Links, albeit tenuous, to billionaire investor Warren Buffett put IPB Petroleum Ltd in the spotlight during the last quarter as the Hampton, Victoria-based junior explorer finally drilled its first Browse Basin well, Pryderi-1.

This was no ordinary well. Apart from its coveted postal code among some exclusive offshore neighbours—Prelude, Ichthys, Calliance, Brecknock and Torosa—the well was funded by 25 per cent stakeholder, CalEnergy Resources, a wholly-owned subsidiary of MidAmerican Energy Holdings Co, which is 89 per cent owned by Buffett’s Berkshire Hathaway holding company.

IPB did its best to play down its convoluted links to Berkshire Hathaway, diverting attention to independent analysis of the previous BHP Billiton explored area that had delivered a 75 per cent prospect of the well intercepting hydrocarbons and a 45 per cent chance of finding oil.

Buffet’s distant connection had piqued interest, and that was no great surprise considering his astute investment savvy. No wonder IPB’s stock climbed from 25 cents in June to an all-time peak of 41 cents in early September, settling at 36 cents as the well was drilled.

You could almost hear the collective groan in the industry as Pryderi-1 deflated to the disappointment of water bearing yields in the target reservoir. IPB went into freefall on the Australian Securities Exchange (ASX), losing 84 per cent of its value and crashing to 5 cents, before levelling off around 2.3 cents towards the New Year.

Against the backdrop of slumping oil prices—down more than 40 per cent in the second half of the year—hope that Pryderi-1 might replicate recent successes of wells such as Phoenix-1 had burned like a beacon beneath dark clouds.

I’m willing to bet Buffett barely flinched. Not because I know the man personally, but because the man once said, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Rewind back to mid-2009 and the height of the global financial crisis. At that time, Buffett said more millionaires are created in times of economic downturn by shrewd investors heeding the maxim, “price is what you pay, value is what you get,” seeing opportunity in bargain stocks that would rebound on the upturn.

At that time, the Dow Jones Industrial Average was around 8500, and yours truly was tempted to buy the index, but failed to act on Buffett’s advice. Today the index is hovering at 17,500, and in hindsight, we can reflect on another investing pearl, “The rearview mirror is always clearer than the windshield.”

Amid the gloom of both iron ore and oil prices crashing to five-year historic lows, it’s comforting to hear the calm reaction of some seasoned resource professionals in commodity-reliant Western Australia. The state has always been a boom-or-bust sort of place, and anyone who has lived through a previous slump will know that it always bounces back.

There is a silver lining from Saudi Arabia opening the spigots during the last quarter in the OPEC-driven battle for crude oil hegemony. Many who were oblivious previously are awakening to the spectacular success of hydraulic fracturing in the United States. The proven technology that has unlocked shale and tight gas treasure trove benefits can no longer be ignored in the quest for energy security, irrespective of current trading conditions or oil prices. The landscape has changed forever and the Saudis, regardless of when the taps tighten and prices climb back to cruising altitude, are no longer sitting in the captain’s seat and maybe not even be in the cockpit.

In much the same way that slumping iron ore prices have left Rio Tinto and BHP Billiton standing almost alone in the wilderness of an increasingly monopolised market, ExxonMobil’s assurance that it can profitably produce oil from as low as $40/bbl reveal the safety margins of the supermajors.

Before we discover who blinks first from the squeeze, the billion dollar question is: Which small and midcaps companies will still be standing after the standoff? You can bet that canny investors, like Buffett, will be cherry picking bargain basement buys for long-term gains during this window of opportunity.

But the suffocating of smaller, entrepreneurial-driven companies that represent the soul of the sector is never a good thing for the oil and gas industry. Particularly in Australia, where so many of these businesses are driving code-cracking visions in the frontier territories.