Back To Our Priority and Focus

Our planned diversion away from our focus on the user community ended late last week when we realized that the oil and gas investor was too passive to involve themselves in People, Ideas & Objects. They are employing a cut and run strategy away from oil and gas and from the look of most stocks, who can blame them. One of our favorites, in that we mentioned them here late last year is Penn West Petroleum. They had the misfortune of having to restate their financials for a number of quarters based on the fact that they had previously capitalized royalties. Anyway, at the time their stock was as high as $10.19 last year with a market cap of approximately $5.1 billion. Last week the stock touched $1.30 with a market cap of $650 million. Thats a loss of $4.5 billion, or 88%. I have held to a principle in the stock market that if a company loses half of its value in an “event,” then that company can effectively be seen as dead. There is no return for a firm that has taken a hit of that calibre to its stock. The event that has hit Penn West of course is the decline in oil prices and there does not seem to be the resources or capabilities, as far as the market is concerned, for Penn West to survive. I wonder how many other half dead producers there are out there. It is clear to me that we are involved in a disintermediation of the oil and gas business based on the creative destruction of the current infrastructure.

Anyway our priority and our focus is the user community and its involvement in providing the oil and gas producer with the most profitable means of oil and gas operations. We need to refocus on this priority as this is our means of being involved in the development of our product the Preliminary Specification. If we had our budget in the bank today, our priority and focus would be on the development of the user community and therefore we are not wasting any time now as a result of being unable to fund our budget. The ability of our message to be broadcast across the industry exists due to the capabilities of the Internet. And the ability of like minded people to communicate and collaborate exists when our budget funding does come into play. For now spreading the word and thinking about how the Preliminary Specification impacts your areas of the oil and gas industry are things that we can and should be doing. This gives us the time to be creative and put some energy, and the necessary quality of time that is needed for a high quality user community based product to be developed. Rebuilding the industry from the ruins that are starting to show, and as noted above, is very exciting from this side of the fence.

Most producers are now starting to make cuts to their staff. Such that staff were the problem that caused the profitability issues the producers are facing. We have been hounding the producers for over a decade about the work that we are doing here. Trust me the failure of the industry is the bureaucrats fault. They have provided less value to their shareholders than if the investors had put their money in the commodity markets. A sad commentary on the performance of the industry over the past ten to fifteen years. Those that are being let go from the producers should find hope that they can be seen as valuable again by joining this community and being part of this revolution. Thats a good word for what we are doing here.

To have the Preliminary Specification operating in the oil and gas industry would provide a lot of value for everyone involved. Those that participate in the user community are the main benefactors and will hold a special seat in the way that the revitalized oil and gas industry operates. Through our user community vision it is the user who has control of the business model that is contained within the software that operates the industry. If there is need for a change in the business model it is the user community that has the power to make those changes. It won’t need to ask anyone for permission or consent. And the user community will have the software development capabilities of People, Ideas & Objects available to implement those changes when they are required. This is a new way of running an industry. One that if you read the current business literature, is becoming somewhat the prototypical organization of the future.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

A Revelation in how our Budget is Funded

A few days ago we asked if we could afford failure. Failure in the oil and gas industry itself. Now I want to ask it in terms of People, Ideas & Objects and the development of the Preliminary Specification. Clearly we are engaged in a battle with the powers that be, the bureaucracy who hold little regard for us. And that makes our task difficult in terms of succeeding when you are in a protracted battle with your customer. However, our appeal, based on our value proposition, has been to address our message to those that are directly affected by the difficulties in the industry, the oil and gas investor. And it is here that we have specifically addressed 386 blog posts. The time has come to evaluate that approach, and ask if its reasonable at this point to assess this as a failure. Clearly the investor, and board of directors who represent them, are too detached from their investment in order to make any fundamental change. It is for them a passive investment. It is therefore fair to assume that our appeals have fallen on deaf ears. Our ability to cobble together a coalition of like minds in this area and fund our budget is a non-starter. And we need an alternative means in order to address our budget needs.

