Goldman Downgrades Deep Water Drillers (HAL, ESV, NBR, DO, ATW)

Goldman Sachs is out with an analyst note this morning where they lower their coverage view on the Deep Water Drilling Sector to Neutral from Attractive. They cited three factors: (1) We think that the current six-month moratorium on DW drilling in the US could be extended and now assume that it lasts 12 months with limited activity until 2012 (2) DW day rates are likely to face pressure as 20% of global capacity is freed (3) Oil service pricing power is likely to be delayed until 2011. Estimates and price targets have been cut across the board, 20-30% for Deep-water drillers and 15-20% for the rest of their coverage space. They reiterated that their favorite sub-sectors in the oil and gas industry are now land drillers, diversified service, and shallow water drillers. Goldman Sachs’ favorite Buy candidates are Halliburton HAL, Ensco PLC ESV, and Nabors Industries NBR. Their favorite shorts are Diamond Offshore Drilling DO and Atwood Oceanics ATW.