This paper presents the results of a theoretical study, supported with the finite element analysis, into potential loss of external integrity around a casing shoe resulting from leak-off testing (LOT) in upper marine sediments (UMS). Three types of possible failures from LOTs were considered: vertical fracture, horizontal fracture, and a channel outside cemented annulus. It is proved in the paper that vertical fracture is the most unlikely failure of the three. The other two types of failure can be distinguished by different values of propagation pressures. Although horizontal fractures are initiated at low pressure in the plastic zone around the wellbore, they cannot propagate beyond the plastic zone until wellbore pressures exceed overburden pressures. Annular channels, on the other hand may propagate upwards at pressures lower than overburden pressure. The paper shows that these channels are initiated at pressures equal to the contact stress between cement and rock and their propagation pressures are on average 3.5-fold greater than contact stress. It is also explained how to identify the UMS with high risk of annular channeling during LOTs.