What we have is a value proposition that is in the trillions of dollars. What is needed to achieve this value is the software necessary to identify and support the organization to realize that value. Our budget is the key to establishing that organization. The organization consisting of People, Ideas & Objects, our user community and the service providers. These service providers will have the $40 to 60 billion in overhead that is incurred by the industry today, as the source of their revenue stream for tomorrow. Identified and controlled by the software that they participate in developing. The oil and gas industry generates several trillion per year in terms of its revenues with North America being a large subset of that.

How does disintermediation work? We certainly have identified the needs of the user community and service providers as necessary to make up the changes within the industry. Changes to enable the Preliminary Specification. However is that enough change in order to ensure that society's energy needs are met in the long term? Certainly we have identified the bureaucracy as a redundant form of organization within the People, Ideas & Objects ecosystem. However, is it appropriate to ask if the passive investor model of ownership of the oil and gas industry is also past its usable life? If they too are uninterested in the long term of their investment. And are willingly walking away from those investments. Who are we to argue?

What we therefore need to do is to identify new candidates for interested parties willing to disintermediate the oil and gas industry. In other industries that have been disintermediated the shareholders and directors of the “old” industries did stand by and watched as their investments were fundamentally destroyed. This is the model that fits in every example that I can see. The value of Apple has assumed the value of the industries that they disintermediated. Where are the shareholders in those “old” businesses and industries today?

Which leads us to the logical conclusion that we have for who we can approach to fund the disintermediation of the oil and gas industry. We can not only provide them with the upside in terms of our value proposition. A means in which to operate the industry in the most innovative, dynamic, profitable and successful manner. But also the disintermediation of the existing producers revenue stream which are being willingly given up by the investors and shareholders of the current producers. Who are the natural candidates for this approach? Two off the top of my head are Apple and Oracle.

So here is the revised plan for our development. We are sticking with the January 2017 software development start date. And user community developments are our priority for the period of time up to that point and always. However we will be actively looking to people who are interested in disintermediating the industry as sources for our budget. Passive investment is something that came into play when the merchant organizations became too big to manage by the founder. Disintermediation is a means of exercising the value away from the uninterested passive investors.

What disintermediation has proven time and again is that Information Technology is disrupting current business models. Its only now that I am realizing that one fundamental business model that is being disrupted is the passive investor model. Action is the last thing that comes to the mind of the investor in terms of what to do with their poor performing stock. The first thing they do is sell it. The trick will be not to hold any oil and gas stocks when the pain is realized in the marketplace. Not to involve yourself in fixing things. Therefore our plan will be implemented immediately with a return to our focus on the development of our user community come Monday. Over time we will figure out the funding requirements and ensure that society's energy needs are met in the long term.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

My Oil and Gas Overvalued Hypothesis

The book value of a firms assets are not particularly relevant to the day to day operation of the business. Particularly when the business is a public company with shares traded on an exchange. The market value of those shares will provide the real value of the company based on the markets perception of its value. The book value is what concerns the accountants and is of relatively little concern other than it has significant impact on the firms profitability. And that is determined in the matter of how the assets of the firm are depreciated or depleted in the oil and gas industries case. It is my hypothesis that the oil and gas industry is carrying excessive asset values on their books. These are a result of the SEC’s requirements to follow either successful efforts or full cost accounting requirements in the determination of those assets. This overvaluation of assets. Which I suggest is systemic, large and unreasonable. Leads to material overstatement of profits in the reporting of producers earnings. These are the differences between what I claim the industry, on a wholesale basis, is losing money, vs. the average producer continuing to report earnings in this low commodity price environment.

