SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the financial period ended
March 31, 2007
Commission file number: 2-99518-D
State of incorporation: Colorado
I.R.S. employer identification number: 74-2446999
GOLD HILL CORPORATION
2233 West Lindsey
Suite 117
Norman, Oklahoma 73069
Registrant's telephone number, including area code:
(405) 321-8371
Securities registered pursuant to Section 12 (B) of the Act:
Title of each class: None
Name of each exchange
on which registered: None
Securities registered pursuant to Section 12 (G) of the Act:
Common Stock, $0.002 Par Value
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(D) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports,) and (2) has been subject to such filing requirements for the past 90 days.
Yes: X
The number of shares of the common stock of the registrant outstanding as of March 31, 2007
5,835,822 shares
PART I
ITEM 1. BUSINESS
Results of Operations.
Earnings and Cash Flows from Operating Activities.
For the current quarter, Gold Hill Corporation ("the Company") realized a small net gain which is detailed in the financial section of this report. The increase in earnings and cash flows reported for the period was due primarily to oil and gas income from the Wanette project.
Mineral Exploration.
During the quarter, the Company continued to evaluate its North Goldfield gold prospect located 10-15 miles north of the town of Goldfield, Nevada, where it holds 156 unpatented lode mining claims encompassing over 3,000 acres in a contiguous block.
During February 2007, the Company drilled three holes on the prospect, one vertical and two angle, all from the same location in an attempt to test possible gold veins along a northerly trending fault. A total of 2,220 feet were drilled in the three holes using a reverse circulation drill rig. The deepest hole was 800 feet. Twenty one samples were assayed for gold-silver, including assays for pathfinder or tracer elements, which are also referred to as indicator minerals. The results were mostly negative except two of the samples contained slightly anomalous amounts of gold-silver. Several of the samples, however, contained anomalous amounts of tracer or indicator elements such as arsenic, antimony and lead, indicating the area is prospective for gold and silver. All of the drill hole cuttings contained abundant iron oxides, which is encouraging, but quartz was lacking and silicification was low. Most of the gold produced from the Goldfield district wa s associated with quartz.
Further study and evaluation of the prospect is planned on site during May and June of this year to determine possible drill sties. There is still a general shortage of drill rigs in Nevada due to increased exploration activity. The current price of gold is over $675 per ounce.
ITEM 2: PROPERTIES
Oil and Gas Properties.
The Company is also continuing to focus efforts toward oil and gas exploration. The Company is currently in search of oil and gas prospects in east-central and northern Oklahoma where several prospects have been identified. The prospects are considered “wildcat” plays with significant potential, but as “wildcats” these prospects should be considered high-risk.
The prospects currently under study have potential of 1 to 5 million barrels each, which if successful could favorably impact the share value of Gold Hill stock.
In May 2004, Gold Hill participated in a well with West Star Operating Company to earn a 25% interest in the South Wanette Layton Oil unit, which included 1520 acres of unitized leases, five stripper wells, a tank battery and flow lines, and substantial oil reserves that may be recoverable by secondary recovery methods. The Company’s interest has since been increased to 75 percent. The well was drilled to a depth of 4,000 feet and completed in the Calvin sand which was the main objective at about 3,860 ft. Initial production after a sand frac was about 700,000 cu ft of gas/day.
Management believes it to be an edge well close to a channel sand having greater porosity, permeability, and thickness. Oil is the primary target rather than gas. The gas well has been producing steadily at a little over 200,000 cfg/day. Since the gas has a high (22%) nitrogen content, the well is not producing at full capacity due to market conditions. The well has been averaging about 220,000 cfg per day and is penalized because of the high nitrogen content. The current price of natural gas is around $7.50 per mcf.
The Company has abandoned its previously stated plans to acquire oil and gas leases adjoining its jointly owned Wanette unit acreage block. Instead, the Company is planning to drill a Calvin Sand test hole in the west half of Section 7, where the Company, together with West Star already owns the leases. The location is about three-quarters of a mile southwest of the gas well. This test is considered a wildcat.
The Company recently sold its Pre-Pennsylvanian rights in the Wanette unit for $157,500, plus a retained overriding royalty. This sale does not affect any of its Layton and Calvin rights.
The Layton oil sand was encountered in the gas well at about 3,100 feet and had good development. It will be perforated for production at a later date.
