May 30, 2012 / 4:27 PM / 5 years ago

TEXT-Fitch affirms Total SA at 'AA'; outlook stable

May 30 - Fitch Ratings has affirmed Total S.A.'s (Total) Long-term
Issuer Default Rating (IDR) and senior unsecured rating at 'AA'. Total Capital
and Total Capital International's senior unsecured debt issue ratings, which are
fully and unconditionally guaranteed by Total, have been affirmed at 'AA'. The
Outlook on Total's Long-term IDR is Stable.	
	
The affirmation and Stable Outlook reflect Fitch's expectation that the company
will maintain its relatively strong industry position and significant global
market share as it works to strengthen its upstream portfolio by building on
current projects. The ratings could be positively affected by a growing upstream
production profile that more closely resembles those of larger peers, cash flow
generation greater than the industry average, cost-containment positioning that
leads to competitive advantages, or a greater market share in global liquefied
natural gas (LNG) trade.	
	
Total SA's high investment-grade ratings reflect its significant production
scale, competitive production costs relative to peers, and a well-diversified
and vertically integrated profile that allows it to retain a significant share
of the global oil and gas industry. Its ratings are further supported by a
rising position in the global LNG market.	
	
Total has completed a restructuring of its downstream business, which the
company expects will increase profitability by 5% in 2015 in a stable
environment. This partially comes from a combination of reduced refining
throughput in Europe and growing chemical production in Qatar and South Korea.
Fitch expects the commissioning of the Port Arthur deep conversion refinery in
the US to benefit Total's downstream operations, thanks to higher average US
refining margins and lower WTI crude oil feedstock costs in the US.	
	
Total's financial profile is somewhat stretched for its current ratings due to
increased borrowings used to maintain its cash-neutral funding position. Fitch
expects some of the company's other credit metrics to improve in 2012,
benefiting from a higher oil price and FFO margin of around 14%. Profitability
remains strong as of end-2011, with FFO of about EUR21.3bn, compared with
EUR19.0bn at end-2010.	
	
Fitch anticipates that Total will maintain a net leverage ratio (measured as
funds from operations (FFO)-adjusted net leverage) of around 1.0x-1.5x over the
business cycle (end-2011: 1.3x). Fitch would likely take negative rating action
if FFO adjusted net leverage approaches 2x on a sustained basis. Fitch believes
Total will struggle to remain marginally free cash flow (FCF) positive in 2012
due to high capex and steady dividends. Total presently has ample liquidity with
around EUR14bn of cash and cash equivalents and USD10.1bn of undrawn committed
credit facilities at end-2011, which supports the current ratings.	
	
Additional information is available on www.fitchratings.com. The ratings above
were unsolicited and have been provided by Fitch as a service to investors.	
	
The issuer did not participate in the rating process other than through the
medium of its public disclosure.	
	
Applicable criteria, 'Corporate Rating Methodology', dated 12 August 2011, are
available at www.fitchratings.com.	
	
Applicable Criteria and Related Research:	
Corporate Rating Methodology

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