If producers were to recognize a reasonable depletion of their capital costs. A method that is closer to what a traditional business would use. Their depletion expense for each year would be higher than what is currently reported. By assigning all of the costs involved in the producers capital costs to the asset base of the producer, this inflates the assets on the high side. Traditional businesses who are involved in elements of research are required to expense all research expenses incurred in the current period. Any unsuccessful operations would also be expensed in the current period, however that is not the case in oil and gas. The other aspect of oil and gas capital costs that causes them to bloat the balance sheet and over report earnings is the fact that the capital costs are deducted across the reserves base. In many cases the reserves base is continually expanded from year to year. And the reserve life index of the firm in most cases exceeds a decade. Leaving the situation where most producers are deducting far less than 10% of their assets within a reporting year. This seems inconsistent when the costs to maintain that reserve base and deliverability can and does usually cost upwards of 30% of the asset value of the firm on an annual basis. This would appear to me to determine that the capital costs of the producer should be depleted over a three year term.

Clearly this overvaluation is the SEC’s fault and the accountants at the audit firms accept this thinking as it makes them feel cool and hip in the eyes of the engineers and geologists of the producer firms. Something that they are not generally known for. The problem is that the engineers and geologists are not trained in the accounting requirements and are unaware of the distortions within the balance sheet and income statements that they are producing. They think their activities which are building the firm and its profits are moving the firm in the right direction. Whereas a more conservative evaluation of their asset base would instill a more conservative use of their discretionary cash flow and earnings. If there were any. The net effect of a more conservative depletion methodology would be a more focused industry. In my opinion.

What we have now is the fire alarm ringing and producers running about spending money on the shale based plays that are the place to be. Expanding their productive capacities, building their asset bases and destroying the commodity marketplaces. The continuation of these activities in the face of such losses is not evident to them. Even though they are having to finance their negative cash flows, which on an industry wide basis are projected to be negative $100 billion just for shale. A ludicrous and incoherent manner in which to run an industry.

Clearly the bureaucrats are unable to change. But the incentives and the requirements of being in business are being distorted by a methodology of accounting that doesn’t recognize the real cost of the business. Until a new business model, the Preliminary Specification, and the user community and service providers are able to provide the industry with these kinds of appropriate accountings the industry will be run in this distorted manner. Remember the SEC defines the upper limit of what can be recorded as assets. That doesn't necessarily mean that everything has to be reported as an asset or that the upper limit has to be reached. In an industry that expects to spend the money the oil and gas industry does in the future. Estimates vary and range in the many trillions of dollars over the mid-term. Its important to put those costs in the proper context. Are they assets, or should they be written off in an appropriate time table. One that leads to systemic, large and unreasonable industry wide losses.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Can We Afford Failure?

In most businesses or industries the results of the bureaucracies failures occur with little to no interest from the general public or other concerns. The demise of the record store, Nokia or Blockbuster Video is met with a shrug or a general lack of concern about a way of life that has past. In other industries such as banking, intervention by governments to ensure that the systems that maintain the daily economic requirements of our way of life are maintained is now commonplace. These banking interventions are into their seventh year and there doesn't seem to be any clear direction of a return to normal operations any time soon. Which category does the oil and gas industry fall under. Is it something that we can ignore and idly watch itself destroy its value and capabilities over time. To the point where it can no longer provide for the needs of its customers. Is that the point where wind and solar, tidal and nuclear energy will magically be capable of replacing “dirty” oil and gas? Can we rely on the radical environmentalists to show us the errors of our ways? Or is it something that we should be cautious of and ensure that the capabilities and capacities of the industry are maintained for the need of society? Altruistic questions, but maybe they should be asked.

In mid February I noted the effect of shale based reserves on the oil and gas production markets. These were reflected in the following two graphs. (Sources eia.gov and econbrowser.com)

Note the prolific nature and characteristics of the shale based reserves on deliverability. They have literal hockey stick implications to the continents productive capacity. Here is an updated version of the econbrowser.com graph for the month of February.

