The big fish will eat the highly leveraged smaller ones, and life will go on.
If the boom busts. The biggest players might reduce activity and contractors will be pressed to reduce rates and prices (we call that competition). With the amount of investment involved, unless the price drops below lift costs nothing will be shut in.
Maybe rent will drop to more reasonable levels, too.
The real question is one of just how long even the Saudis can keep taking a hit to try to harm the US.
In the meantime, those few who defaulted will have lost production assets to banks, who will realize a handsome profit when the price goes back up, and those who kept on drilling new wells will be in a position to do the same because they will have more oil to sell.
The surviving producers, which includes some well-backed players with plenty of resources, will increase drilling activity and the game will be on again. Only once in the history of the Williston Basin has drilling completely stopped since oil was discovered, and that year sweet crude was selling for $6.50 a barrel.
Responding to several comments.
The Saudis have not increased production 1 bpd. Not at all. They did not drive the price down. Why are all eyes on them to drive a price up (by cutting their own revenue via reduced pumping)? They did nothing to cause this. No reason they should be the party to fix it.
They did a tiny price reduction to the US in early November, at which time oil was already down about $25 - $30 since June.
Repeat, the Saudis didn’t do any of this. No reason they should be the party to “fix” it.
NoDak’s reclamation bond is $20K. That won’t even dent hauling stuff from a pad and pouring concrete down a hole. Price for all that, maybe $150K. NoDak will be stuck with it. Future such bonds will be $250K.
Big guys will buy out small guys? Why? The small guys were late to the party and didn’t buy sweet spots. Why would big guys want to buy less sweet spots, and with what money would they buy it when they owe billions for their own well financing that now can’t be serviced?
Suppliers will cut prices? Suppliers are about to be stiffed. They will go COD and/or elevate prices because the purchaser is now untrustworthy. They MUST guard against getting stiffed by the drillers. If the drillers want 60 day loans (which is that placing an order without paying up front is) they can get it from a bank and pay COD. If the bank won’t lend, that will say a great deal.
As for ho hum, it’s just another boom bust, there is no history for shale. It’s very credible, per all of the above, that this is an ending that is permanent.