativeestimate of 6 million barrels in the Upper U Sand to establish possible value.The Lower U Sand flowed oil to surface during previous testing. The Upper USand has yet to be tested. In November 2005, Ecopetrol (ECP), the operator ofthe block, participated in the farm-out. On 10 October 2006, the Company announced that ECP had advised that it wasactively investigating other rig options to the very expensivehelicopter-supported operation that would be necessary to commence the re-entryand drilling programme before January 2007 (the end of Year 1). In addition ECPwas holding high level talks with the ANH to guarantee that the timingimplications of using the much cheaper land rig option were approved by them.The results of these negotiations should be known shortly. Puerto Lopez Oeste On 21 November 2005 the Company announced its second deal: a consortium, inwhich the Company can earn a 54% equity interest, was granted an exploration andproduction contract over the Puerto Lopez Oeste Block in the Llanos Basin, eastof Bogota. The programme involves: reinterpretation of existing seismic data,and to shoot, process and interpret around 100km of new seismic. The partnersare Expet S.A. and Consultoria Colombiana S.A. (CCSA), who are joint operators. On 3 October 2006, the Company announced that it had secured a change in theeastern boundary of the block resulting in the inclusion of the majority of thelarge Metica Sur (South) lead. Metica Sur is one of two interesting potential prospects identified as a resultof the reprocessing and interpretation of existing seismic in the Puerto LopezOeste Block, which was completed in September. The other, perceived as the moreinteresting of the two, is the Metica. Both are plays in the prospectiveMirador Formation. To mature these leads into prospects will require further seismic acquisitionand therefore a 100km new seismic programme has been contracted which commencedin late October. The geology of the Metica lead is controlled by the Metica 1Well, drilled in 1985 by Elf Aquitaine immediately to the northwest of theMetica lead, which recovered crude oil in a drill stem test of the MiradorFormation. Current mapping shows the well to be situated just outside theclosure of the Metica lead. If the Company enters the optional second year commitment, this includesdrilling one well, financed wholly by Chaco. Primavera The third E&P Contract, Primavera, also in the Llanos, was signed on 9 May bythe ANH, the Colombian state agency that oversees hydrocarbon permits. TheCompany will be able to earn a 55% equity interest in an E&P project for whichexisting seismic data already exists. The programme involves reprocessing andre-interpreting existing seismic and drilling two wells. The partners are Expetand Argosy Energy International (operator). Argosy was recently acquired byGran Tierra of Canada. Preliminary reports from the re-processing indicate that the CarboneraSandstones can be confidently mapped and the re-processing generally confirmsthe existence of a number of structural leads. Mapping of these re-processedlines was completed in September and 20 km of new seismic will be shot over twoof the leads in November 2006 with the objective of maturing these leads intodrilling targets. Drilling on the first of these targets is scheduled to commence in January/February 2007. The operator is in the final stages of selecting a suitable rig. For further information please see the Annual Report on the website:www.chacoplc.com Chaco Resources plc (AIM Trading Symbol: CHP) has offices in the UK, WesternAustralia and Paraguay and intends to open an office in Colombia shortly. This information is provided by RNS The company news service from the London Stock Exchange