AMER.L Regulatory News (AMER)

12 May 2006 07:00

Chaco Resources PLC12 May 2006 AIM: CHP12 May 2006 CHACO RESOURCES PLC ("Chaco" or "the Company") Exploration and Exploitation Contract for Primavera Block in Colombia is Finalised Chaco Resources Plc (AIM:CHP) announces that the Exploration and ExploitationContract for the Primavera Block in Colombia was finalised on May 9, 2006between Argosy Energy International as Operator and the Colombian Government(ANH). Participating interests in this contract are: • Argosy Energy International (Operator) 15% • Chaco Resources Plc 55% • Expet S.A. 30% Chaco is committed to fund the first year's exploration programme ofreprocessing and reinterpreting 300km of existing 2D seismic in the block anddrilling two exploratory wells. Chaco will also put infrastructure in placesuch as access roads, etc. The estimated cost of this programme to the Companyranges between US$2.5m and US$4m depending on locations of wells andinfrastructure required. Technical Director, Mr. Graeme Stephens commented "This is an exciting newexploration project for Chaco. A number of large undrilled structures have beenpreviously mapped in the block and some old existing wells located immediatelyto the east of the block which appear to be off-structure have had good oilshows . " his is now the third Exploration and Production (E&P) project Chaco hasundertaken in Colombia, with the other two being a 25% farm-in to the Aleaoilfield in the Putumayo Basin, operated by Ecopetrol, and a 54% equity in thePuerto Lopez Oeste E&P Contract in the Llanos Basin, operated by CCSA. -Ends- For further information contact: Martin Groak, Finance DirectorChaco Resources PlcTel: 07949 209 301Website: www.chacoplc.com Marc YoungDaniel Stewart & Company plcTel: 020 7776 6550 Simon Robinson / Ana RibeiroParkgreen CommunicationsTel: 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. ParaguayThe 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. ColombiaChaco 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 Repsol to exploitthe Platanillo block in the Putumayo (on the Ecuadorian border) whereby theCompany 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 first year commitment is capped at $7.4 m. andinvolves re-entering the first well, building an access road and drilling astep-out well to determine the size of the field. Repsol's calculation of theMean Truncated Resources of the structure ranges from 21mm to 38mm barrels ofoil depending on whether one or both of two potentially productive sands areconfirmed by testing. In December 2005, Ecopetrol, the operator of the block,also joined the farmout to Chaco. On 21 November 2005 the Company announced its second deal. A consortium, inwhich the Company can earn a 54% equity interest, had been granted anexploration and production contract over the Puerto Lopez Oeste Block in theLlanos Basin, east of Bogota. The programme involves the reinterpretation ofexisting seismic data (which has commenced and should be completed by June 2006)plus the shooting, processing and interpretation of around 100 Km of newseismic. The cost is just over $1 m. The partners are Expet S.A. and ConsultoriaColombiana S.A. (CCSA), who is also the operator. Primavera described above, is the third consecutive application for an E&Pcontract in Colombia where the Company has succeeded in securing aparticipation. 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: CHP) has offices in the UK, Western Australia andParaguay and is in the process of establishing a branch of one of itssubsidiaries in Colombia. This information is provided by RNS The company news service from the London Stock Exchange