Dropping oil prices should not have surprised anyone in the industry as the futures curve has been in contango since 2011, according to Jefferies managing director Bill Marko, but the size of the fall certainly is a surprise.

“We’ve gone a lot lower a lot quicker than anyone expected,” he said. “Investors run into this space at the same time, and they run out at the same time.”

Marko spoke as part of a panel at the recent NAPE Business Summit in mid-February, as WTI hovered in the low $50s per barrel. However, putting the drop in context, he notes that in 2008 oil fell from more than $140 per barrel to under $40. Prices rebounded on a two-year push to more than $100.

“I think this is an overreaction too, and should correct somewhat.” Still, he doesn’t anticipate production to roll over until sometime in 2016, the catalyst that will support a floor on prices.

“We’ll wake up one day and have too few rigs, and it will reverse. If operators cut production and there is an unexpected supply disruption, we could see a big bounce.”

But he added that Saudi Arabia’s decision to sustain production levels will also be a factor in price recovery.

“The Saudis can hold their breath for a really long time,” he said.

Credit Suisse managing director Tim Perry said he expects a price turnaround sooner rather than later—possibly as soon as the end of first-quarter 2015.

“We think the worst is going to be over earlier than some. When it gets to contango, expect to see some response fairly quickly.”

Credit Suisse has a price deck of $70-75 for 2015 through 2017.

The recent crude pricing volatility has more to do with investor overreaction than oil oversupply, he believes.

“An oversupply [globally] of 1% to 2% caused a price change of 50%. That’s small for an oversupply,” he said.

Geoff Davis, Morgan Stanley managing director, said E&P companies became accustomed to $100 oil and most believed $80 to be the floor. When the bottom fell out of that paradigm, many entered the downturn with higher operating costs and financial leverage than in the past. He sees companies falling into three categories in today’s environment.

Large-cap, investment grade—such companies, with quality assets and low leverage, are healthy and looking for opportunities, he said. “Some companies are strong and will do transformative deals.”

He said to watch for opportunistic acquisitions of assets and prized companies at affordable prices. Unconventional play consolidation to achieve economies of scale is likely during the downturn. And the potential is significant for stock-for-stock M&A.

“Corporate deals are easy,” he said, due to the simple metric of the valuation of the stock price. Asset deals are harder in a volatile market, as it’s hard to agree on a purchase metric that is in motion or that lingers in memories of better days. Vulnerable E&Ps will be more pressured in the latter half of the year, he said.

Middle range with modest leverage—the bulk of the E&Ps, the group is hunkered down and focused on survival. Reserve-based lending covenants are looming large, and 2016 with projected higher prices can’t come too soon.

These companies are cutting costs drastically and drilling only their best return wells. Cutting drilling and completion costs is paramount, and these E&Ps will quickly shift to pad drilling of multiple benches, where available, as well as focus on infill drilling their best acreage to create economies of scale. The compromise is they are borrowing from their future.

“They are harvesting their best wells now,” he said, leaving only lower return wells in their portfolio for the out years.

Distressed—defined as companies with more than 3x total debt-to-EBITDA, whose equities have generally fallen 70-80%, and bonds too have fallen 50-70%, as well as a basket of weaker assets.

Distressed companies may not have a lot of options, he said, and asset sales may not save them. “Noncore assets still have to have intrinsic value or you don’t have a buyer pool. There aren’t many buyers of bad deals,” he said.

The only hope for distressed companies today is to extend terms and buy time, he said. In their favor, “Nobody on the lending side wants to operate wells.”

Looking over a historical WTI price chart, Davis observed, “There is good news: the price of oil always rebounds.”