AMER.L Regulatory News (AMER)

8 Dec 2005 08:30

Chaco Resources PLC08 December 2005 CHACO RESOURCES PLC Colombian JV and Board Update Ecopetrol joins Repsol in Chaco's Colombian Alea Field Farm-out • Ecopetrol ( the Colombian national oil company) joins Repsol in Alea field farm-out • Chaco stake unchanged at 25% • Colombian Government changes name of block from "Guara" to "Platanillo" • Production could start in Platanillo Block in first quarter of 2006 • Colombian Government announces intention to reduce corporation tax by 35% The Directors of Chaco Resources plc ("Chaco" or "the Company") announce thatEcopetrol S.A. ("Ecopetrol"), the national oil company of Colombia, has joinedRepsol Exploracion Colombia S.A. ("Repsol") in the farm-out of the Alea fielddevelopment project first announced by the Company on 3 October 2005. The equity to be earned by Chaco remains at 25% and the Company's earn-inobligations - to fund the first phase programme up to a maximum of US$7.4million - are unchanged. The Company has been advised that the Colombian Government has changed the nameof the block from "Guara" to "Platanillo". Ecopetrol, which is the operator of the Platanillo Block, has already started tolook for an appropriate rig to re-enter and test the Alea 1 discovery well inthe block. Ecopetrol is hopeful of obtaining a suitable rig to commence theseoperations by the end of the first quarter of 2006. The Company also advises that the Colombian Government has announced itsintention to reduce the rate of corporation tax from 38.5% to 28.5%, a reductionof more than one third, subject to ratification during 2006. Directors Standing Down The Company also announced on 3 October that Dr Tom Elder and Lee Graber(together "the Former Directors") had agreed to stand down as directors of theCompany when Graeme Stephens joined the board. As compensation for loss ofoffice, the Remuneration Committee of the Company has agreed that the FormerDirectors would continue to benefit from their original options that weregranted to them on 17 December 2004, giving them the right to acquire 1,000,000Ordinary shares in the Company at a price of 2.16 pence per share until 17December 2009. A new form of option was therefore executed which allowed thisbenefit to continue. No other compensation or remuneration was granted on thetermination of their directorships on 30 September 2005. Changes to composition of Committees of the Board and Non-Executives As a result of the departure of Tom Elder, the composition of both theRemuneration and Audit Committees has changed. Jon Pither continues to chair theRemuneration Committee and is joined by Martin Groak. The Audit Committee willnow consist of Martin Groak (Chairman) and Jon Pither.Following Graeme Stephens' appointment as Technical Director, Doug Jendry hasreverted to non-executive. 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. On 3 October 2005, the Company announced a joint venture with Repsol to exploitthe Alea field in the Putumayo whereby the Company could earn a 25% equityshare in a project containing a discovery well that had been capped in 1988, butwhich had flowed at 533 barrels per day. (Although Ecopetrol were operators ofthe block, they were not initially party to the farm-out to Chaco-see Colombiapowerpoint presentation on the website: www.chacoplc.com) On 21 November 2005 announced its second deal: a consortium, in which theCompany could earn a 54% equity interest, had been granted an exploration andproduction contract over the Puerto Lopez Oeste Block. (see website fordetails). 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 30 day response periodrelating to the third application is due to expire in approximately two weeks.Website update The new Investor Relations section of the Company's Website (www.chacoplc.com)has now been activated, which shows current share price, a summary of the day'sshare dealings, historical share price data and a number of other new features. 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 :Chaco Resources Plc 07949 209 301 Simon RobinsonPark Green Communications 020 7493 3713 Website: www.chacoplc.com This information is provided by RNS The company news service from the London Stock Exchange