Energold Drilling – When They Hate Them, They Hate Them

by | Dec 14, 2015 | Investment Ideas | 0 comments

When it comes to the drilling contractors, they can be loved or hated.

Energold Drilling Corporation (EGD in Canada, EGDFF in US) is a drilling contractor with three business sectors: mineral exploration, energy exploration, and equipment manufacturing. Before it became a drilling contractor, Energold was an exploration company. Back then, it faced problems with exploring hard-to-access areas because traditional rigs were truck-mounted and needed a road to drive through. To solve this problem, the company developed its own “man-portable” rigs which can be disassembled, carried by people, and reassembled on site.

With these rigs, Energold was able to explore regions that were previously impossible to reach with traditional rigs. Soon the word got out and other companies wanted to hire Energold as a drilling contractor for gold, copper, and other minerals. This is how Energold became a drilling contractor. The company has completely exited the exploration business, but it still owns 11 percent of IMPACT Silver, which is a legacy asset from its exploration days.

At first, the mineral drilling business was mainly servicing junior mining companies but later major mining companies came on board.

With the mineral drilling, Energold grew from nothing to more than $100 million in revenues. However, because the mineral drilling business is extremely cyclical and volatile, the management wanted to diversify its revenue stream. It accomplished this goal by making two acquisitions: Bertram Drilling Corporation and Dando Drilling International. Both of these companies were acquired in 2011.

Bertram is a diversified specialty drilling company serving an array of customers, primarily in the energy industry. It was founded in 1962, and since then, it has grown into one of the largest specialty drillers in North America. Bertram operates its own rigs, which are primarily used for oil sands coring, geothermal drilling and shot-hole seismic drilling. Today, Bertram represents Energold’s Energy Division.

Dando is a United Kingdom-based company with more than 140 years of experience in the design, manufacture and sales of drilling rigs and ancillary equipment. Its rigs are used for waterwells, geotechnical investigation, mineral exploration, seismic investigation, environmental monitoring and geothermal drilling.

Energold’s acquisition of Dando was strategic. Over the years, the company used its “man-portable” rigs to win over clients or get their foot in the door. Once the business relationship was built, some clients needed additional drilling services that were beyond the scope of Energold’s rigs. Instead of allowing the clients to go with someone else, Energold’s CEO saw that the acquisition of Dando’s manufacturing business would allow the company to provide these clients with additional services.

Another reason for the acquisition was because Dando had rigs for waterwells. It is not a secret that there are tremendous water shortages in some parts of the world. To solve this problem, the world will need to drill for water. Acquiring Dando was a low-cost way of entering this market.

Today, Dando represents, Energold’s Manufacturing Division.

Because of the low price of gold and oil, drilling contractors are getting less business. Consequently, such companies are not popular. Energold is so hated that it is pretty much trading for the cash in the bank.

Disclosure: I do not own any Energold Drilling

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About Mariusz Skonieczny

Mariusz Skonieczny is the founder of Classic Value Investors.