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Total’s Credit Rating Outlook Lowered by Moody’s on Spending

Total SA (FP) had its credit rating outlook lowered by Moody’s Investors Services after Europe’s third-biggest oil company boosted spending to raise production.

The outlook for Total’s Aa1/P-1 senior unsecured debt was reduced to negative from stable, according to a statement today. The shares fell as much as 1.8 percent in Paris trading.

The change reflects “concern that the significant increase in investments made by Total in the past two years to give fresh impetus to its upstream growth strategy has constrained the recovery in its credit metrics,” Moody’s said in the statement.

France’s largest oil producer reported higher second- quarter profit and raised its dividend even as a North Sea leak and security issues in Nigeria and Yemen helped push production down 2 percent, offsetting growth from new projects. The company is trying harder to make big discoveries by drilling more exploration wells while at the same time investing in projects from Angola and Australia to Canada and Norway.

Total may have to sell more assets to keep its credit rating, according to Moody’s. In the year to June, the energy producer’s investment in exploration and production amounted to $26 billion, it said.

Total is increasingly participating in expensive, long-term projects, including liquefied natural-gas and unconventional sources of energy, that are “resulting in higher allocation of capital towards unproved, not yet producing assets,” Moody’s said. Higher oil prices haven’t been enough for Total to rebuild its finances, the service said.

Total’s ability to keep its current rating will depend on oil prices remaining high, projects being completed on time and within budget and the “timely execution of further asset disposals,” according to the statement.

Total fell 70 cents to 39.105 euros as of 3:01 p.m. in Paris. The shares are up 18 percent in the past year.

Anastasia Zhivulina, a spokeswoman for Total, wasn’t able to provide an immediate comment.

To contact the reporter on this story: Tara Patel in Paris at

To contact the editor responsible for this story: Will Kennedy at

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