Transocean (RIG) Showing Notable Weakness After Goldman Flags Spill Risk

Transocean Ltd. (RIG), whose Deepwater Horizon rig blew up on April 20, killing 11 and causing the biggest U.S. oil spill on record, slid more than 10% to $44.07 after Goldman Sachs (GS) downgraded oil drilling firms to ‘neutral’ from ‘buy’ and issued bearish comments on the effects of the oil spill in the Gulf of Mexico.

MW: “We believe that the Macondo oil spill is likely to have a long lasting impact on the industry and most negatively impact the deep water drillers,” Goldman Sachs said in a note to clients. “We think that the current six month moratorium on deep water drilling in the U.S. could be extended and now assume that it lasts 12 months with limited activity until 2012; deep water dayrates are likely to face pressure.”

Goldman also downgraded (to sell from neutral) Diamond Offshore Drilling Inc. (DO) : $56.20 Down $3.01 (5.08%) 11:56AM EDT, and Atwood Oceanics, Inc. (ATW) : $24.34 Down $1.67 (6.42%) 11:56AM EDT.

Separately, The New York Times reported today that Wall Street bankers are weighing the remote possibility that the mighty BP (BP) may have to file for bankruptcy as a result of fallout from the massive Gulf spill.

Under one scenario, which is starting to percolate on Wall Street, the co.’s deteriorating pps could leave it vulnerable to a takeover, which could include a spin-off of the company’s Gulf of Mexico liabilities. “Shell and Exxon Mobil are both said to be licking their chops.”

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