Notice any trend from the one that was published in November 2014? This productive capacity increase occurred during a time when the producers announced there would be an approximate one third drop in capital expenditures for the calendar year 2015. Although it might be too early to tell, the announcement itself certainly didn't have an effect on the increases in production. It remained on its upward trajectory. And I think it is reasonable to assume that the actual decline in capital spending will have the same effect. The current motivation for the producer, any producer, to achieve those increases in productive capacity will not cut those shale based capital programs. Why would they? The bureaucrats focus will be on reducing the costs associated with drilling, completion, equipping and operations. Also the overhead in the head office will have to be rationalized further in order to ensure that the producer becomes profitable. If that will ever be possible in this pricing environment.

That is the logic that is the state of affairs in the oil and gas industry. What the bureaucrats are being educated on today is the elasticity of supply and demand of the commodity markets. Their ability to reduce costs to produce a profit will never be achieved because of the effect of continued overproduction in the market. Now this isn't news to anyone is it. However, we see the industry stuck in a business model that it can’t, won’t, will never and does not change. Its demise and eventual destruction of its capabilities would therefore be a follow on process.

Bureaucracies don't change. People do however. And that is why we need to move to a new business model. The Preliminary Specification with its decentralized production model provides a solution to this overproduction by allocating production between producers based on profitability. If the property can be produced profitably based on the current commodity price then it will be produced. Otherwise it remains shut-in. But to do that we have to make some serious changes to the industry and they won’t be made by the bureaucrats. They fight change, like they fight People, Ideas & Objects Preliminary Specification, our user community and the service providers.

Therefore to answer the bigger question of whether we should be concerned about the demise of the oil and gas industry. I suggest that we should. Like banking, oil and gas provides us with everything that makes up our modern lives. Without it we are reduced to prehistoric capabilities. Not a pleasant thought. Should we just wait and leave this up to the bureaucrats to determine the outcome. Or should we act and ensure that the industry continues on in a healthy and prosperous manner for all concerned. I know which side of the fence I’m on.

And just as it was evident that the U.S. housing market was not a place to put your money. The oil and gas industries difficulties are plain for everyone to see. The fact that the U.S. housing crisis stewed for decades probably shows how long we'll have to wait for someone to act in our oil and gas interests. However, we need to remember there is no “Fed” to flood the market with deliverability when things do fall apart.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why We Need All of our Budget

People, Ideas & Objects has a big job to do which provides significant value to everyone involved in the oil and gas industry. It is as a result of our value proposition that our expectations might seem a bit odd. And as a result they can be taken out of context quite easily. One of these expectations is in regards to our budget and the expectation that it will be fully funded before any work is undertaken. The reason for this is detailed in this post and is as with all things with People, Ideas & Objects, related to our users.

Clearly we have a powerful bureaucracy who are well aware of this project and have chosen not to support it. This can be assumed to continue and that steps will be taken against People, Ideas & Objects and those that willfully participate in either the user community or the future service providers. Protection for these people during the critical period in which they are exposed to the antics of the bureaucracy must be provided. That protection is the assurance that during the transition period that we are building the systems. The revenues they will need to make this software and establish their organizations for the future oil and gas industry. Will be there in the form of the user community fees paid by People, Ideas & Objects during development.

There is significant career risk to those individuals who chose to decide to join the user community and service providers. The bureaucrats will list these people on their “do not hire” list that is shared amongst the bureaucrats at their lair. This will be a permanent change in the users life, there will be no going back to the old ways. However, people who are making the commitment to the industry in the long run. Who are tired of the losing ways of the industry. And chose to join People, Ideas & Objects. Those that are committed to providing the most profitable means of oil and gas operations. Why are they required to take any financial risk in the transition of the industry in order to provide the industry with the $5.7 trillion value proposition?

