Oaktree-backed DDH1 makes Australian drilling bolt-on

Oaktree executed its investments in both companies under its private equity strategy. The firm acquired a 50% stake in DDH1 last year with a view to bolting on competitors that have different drilling specializations in order to establish a comprehensively competent resources industry services provider.

Current ownership stakes of DDH1 have not been disclosed, but AVCJ understands that Oaktree’s position has been diluted due to the management team of Strike rolling over some of their equity in Strike into DDH1. Financial services firms Novo Capital and Challenger facilitated the transaction.

“In an improving resources industry services market like you have today, it’s very difficult to build new specializations in drilling organically because you really need good drillers and good management with long experience in that field,” a person familiar with the transaction told AVCJ. “It makes more sense to partner with the best in class in those fields.”

Strike focuses on techniques known as aircore and reverse circulation drilling, which are essential practices in resources exploration and mine site expansion. The company was considered a standout acquisition target because it has developed regionally unique equipment that combines aircore and reverse circulation abilities in a single rig. It operates eight rigs in Western Australia.

DDH1, which operates a fleet of about 55 rigs nationwide, is a specialist in directional drilling, which facilitates underground work in complex geological settings by allowing for the creation of non-vertical wells. According to a statement, the company will be able to offer a “full suite” of drilling services across the resources project life cycle as a result of the Strike acquisition.

Private equity interest in Australian mining services picked up momentum last year with an overall rebound in global commodity prices and improved outlooks for greenfield and brownfield work. However, drilling teams are considered relatively easy to mobilize and demobilize by resource industry standards and are therefore among the more vulnerable players to changing sentiment around the sector’s economic cycles.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Australasia
• Industrials
• Buyouts
• Australia
• Oaktree Capital
• resources
• Commodities
• M&A