Energy Outlook – Bond Market Doesn’t Get Much Better Than This: Credit Outlook

With credit spreads already near historically low levels and balance sheets in their strongest position in decades, energy bonds may be entering 2026 with limited upside potential. Though natural gas producers may benefit from a rebound in prices to more than $4 per 1,000 cubic feet, much of the related free cash flow is earmarked for stock buybacks and dividends rather than building the business and balance sheet. The consolidation wave is likely to extend into 2026, though companies and investors may be tempted to use an increasing amount of debt to get stock prices out of the doldrums.