Between the recent meeting of the 35th annual IHS CERAWeek in Houston and fourth-quarter conference calls, we now have a sense of the state of the oil and gas industry and the outlook of some of its key players.

It ain’t pretty—but a few have their checkbooks at the ready.

First, it strikes me that as much as we in the U.S. worry about what OPEC might do next, OPEC is worrying about us in much the same way. It recognizes the vast reserves of light tight oil in America, the flexibility and technology of our industry and our never-say-die spirit. In his address at IHS CERAWeek, Abdalla Salem El-Badri, OPEC secretary general, said he frankly doesn’t know how OPEC and U.S. shale producers are going to live together, an astonishing admission.

EIA chief Fatih Birol said any price recovery would lead to increased U.S. shale drilling, putting us right back where we started by capping the price rally. He also cautioned that longer term, as global demand inexorably grows, shale oil will be needed, but oil supply is threatened by the drastic cut in spending, a thought echoed by several other speakers.

Saudi oil minister Ali Al-Naimi gave attendees a dose of free-market reality, saying producers of high-cost or marginal barrels must lower their costs, borrow cash or liquidate. “I know it sounds harsh … but it is the most efficient way to rebalance markets,” he said, reiterating his stance that there will be no rescue coming from OPEC or the Saudis. (He actually called it “meddling” in the market.)

Several people cited the need to deal with the big picture. “It’s all about the macro right now,” said Tudor, Pickering, Holt & Co. chief Bobby Tudor. To do any deals “buyers need confidence about oil prices on the back end. One of the hardest parts of being in this cycle is being able to deploy capital.’’

Lower for longer is still the prevailing belief, with speakers citing the entrepreneurial U.S. producers who, once oil prices go back up, will complete hundreds of DUCs and bring back some rigs.

Meanwhile, the E&P industry is adapting with asset sales, equity issuance and debt swaps. “There will be bodies all over the place,” predicted Mark Papa, Riverstone Holdings LLC partner and former EOG Resources Inc. chief executive, who likened the situation to going through the valley of darkness. He called it right, but he also is prepared to act, as that same day he IPO’d a blank check company that raised $450 million to buy distressed assets.

The next six to 12 months are going to see “a decimation for the industry…,” he said during a Q&A with IHS CERA chairman Daniel Yergin.

“From those ashes you’re going to see the companies that survive are going to come out of it a lot more conservative as they go forward. They’re not going to stretch their balance sheets so much and make acquisitions based on false premises.”

In the current environment, standing down is the better part of valor, but still, it is a sad day when an E&P company can see $1.5 billion in cash flow from operations in 2015, yet lose money, lay off a significant amount of staff—and have absolutely no rigs running in 2016, as is the case with Southwestern Energy Co.

Papa said the “run-and-gun” mentality of the past five years is gone. “A lot of the companies that survive are going to be grievously wounded—I think you’ll see a more stable, balance-sheet-focused industry emerge.”

The examples of pullback in some cases are extreme. Continental Resources Inc. is not drilling in the Bakken. QEP Resources Inc. is dropping from nine rigs to three. Whiting Petroleum Corp. has chopped 2016 capex 80% from the prior year and will show reduced production—after paying $3.8 billion in stock for Kodiak Oil & Gas Corp.

E&Ps have always outspent cash flow to build themselves up on debt, especially in the late great boom when expanding shale opportunities were more exciting than anything the sector had ever seen. Now the chickens have come home to roost. Bloomberg said it has calculated that of $197 billion in oil and gas bonds, about half—$101 billion—is now junk rated.

Despite the range of problems confronting most E&Ps, I think OPEC is right to worry. Some good examples include Concho Resources Inc., whose full-year production rose 31% in 2015 despite reducing capex. It now guides to production going down only 5% this year—and it still has 18,000 locations. RSP Permian Inc. guided to 19% production growth this year although its budget is 41% lower than last year.

These announcements make us proud of the new efficiencies, yet they can portend a delay in the price recovery.

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