Nobody could predict when it would happen, but many people now ruefully admit that they secretly thought the upstream industry needed this time out. Indeed, we just lived through a classic, frothy frenzy for about five years, when a guy with six employees could build a company from scratch with some private equity, make a few deals, drill a few wells, and then sell it less than 18 months later for $500 million—or IPO it for a billion. It was extraordinary.

But now OPEC has thrown us a curveball, and well before spring training was to begin. Its decision not to cut oil production has forced the issue and focused the mind, if painfully so. The EKG machines are running full bore right now in boardrooms across the oil patch.

Here we are, watching the cartel playing against type by allowing the market to determine crude oil prices, and from there, incremental production. This is somewhat ironic in that U.S. producers have always touted a free market and cited supply and demand dynamics. But as industry advocate Mike Cantrell, our Legends interviewee this month, says, we have not had a 100% free market since John D. Rockefeller’s day.

Nobody could have foreseen the speed and severity of the oil and gas industry’s reaction. People thought the oil price was going down, but they didn’t think it would sink as low as $45/bbl. I’m not sure what they think it will rebound to, or when, given the number of rigs that have stopped working.

Between an 80-year high in the amount of crude in storage, weak demand growth globally, and U.S. production still rising, it’s hard to see a turnaround any time soon.

Several buyers I’ve spoken with said they think it is a great time to buy assets, but not for another nine months to a year. A workout or restructuring consultant visited us, and said his phone has been ringing off the hook, including calls from a major private-equity fund with billions under management. Yet at the same time, we know of another fund about to close any day at more than $3 billion, and KKR just announced forming a $4.5 billion fund to buy more energy assets.

“High well costs were OK before, because you couldn’t drill a dry hole—we were in manufacturing mode, remember?” said Todd Dittman, managing director with AG Energy Partners, a unit of Angelo Gordon & Co. that opened a Houston energy office in October 2013. He spoke at the recent IPAA Private Capital Conference.

“Things have changed, and that tells you no shale plays were economic. If that were the end of it, cutting capex would be the end of the story, and oil prices would recover, but for some reason we still need new sources of capital … because of capital flight [from public debt and equity markets]. The current environment offers risks and rewards to investors capable of sifting through the carnage.”

The cost of capital is going up this year and the providers have no room for error, as they’ve increased the speed of the treadmill used for their stress tests. Bank advance rates that stretched beyond proved developed producing reserves will no longer prevail.

“You do need to fix your balance sheet, but what do you have when you’re done, but a crappy company with a better balance sheet,” said Mike McMahon, managing director of Pinebrook. “I need to have good rocks first, and a good management team.

“One of the keys to success is to avoid the delusion of unlimited opportunity,” McMahon also told the IPAA audience.

Necessity is the mother of invention today—and for more than technology such as a 93-stage frack job Whiting Petroleum recently did in the Williston Basin. (See more in this month’s cover story.) For example, BMO Capital Markets raised capital for Oasis Petroleum in senior medium-term notes, linked to a basket of E&P stocks.

Linn Energy, seeking project equity, formed a $500 million, five-year venture with Blackstone’s GSO Capital Partners to obtain more drilling capital. GSO gets an 85% stake in the wells until certain return hurdles are met. It’s one way to keep drilling when you’ve cut your budget back.

Our spring lineup of networking events is here. First up is our DUG Bakken and Niobrara Conference on April 1 and 2 in Denver. You can register at DUGBakken.com. And, we are excited about this year’s Energy Capital Conference, which we have moved to a new date and venue. It is being held at the Omni Barton Creek Resort in Austin in April. We will have golf on the 6th, followed by an awards dinner for our honorees who have won the Oil and Gas Investor Excellence Awards, based on 2014 activity. The conference is on the 7th. You can register and review the agenda at energycapitalconference.com.

As always, feel free to email me with your questions and suggestions about these events, the magazine or our websites, at lhaines@hartenergy.com.