Chaco Finalizes Contract for Primavera Block in Columbia

Chaco Resources says that the Exploration and Exploitation Contract for the Primavera Block in Colombia was finalized on May 9, 2006 between Argosy Energy International as operator and the Colombian Government (ANH).

Participating interests in this contract are Argosy Energy International as operator with 15%; Chaco Resources with 55% and Expet SA with 30%.

30% Chaco is committed to fund the first year's exploration program of reprocessing and reinterpreting 300km of existing 2D seismic in the block and drilling two exploratory wells. Chaco will also put infrastructure in place such as access roads, etc. The estimated cost of this program to the Company ranges between US$2.5m and US$4m depending on locations of wells and infrastructure required.

Technical Director, Mr. Graeme Stephens commented 'This is an exciting new exploration project for Chaco. A number of large un-drilled structures have been previously mapped in the block and some old existing wells located immediately to the east of the block which appear to be off-structure have had good oil shows.'

This is now the third Exploration and Production (E&P) project Chaco has undertaken in Colombia, with the other two being a 25% farm-in to the Alea oilfield in the Putumayo Basin, operated by Ecopetrol, and a 54% equity in the Puerto Lopez Oeste E&P Contract in the Llanos Basin, operated by CCSA.