An oil reserve study made of the Layton oil sand unit (1,520 ac) indicates potentially recoverable oil reserves by improved waterflood methods to be several million barrels. The Layton oil zone was not adequately drained by previous production due to well spacing and failed waterflood attempts.
West Star will continue as operator of the unit. Development of the Layton and Calvin zones will be pursued by subsequent drilling. The current price of oil is over $60 per barrel, but there is still a shortage of drill rigs and much higher exploration costs. Drilling costs have more than doubled over the past several years.
ITEM 3: OPERATIONS
General Operations.
Gold Hill will continue its conservative policy of avoiding debt and maintaining very low overhead costs. No salaries will be paid or allowed to accrue at this time. Gold Hill will not be charged for the use of office space currently provided by its principals.
Private Placement.
Gold Hill is continuing to make a private placement of its common stock in order to finance a portion of the costs of the projects described above.
Competition and Risks.
The business environment is very competitive and there are a number of significant risks associated with oil and gas, and mineral exploration and production, including operations as well as exploration. Gold Hill Corporation intends to seek high-risk, high-potential prospects as well as lower-risk, lower-potential development ones. However, the major effort will be towards wildcat oil prospects with potential of 1,000,000 bbls or greater, and gold prospects with potential greater than 1,000,000 oz.
Regulation.
The domestic exploration for mineral, including oil and gas is subject to various state and federal environmental laws, rules, and regulations. Operators in the industry are subject to the Clean Water Act and damages which could arise out of environmental pollution.
Corporate History.
Gold Hill Corporation is an exploration company focused on large wildcat oil and gas and gold prospects, which if successful will significantly impact upon the value of the Company's stock. In addition to the Nevada Gold prospects, Gold Hill is active in oil and gas exploration. Although Gold Hill is a public company, it is considered to be a developing company and its stock does not presently trade. Management's policy is to withhold stock trading until an important discovery is made. Gold Hill's management is comprised of experienced and successful explorationists who are qualified to carry forth the goals and aspirations of the company. The primary goal of the Company is to discover a major deposit while avoiding debt. At the same time, the company is focusing on retaining a large interest in each prospect so that a discovery will have a dramatic impact on stock value to the benefit of the shareholders.
Gold Hill's executive and operations offices are located in Oklahoma at 2233 West Lindsey, Suite 117, Norman, Oklahoma 73069 (telephone 405-321-8371). Unless the context otherwise requires, the term "Gold Hill" as used herein refers to Gold Hill Corporation
.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of Ron Kirkpatrick, C.P.A., are contained within this report.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission. All material adjustments which, in the opinion of Management, were necessary for a fair presentation of the results for the interim periods have been reflected.
Gold Hill Corporation
Balance Sheet
March 31, 2007
Current Assets
BANK OF OKLAHOMA $ 563,232.96
BANK OF OKLAHOMA 5,656.93
ARVEST MONEY MARKET $ 113,947.87
A/R - Stockholders $ 1,839.66
North Goldfield BLM Bond $ 1,983.00
Treasury Fund Account $110,260,78
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Total Current Assets $ 796,921.24
Fixed Assets
FURNITURE AND FIXTURES $ 588.46
TANGIBLE EQUIPMENT $ 31,952.75
ACCUMULATED DEPRECIATION ($32,091.21)
WEST-STAR1-6 $ 140,000.00
Total Fixed Assets: $ 140,450.00
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Total Assets $ 937,371.24
Current Liabilities: none
Equity
COMMON STOCK $ 1,593,900.00
RETAINED EARNINGS (1,079,333.37)
PAID-IN CAPITAL 247,904.00
Current Income (Loss) 174,900.61
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Total Equity $ 937,371.24
Total Liabilities and Equity $ 937,371.24
INCOME STATEMENT
3 Months Ended March 31, 2007
Revenue
INTEREST INCOME 7,768.43
OIL AND GAS REVENUE 39,281.56
DEEP RIGHTS (WANETTE) 157,500.00
Total Revenue 204,549.99
Cost of Sales 87,992.05
Gross Profit 116,557.94
Operating Expenses 9,289.05
NET INCOME 107,268.89
SIGNATURES
Pursuant to the requirements of Sections 13 and 14 (D) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of Undersigned, there unto duly authorized.
GOLD HILL CORPORATION
