Chaco Joint Venture Wins Primavera West Block

Chaco Resources will hold a 55-percent equity interest in a joint venture group that recently won an exploration and production contract over the Primavera West Block in Colombia's Llanos basin. The contract, which is subject to agreement on work program details, will be finally negotiated and executed with the Colombian Hydrocarbons Agency in the next few weeks.

Chaco regards this part of the Llanos basin as extremely attractive, so it sought to secure substantial acreage. In practice, this has not been easy because there is strong competition for terrain and incumbents would usually exercise their preemption rights.

After extended and discreet negotiations, Chaco secured the block. Lying northeast of Bogotá, Primavera West covers an area of approximately 146,100 hectares. The first-year program involves the reprocessing of 300 kilometerx of 2D seismic data and the drilling of two shallow wells to approximately 3,500 feet in order to penetrate the Mirador formation, which is the principal reservoir in the Llanos Basin. Other productive formations, such as the Carbonera, are also present within the block acreage.

Chaco's partners include Expet and Argosy Energy International (operator). Chaco will fund 100 percent of the first-year program in order to retain a 55-percent equity interest. The cost of the program is an estimated US$2 million.

"Securing this third consecutive participation in an E&P contract in Colombia is very important to the group’s progress," said Jon Pither, Chaco's chairman. "Chaco has now established a significant presence in a country which is gaining in international approval and which has both the organizational and fiscal structure to allow companies such as ours to thrive. Coupled with its activities in Paraguay, where it also receives a great deal of official support and encouragement, Chaco has created the potential to deliver real long term value to its shareholders.”