They aren't being asked to do that and they won't be asked to do that. They will have the financial resources necessary to leave their place of employment in the industry and participate in the user community, and seek to establish a service provider firm for the future of the industry. This will be done on the basis of the work that they do for the user community, the People, Ideas & Objects developers, and will be well compensated for out of the budget of $667 million for user community participation.

If we think that the industry will fund the development of the People, Ideas & Objects Preliminary Specification, user community and service providers on an annual go forward basis. This would be a foolish approach to take with the likes of the bureaucracy lurking in the shadows waiting to poach responsibility for that annual payment. They would most certainly come up with some reason to terminate the funding, or cut the funding, or tie the funding up in some way. I could go on but I’m sure that it is understood that they would try to do something. It is therefore incumbent upon us to ensure that our users and service providers are protected, and the overall viability of this project meets its successful conclusion. Having all of the funds at the beginning of this process is what is required to deal with the personal risks of the user community participants and the inability of putting this project back to together again if there were a temporary disruption. We must begin, continue without disruption and successfully build without the disruptive influence of the bureaucracy. They have shown themselves to be untrustworthy and unreliable. And that is how this unreasonable and odd expectation of having our budget fully funded has been developed.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Oil and Gas Operations in the 21st Century

Last week we highlighted the ways in which People, Ideas & Objects would enable a successful oil and gas industry. One that was dynamic, innovative, profitable and successful. This is detailed in the Preliminary Specification and is what is required for the industry to move forward in the 21st century. Currently the bureaucracy provide no future other than the financial demise of the industry. Theirs is a form of operation that is consistent with how things were done in 1960 or 1935. The need for change is evident based on the earnings of the producers and the changes they have implemented to deal with their financial losses. And that is, they have done absolutely nothing. Sure they have cut their capital budgets, but as we are all learning that does little if nothing to deal with the issues at hand. It is 2015 and we offer a means in which to operate the industry up to 2040. That only seems to me to be a reasonable approach to the way we should be operating the industry.

Change of this scope, led by Information Technology, is occurring in every industry. In every industry the entrenched status quo is fighting to maintain their archaic ways of business. This is the situation in oil and gas. It won’t be the oil and gas producer, led by the bureaucracy, that stands up and says we need to adopt People, Ideas & Objects Preliminary Specification. They have fought long and hard to ensure that we don't see the light of day. What is needed is for those that will be the ultimate beneficiaries of the changes that are made when the system is implemented. And that is the oil and gas investor who are being abused by the bureaucracy as badly as we are. It might be wise to have the investor direct the producers to fund People, Ideas & Objects from their savings in the reductions of their capital budgets.

If we continue on in the manner that we have in the oil and gas business things are only going to get worse. And does it surprise anyone that there is no response from the bureaucrats? This summer its reasonable to assume that storage facilities for natural gas will reach capacity. What this will do to prices for the years to come is certain to be bad news. Recently I read that Canadian producers who were unhappy with the prices for their oil production were shifting to drilling natural gas targets. Bureaucracies are incapable of doing anything but meeting the prime directive. And that is, increase productive capacity and produce. After more than five years in the natural gas business their behavior should have changed. Clearly it hasn't, and it never will. Nor will it change on the oil production side of the business. Surely investors can see that the trend is there. In many ways the oil and gas industry is not a business. Its an engineering exercise.

Who can instill the business discipline that is necessary in the oil and gas business? Only those that are affected by it. There can be a strike by the investors and they can refuse to invest in the industry. This has essentially been happening since 2008, and still these problems exist. The bureaucrats found willing junk bond markets to fuel their needs. And now that that avenue is closed. The reduction in capital expenditures will enable them to continue on without less difficulty. However, you will see continued overproduction, and increases in production in both oil and gas in North America for at least ten more years. The only thing that will stop them is the end of the shale based reserves. Which in natural gas is 50 years. In oil its as little as 10. And that is the Saudi’s game plan. Let the shale based producers, their investors and junk bond holders suffer with losses and financial destruction for the 10 years that shale based oil exists in North America. And then they will have both market share and pricing power again.

