Appalachia under stress

Persistent low gas prices in the United States has led to concerns about (1) high leverage and potential breaches of covenants, and (2) doubts about sustainability of production. In this report, we estimate shale-focused US producers’ (1) required gas price to maintain current production without increasing leverage and (2) Debt-to-EBITDAX (a key covenant ratio) under strip and Wood Mackenzie price assumptions and assuming a flat production outlook.