AMER.L Regulatory News (AMER)

27 Mar 2006 07:02

Chaco Resources PLC27 March 2006 AIM: CHP27 March 2006 CHACO RESOURCES PLC ("Chaco" or "the Company") Chaco Joint Venture Awarded Primavera West Block in Colombia • Primavera West Exploration and Production Block awarded in Colombia • Chaco to hold 55% equity share in joint venture. • Chaco to fund 100% of phase 1 seismic re-interpretation and drilling of two shallow wells • Estimated cost of phase 1 approximately US$2m. The Directors of Chaco Resources Plc (AIM:CHP) are pleased to announce that ajoint venture group, in which Chaco will hold a majority equity interest of 55%,has been awarded an Exploration and Production Contract over the Primavera WestBlock in the Llanos Basin of Colombia, subject to agreement on work programmedetails ("the Contract"). The Contract will be finally negotiated and executedwith the Colombian Hydrocarbons Agency in the next few weeks. The Company regards this part of the Llanos basin as extremely attractive andhas therefore endeavoured to secure a substantial acreage. In practice, this hasnot been easy as there is strong competition for terrain and incumbents wouldusually exercise their pre-emption rights. After extended and discreet negotiations, the Company was able to secure theblock which covers an area of approximately 146,100 hectares and lies north eastof Bogota. The first year programme involves the reprocessing of 300 km of 2Dseismic data and the drilling of two shallow wells to approximately 3,500 feetin order to penetrate the Mirador formation, which is the principal reservoir inthe Llanos Basin. Other productive formations, such as the Carbonera, are alsopresent within the block acreage. The Company had originally applied for acreage mainly to the east which waspartially pre-empted. A revised application was then made to include the portionnot pre-empted, enlarged predominantly to the west and re-submitted. Significant portions of previously identified structures within the originalsubmission extend into the revised block, which contains the same reservoirs andsimilar targets as the original acreage, plus a number of attractive undrilledstructures identified from previous seismic work and on-trend areas that havenot been explored. The partners in the joint venture are Expet S.A. and Argosy Energy International(operator). Chaco will fund 100% of the first year programme in order to retain a 55% equityinterest. The cost of the programme is estimated at approximately US$2m Chairman Jon Pither commented "Securing this third consecutive participation inan E&P contract in Colombia is very important to the Group's progress. Chaco hasnow established a significant presence in a country which is gaining ininternational approval and which has both the organisational and fiscalstructure to allow companies such as ours to thrive. Coupled with its activitiesin Paraguay, where it also receives a great deal of official support andencouragement, Chaco has created the potential to deliver real long term valueto its shareholders." -Ends-For further information contact: Martin Groak, Finance DirectorChaco Resources PlcTel: 07949 209 301 Marc YoungDaniel Stewart & Company plcTel: 020 7776 6550 Simon Robinson / Ana RibeiroParkgreen CommunicationsTel: 020 7493 3713 Website: www.chacoplc.com 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 obtained preliminary rightsto a total of approximately 4.7 million hectares held under three applications.Two of the three applications covering approximately 2.3 million hectares weresubsequently granted as Exploration and Production ("E&P") concessions and thethird (Canindeyu) is still in process. For various reasons, the country has seencomparatively little exploration activity to date, but it is of interest due tocommercial extraction of hydrocarbons having been made in adjoining countriesfrom hydrocarbon basins which extend into Paraguay. All the historical seismicdata relative to the applications was purchased at the time of the acquisitionsand is currently being re-processed using modern computers and analyticalprograms. It is now scheduled for completion around the end of the secondquarter, as is the conclusion of the Canindeyu E&P application. On completion 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 for thissecond 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 E&P concessions. • On 3 October 2005, the Company announced a joint venture with Repsolto exploit the Platanillo block in the Putumayo (on the Ecuadorian border)whereby the Company could earn a 25% equity share by farming into a projectcontaining a discovery well (Alea 1) which had been capped in 1988, but whichhad flowed at 533 barrels per day. Chaco's first year commitment is capped at$7.4 m. and involves re-entering the first well, building an access road anddrilling a step-out well to determine the size of the field. Repsol'scalculation of the Mean Truncated Resources of the structure ranges from 21mm to38mm barrels of oil depending on whether one or both of two potentiallyproductive sands are confirmed by testing. In December 2005, Ecopetrol, theoperator of the block, also joined the farmout to Chaco. • On 21 November 2005 the Company announced its second deal. Aconsortium, in which the Company can earn a 54% equity interest, had beengranted an exploration and production contract over the Puerto Lopez Oeste Blockin the Llanos Basin, east of Bogota. The programme involves the reinterpretationof existing seismic data (which has commenced and should be completed by June2006) plus the shooting, processing and interpretation of around 100 Km of newseismic. The cost is just over $1 m. The view is that the block could contain amirror image of an adjacent 10 million-barrel field, and the cost of confirming,or otherwise, is very acceptable. The partners are Expet S.A. and ConsultoriaColombiana S.A. (CCSA), who is also the operator. • Primavera West, described above, is the third consecutive applicationfor an E&P contract in Colombia where the Company has succeeded in securing aparticipation. The Company originally applied for an area that was partiallypre-empted by a company holding previous rights. The area currently awarded toChaco includes a large portion of the original application area which was notpre-empted as well as additional attractive on-trend acreage. Competent person: Technical information in this announcement has been supplied or verified byGraeme Stephens, the Company's Technical Director. Mr Stephens is a qualifiedgeologist and has been a member of the American Association of PetroleumGeologists since 1972. Chaco Resources Plc (AIM Trading Symbol: CHP) has offices in the UK, WesternAustralia and Paraguay and is in the process of establishing a branch of one ofits subsidiaries in Colombia. This information is provided by RNS The company news service from the London Stock Exchange