Or maybe someone will come up with an idea that makes this nightmare go away. Provide the producers with commodity price making strategies like People, Ideas & Objects does. And we can skip the financial destruction that in my opinion is only really beginning.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Will Be Off This Week

Returning Monday March 16, 2015.

How We'll Be Successful Part IV

People, Ideas & Objects capital structure also provides for its success. There is a long history of venture capital groups involvement in oil and gas ERP systems. And its not a beneficial one from the point of view of the venture capitalists. The number of oil and gas companies makes for a very small market. What the venture capitalists have learned is to avoid small markets as there is no way in which to leverage an investment without large volumes of sales. And that is the example that has been proven time and again in the oil and gas ERP software marketplace. The market is too small and the producers are able to “negotiate” with the ERP vendor to the point where the ERP vendor is selling their products well below cost. They are subsequently told to make it up on the next sale. Only to find the same movie playing.

We have skipped the venture capital chapters of the People, Ideas & Objects history book. I control 100% of the firm. We are structured much like a utility where the revenue stream that we earn from the producers has an element of profit included in the price. This way there is no confusion or conflict as to who’s money is who’s. The user community and software developers will be provided with the resources that they need for the budgeted year. Our costs to the producers will then be adjusted for the profits of the firm and the Intellectual Property royalties that are due.

It is in this way that I will be able to monetize the investment that I have made in People, Ideas & Objects and ensure that the priority of the user community remains the focus. If, in the traditional manner of monetizing an investment, I would have to sell the shares in order to achieve that. With the shares in other hands the decisions as to how People, Ideas & Objects capital structure and revenue flow could change. And the conflict between the shareholders and the user community, as a priority, may come into play. The oil and gas industry needs the user community to be the priority and that will be the case with the capital structure as is defined here.

These are academic ramblings that imply there is value in People, Ideas & Objects down the road. To define these points are important to determine what our priorities are when we are operational. And how we will in turn ensure that the user community, the service providers and the oil and gas producers are able to successfully build off of this initiative. We have spent the past year emphasizing the importance of, and focusing on the user community. This is the only manner in which the oil and gas producers are going to be able to deal with the issues and opportunities that are presented to them in the next 25 years. How we structure ourselves is an important element of how that is achieved and the success of all concerned.

It is also academic to state that I had the option of accepting venture capital funds. Nothing could be further from the truth. In my years of working on this project many have been approached, oddly enough just as many have said no. The scope and scale of what I was doing was beyond what they thought could be approached in a commercial environment. A diplomatic way of saying you're crazy. A classification, as you know, that I have come to appreciate. If I did take any of the money from the venture capital groups it would not have brought us any further towards our goal of building the Preliminary Specification. The need for the oil and gas investors to step up and direct their oil and gas producers to fund this project are clear. No one is going to do the job for them other than themselves. The bureaucrats are too conflicted. There is no money in it for anyone to invest in. And they have the benefit of the value proposition flowing from the producers bottom line onto their pocket book. Its really that simple. Besides what are you going to invest in today, another gas well?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

How We'll Be Successful Part III

One of the reasons that we will be successful is that we will enable the oil and gas industry to balance the short and long term perspectives of their business needs. This assumes that we are provided with a stable and consistent revenue stream in order to support the work that needs to be done. A criticism of the industry today, and it would apply to all industries, is that it is too focused on the short term and needs to balance this against its longer term needs. Selling today’s production for whatever it is worth would certainly fall into this category. With People, Ideas & Objects providing the dynamic, innovative, successful and profitable oil and gas producer with the most profitable means of oil and gas operations. We have provided the optimal short term perspective in which to operate. The need therefore is to continue to address the issues and opportunities of the business in order to ensure that when things change, the producers business model and mode of operation will change as well. With software taking such a key role in defining and supporting our organizations. This is a permanent software development capability that the oil and gas industry must support and financially commit too.

