Challenges to be faced by BP Plc?

Following the settlement deal worth of $18.7 billion with the local and federal governments. BP Plc. issues and liabilities were most likely to come to an end. However, this didn’t happen.

Earlier last week, a United States Federal Energy Regulatory Commission judge settled with the accusation that the London Oil Company was involved in the manipulation of gas price in 2008. This may put the company into a risk, as it might face a large amount in penalties.

The commission has blamed the company of identifying a “potential windfall” after Texas was hit by Hurricane like in 2008. After the incident, the natural gas wholesale price changed significantly, as production of oil and gas in the region was deeply affected. The authorities have accuses the company of sustaining the price misrepresentation to increase their income.

However, BP has rejected all these claims by the commission and has decided to battle against the charges. The company thinks that the commission doesn’t have any existing or real evidence to prove BP is guilty of manipulating the gas market.

The commission projected that profits from the natural gas manipulation were around $249,000, and it looks like that big company like BP can afford to pay such penalties. However, as BP has recently established a deal of $18.7 billion and its second quarter of fiscal year 2015 earnings weren’t inspiring so, penalties under these circumstances will put the company under more pressure, according to BP stock news. As crude oil prices are falling continuously, investors believe that the company will be unable to make enough cash to pay dividends to shareholders.

The image of the company is at stake, it is the biggest energy company in the U.S, which sold approximately 24 billion cubic feet natural gas a day last year. However, if the accusation is proved, the value of the company will go down, which is already under $70 billion.

Furthermore, big companies such as Exxon Mobil Corporation are very cautious regarding their cash flows. As dynamics of the market are changing, they are not interested to invest in any loss generating company. The strict actions by BP, including asset disposal idea and the London’s government opposition, are decreasing the company’s chances of mergers and acquisitions.

Bank of America Merrill Lynch analysts expect the company to fund its capital spending and 2016 dividends only, if oil prices increases to $75 barrel. However, looking at the current market condition, this looks impossible in the near-term, at least.