Chaco Resources Provides Update on Colombia Ops

Jon Pither, Chairman of Chaco Resources, said: "Approaching three years ago we embarked on a project to refocus your company and become a petroleum producer. We are now within sight of achieving that objective. It has been a busy six months. The next six promise to be even busier. If we achieve what we expect during 2007 then we will have made the important transition from Explorer to Producer."

There is a busy program of work continuing in our three areas of interest in Colombia at Platanillo (Chaco 25%), Primavera (Chaco 55%) and Puerto Lopez Oeste (Chaco 54%). We expect to be drilling wells in all three blocks during the first half of 2007 but at the time of writing there are still a number of uncertainties over timing.

These uncertainties are due to unique logistical difficulties in certain areas of Colombia combined with a rig shortage and are further complicated by onerous environmental and social welfare laws.

In Platanillo, where the government controlled oil company, Ecopetrol, is the Operator, further delays are caused by the fact that all public sector companies must comply with a time consuming tendering and operating procedure which private companies are not subject to. I must also emphasize that although we have control over our investments, we are not the Operator on any of them. This does make a significant difference to our ability to control the timing of events.

However, the recent appointment of Dr. John Wardle as Chaco's Resident Manager in Colombia has already had a positive influence in ensuring that all of our areas of interest are drilled as soon as practicable. To be more specific, at Primavera the Operator has advised that a rig contract is due to be executed shortly. This will enable a spud date late in the first quarter of 2007 for the first of two wells in this block. A well will be drilled on each of the promising Capibara and Cachapa prospects in the north of the block.

At Puerto Lopez Oeste, we announced recently that we will be entering the second phase of the exploration program. However, timing of drilling cannot be finalised until we can view the results of the interpretation of our recent seismic survey and can be sure of an exact drilling location.

At Platanillo the Operator has advised that an application was submitted to ANH (The National Hydrocarbon Agency) to amalgamate Years 1 & 2 of the Contract. This would allow much more efficient logistics planning of the forthcoming program and would alleviate the need to consider very expensive helicopter based operations to meet current deadlines. The request for amalgamation has been favourably received and formal approval is expected very shortly. Any update on dates for commencement of operations must await this approval.

Our overall plan to grow the business remains unchanged. Although execution to date has been slower than we had hoped, we remain confident that we will have a busy and successful 2007, starting quite probably with Primavera. As soon as the drilling schedule gets underway, there should be a regular flow of news.

In Paraguay, we continue to make progress in a country which is being re-rated by the world petroleum industry. We have excellent exposure to two basins and have been undertaking detailed analysis of seismic data while reviewing our strategic options.

We are particularly pleased to have also been awarded the Alto Parana Block in November. This large block, formerly known as the Canindeyu Block, comprises 1.8 million hectares and is situated in the Parana Basin adjacent to the Brazilian border.

The scientific rationale behind the confidence of our technical experts is outlined elsewhere in this report and is available on our website where an update on our work in Colombia and Paraguay has been posted.

It has been a busy six months. The next six promise to be even busier. If we achieve what we expect during 2007 then we will have made the important transition from Explorer to Producer.