This week’s newsletter comes absolutely packed and if you’ve been following the market closely, you’re going to love it. From horsepower-driven shifts in U.S. shale to Europe’s quiet growth problem, from stress-tested producer economics to service-company divergence, this edition brings together hard numbers, forward signals, and uncomfortable truths the market is still digesting.
Monday Macro View drills into Why Horsepower Matters, following a highly engaged Primary Vision webinar that reframed how investors should read frac data. Yes, the headline numbers softened: Frac Spread Count fell to 168 from 173 week-over-week, and Frac Job Count slipped. But the deeper signal remains intact. Sustained frac job activity, not weekly spread volatility, continues to show a strong predictive relationship with U.S. oil production, with correlations consistently in the 0.6–0.7 range and a clear one- to two-year lag. What’s changed structurally is capability. Average hydraulic horsepower per spread has jumped sharply in 2025 even as total active horsepower declines, reflecting the transition away from Tier-2 diesel fleets toward Tier-4 dual-fuel and electric systems. Fewer spreads are now completing more stages per day, with lower fuel intensity and higher reliability.
For the Market Sentiment Tracker, we focus on Europe and ask the question that is one everyone’s mind: why is Europe so hard to fix? The data tells a mixed story. Eurozone GDP grew 0.3% QoQ in Q3 2025, industrial production rose 0.8% in October, and unemployment remains contained at 6.4%. But momentum is fading. Composite PMIs have slid to multi-month lows, ECB growth forecasts sit below 1% for 2025, and cumulative output has undershot prior expectations by nearly a full year. Fiscal deficits are projected to widen toward 3.4% of GDP by 2027, with debt ratios approaching 85%. While the region isn’t collapsing but it is also not growing, and for energy markets it caps demand upside rather than triggering immediate downside risk.
The final part of our highly successful Break-even Series is here as well and it pulls no punches. Stress-testing a 20–25% oil price drop into the low-$50s shows a sharp divergence in resilience. EOG, XOM, COP, and REPX retain meaningful margin buffers, while OXY, VTLE, CRGY, and TALO fall below full-cycle economics, forcing production and capex cuts. A second scenario, assuming a 20% rise in operating costs as shale moves into Tier 2/3 acreage, erases nearly all remaining cushion outside the largest integrated producers. The message is clear: shale’s resilience increasingly depends on cost discipline and asset quality, not price alone.
That divergence is most visible in services and it answers a key investor question: who can protect earnings in a flat market? KLX Energy, trading at ~5.4x EV/EBITDA (4.7x forward), is showing it can. Market-share gains, gas-basin exposure, tight cost control, and falling SG&A have kept margins stable and positioned the business for incremental improvement into 2026. Nine Energy tells the opposite story. With Permian activity down ~15% since Q1, pricing pressure intensifying, no excess cash flow over the past two quarters, and EBITDA trending lower, its 8.2x multiple looks increasingly exposed — despite solid technical execution in the Haynesville. Same market, very different capacity to absorb it.
Finally, this week’s Free Read zooms out to global supply risk. U.S. frac activity remains steady beneath the surface, but the bigger wildcard is sanctions. Russian seaborne crude exports still run near 3.5–4.0 mb/d, yet up to 1.0–1.5 mb/d could face short-term disruption if G7 and EU maritime-service bans tighten. Floating storage has surged toward 150 million barrels, heavily concentrated in Iranian barrels near Singapore - a sign the shadow fleet is already strained.