AMER.L Regulatory News (AMER)

21 Nov 2005 08:31

Chaco Resources PLC21 November 2005 CHACO RESOURCES PLC 21 November 2005 Chaco Joint Venture Awarded Puerto Lopez Oeste Block in Colombia • Puerto Lopez Oeste Exploration and Production Contract granted in Colombia • Chaco to hold 54% equity share in joint venture. • Chaco to fund 100% of seismic programme and first well • $1m of seismic to seek field : potential "look-alike" of field in adjacent block The Directors of Chaco Resources plc ("Chaco" or "the Company") are pleased toannounce that a joint venture group, in which Chaco will hold a majority equityinterest of 54%, has been awarded an Exploration and Production Contract overthe Puerto Lopez Oeste Block in the Llanos Basin of Colombia ("the Contract").The Contract will be formally executed with the Colombian Government in the nextfew weeks. The block covers an area of 35,700 hectares and lies immediately north of, andon trend with, the Valdivia Oil Field, which is currently producing in excess of3,000 barrels of oil per day. The approved work programme for the block over thenext 12 months is to re-process and re-interpret the existing seismic lines inthe block as well as to acquire 100 km of new seismic data. This seismiccoverage is designed to locate a Valdivia Field look-alike which, if present,would be drilled in the second year. The partners in the joint venture are Expet S.A. and Consultoria Colombiana S.A.Chaco will fund 100% of the seismic programme and the first exploration well inorder to retain a 54% equity interest. The cost of the seismic programme isestimated at approximately US$1million. Chairman Jon Pither commented "We are very pleased that our group has beenawarded this block which, although an exploration play, has the potential oflocating one or more Valdivia type fields on the same productive trend. Thisaward, coming so soon after the announcement of the Chaco farm-in to the AleaField Development Project, further cements our position as a serious player inthe exploration for, and development of, new fields in the exciting sub-Andeanbasins of Colombia." 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, focusinginitially on Paraguay. Two local companies, Amerisur SA and Bohemia SA, wereacquired for shares whereby Chaco obtained preliminary rights to a total ofapproximately 4.7 million hectares held under three applications. Two of thethree applications covering approximately 2.3 million hectares weresubsequently granted as Exploration and Production concessions and the third isstill in process. For various reasons, the country has seen comparatively littleexploration activity to date, but it is of interest due to commercial extractionof hydrocarbons having been made in adjoining countries from hydrocarbon basinswhich extend into Paraguay. All the historical seismic data relative to the applications was purchased at the time of the acquisitions and is currentlybeing re-processed using modern computers and analytical programs. Oncompletion of this first phase, the Company plans to review its strategicoptions in terms of doing further seismic work and/or initiating a drillingprogram. The Company's stated intention is to bring in farm-in partners forthis second phase. 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 favourable investment environment. Chaco teamed up with strategic joint-venture partnerswho have many years of experience operating in Colombia and through whom it hasbeen seeking to participate in exploration and production (E&P) concessions. On3 October 2005, the Company announced a joint venture with Repsol YPF SA toexploit the Alea field in the Putumayo (see website for details). The Puerto Lopez Oeste block was the second of three applications submitted. Thethird is highly competitive and the Company is keeping details confidential atthis point. Under current legislation, where an entity holds a Technical Evaluation Area permit ("TEA"), in the event that another party submits adevelopment budget for all or part of that area, the TEA holder must match thebudget within 30 days or lose its rights over the block(s) in question. If theTEA holder does not contest the third party's application, the hydrocarbonsministry (ANH) will consider whether the third party meets its criteria for asuitable applicant. The ANH has up to 60 days to deliver its verdict. It is inthis context that the Company has been submitting development budgets forblocks in existing TEA's through its partners. The Alea Block development budget was matched by Repsol, but they agreed to theCompany's farm-in proposal. In contrast, the Company's Puerto Lopez Oesteapplication was not contested by the TEA-holder. Website update The Company's website is being improved and investors are invited to view thechanges in the Investor Information section which are scheduled to be completedduring this week, including dynamic share price feeds. The Colombia slidepresentation made by Graeme Stephens at the last AGM is also being updated toreflect the latest financial estimates (based on a 54% equity holding) of thereturn from a theoretical 10 million barrel field similar to Valdivia. When theupdate has been completed, the presentation will be re-titled "ColombiaPresentation (updated)". Chaco Resources Plc (AIM Trading Symbol: CHP) has offices in the UK, WesternAustralia and Paraguay and intends to open an office in Colombia shortly Enquiries: Martin Groak : 07949 209 301 Website: www.chacoplc.com This information is provided by RNS The company news service from the London Stock Exchange