AMER.L Regulatory News (AMER)

10 Oct 2006 09:03

Chaco Resources PLC10 October 2006 10th October 2006 CHACO RESOURCES PLC ("Chaco" or "the Company") UPDATE ON COLOMBIAN ASSETS -PRIMAVERA AND PLATANILLO BLOCKS- Chaco Resources Plc (AIM: CHP), the oil and gas explorer and developer focusedin South America, announces the completion of seismic and interpretationreprocessing at its Primavera Block and the investigation of more cost effectiverig options at Platanillo, both in Colombia. COLOMBIA: Primavera Block (Chaco Equity 55%) Chaco Resources announces that the seismic reprocessing and interpretation ofthe Primavera Block in Colombia has been completed. The interpretation has indicated four conventional Carbonera fault trap leads inthe northern half of the block which need further seismic control to advancethem into drilling prospects. Chaco has therefore approved the shooting of twonew seismic lines over the Cachapa and Capibara leads and this shooting isscheduled to commence imminently. This will be followed by processing andinterpretation of the date due to be completed by December. At that time theform and size of the structures can be confirmed and drilling locationsselected. The Operator, Gran Tierra, is in the final stages of selecting asuitable rig for a spud anticipated in January, 2007. Platanillo Block (Chaco Equity 25%) Chaco Resources PLC also announces that Ecopetrol (ECP), the Operator of thePlatanillo Block in Colombia, has advised that it is actively investigatingother rig options to the very expensive helicopter- supported operation thatwould be necessary to commence the re-entry and drilling programme beforeJanuary 2007 (the end of Year 1). In addition ECP is holding high level talkswith the ANH, the government body which administers E&P (Exploration andProduction) contracts, to guarantee that the timing implications of using themuch cheaper land rig option are approved by them. The results of thesenegotiations should be known shortly and Chaco will advise the market as soon asany update is received from the Operator. Competent person:Technical information in this announcement has been supplied orverified by Graeme Stephens, the Company's Technical Director. Mr Stephens is aqualified geologist and has been a member of the American Association ofPetroleum Geologists since 1970. Further details on the Company and its projects are available on the Company'swebsite: www.chacoplc.com 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) is still in process. 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 theapplications was purchased at the time of the acquisitions and is currentlybeing re-processed using modern computers and analytical programmes. Oncompletion of this first phase, the Company plans to review its strategicoptions in terms of doing further seismic work and/or initiating a drillingprogramme. The Company's stated intention is to bring in farm-in partners forthis 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. Under current legislation, where an entity holds a Technical Evaluation Areapermit ("TEA"), in the event that another party submits a development budget forall or part of that area, the TEA holder must match the budget within 30 days orlose its rights over the block(s) in question. If the TEA holder does notcontest the third party's application, the hydrocarbons ministry (ANH) willconsider whether the third party meets its criteria for a suitable applicant.The ANH has up to 60 days to deliver its verdict. It is in this context that theCompany submitted development budgets for blocks in existing TEA's through itspartners. Platanillo / Alea 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 100% carrying commitment was capped at $7.4 m inorder to earn its equity share and involves re-entering the first well, buildingan access road and drilling a step-out well to determine the size of the field.The Company is using a calculation of Mean Resources of approximately 20.6million barrels in the Lower U Sand and a conservative estimate of 6 millionbarrels in the Upper U Sand. The Lower U Sand flowed oil to surface duringprevious testing. The Upper U Sand has yet to be tested. In November 2005,Ecopetrol, the operator of the block, participated in the farm-out. Puerto Lopez Oeste 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, east of Bogota. The programme involves: reinterpretation of existingseismic data, and to shoot, process and interpret around 100km of new seismic.The partners are Expet S.A. and Consultoria Colombiana S.A. (CCSA), who arejoint 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 prospective MiradorFormation. To mature these leads into prospects will require further seismic acquisitionand therefore a 100km new seismic programme has been contracted which is due tocommence by October 23rd. The geology of the Metica lead is controlled by theMetica 1 Well, drilled in 1985 by Elf Aquitaine immediately to the northwest ofthe Metica 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 application, Primavera, also in the Llanos, was granted subject tocontract at the end of March 2006 and the contract signed on 9 May by the ANH,the Colombian state agency that oversees hydrocarbon permits. The Company willbe able to earn a 55% equity interest in an E&P project for which extremelyinteresting 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 by GranTierra 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. 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