With our budgeted resource implementations of thousands of man years that are needed for the development of this software, and thousands of man years within the user community. This capability will have one source of funding in order to ensure it continues to provide this capability to the oil and gas industry. Through the licensing, that source of funding is from People, Ideas & Objects and that means our revenue stream has to be supplied consistently from the oil and gas producers. This software development infrastructure provides the means of which the industry will operate profitably. Currently the bureaucrats are determining its future by not funding it. We can not be subject to this type of thinking now, or in the future. Our value proposition is only valid if we are operating successfully in the marketplace. Any disruptions to our revenue stream will affect the realization of that value proposition by the oil and gas producers. But will also create permanent damage to the capabilities of the software development team, user community and elsewhere. A shortage of funds requires the stoppage of work. I am not of the opinion that this type of software development capability can have an on/off switch for the industry to use.

The type of destruction that would be caused would be the laying off of people who are working on long term projects that require a constant, determined and consistent application of their time. Those that are focused on the long term that are required to “wander through the woods” in order to determine the next decentralized production model or other innovation. Innovations that are necessary so that the oil and gas producers maintain their most profitable means of oil and gas operations. Alternatively we could implement extreme measures, as if there was a funding cut, prioritizing which expenses were cut first. And it would be in that instance that we could address higher priority areas such as the costs of the cloud computing infrastructure. The point is not to threaten, it is to emphasize the need for an approach to the development of this capability that is inconsistent with the current bureaucrats method of doing business.

This is not only counter to the methodology of the bureaucrats today. It is raising the point of how important software is in society. Since the meltdown of the Tech industry in 2000. People have generally disregarded Information Technologies importance overall. And that reflects the manner in which change is reflected in society. Change is always overestimated in the short term, and underestimated in the long term. We are now clearly in the long term orientation of the changes brought about by Information Technology. The need for industry to develop the requisite software development capabilities is a key part of People, Ideas & Objects value proposition. This capability needs to be funded and provided for in a secure manner so that the development of this capability meets its full potential. And what that full potential is probably can’t be measured in a traditional software development firm. It needs a new commitment from the sponsoring industry in order to ensure that it meets that potential successfully

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.

How We'll Be Successful Part II

That blind spot of the bureaucrats should be coming into focus for those that are concerned about the health of the oil and gas industry. The blind spot being that the industry is failing and that a serious problem exists in terms of its profitability. Discussion in the industry is about the future, which is good, however it looks to the possibilities of what could be. How there will be a trillion dollars spent in infrastructure alone to expand the marketplace for oil and gas. That the U.S. can lead the world in terms of production of both oil and gas. No one stops to ask on whose dime though. Money grows on trees as there are no earnings in the producers to support these investments. So how will these investments be made? And what will be done about those losses that are systematic, critical and terminal? Its that bureaucratic blind spot regarding the state of profitability that is so disconcerting.

This disjointed behavior of the bureaucrats is the traditional “muddling along” operating procedure of the industry. There is no capacity to deal with the issues of the industry. And no desire to change that characteristic. That would require effort and work. The key to the oil and gas industry is to build production capacity and to produce. Let everything else take care of itself. In the past this was all that was possible in terms of operational capabilities in the industry. Things haven't changed as far as the bureaucrats are concerned. In the past there was no Information Technology capability that could do the things that we are proposing with the Preliminary Specification. However things are different today and the seriousness of the problem in the industry requires the industry to make the necessary changes before it collapses.

Recently we pointed out that we would be successful as a result of the user communities vision that we have put in place. That the users were enabled and empowered to make the changes to the software that will operate the industry. This is a necessary first step in order for the industry to lose the “muddle along” strategy and turn it into the dynamic, innovative and profitable industry that it can, should and needs to be. Otherwise we are beholden to the delusions of the bureaucrats who will continue to dream of how they will increase their production for the next decade.

Right now what we need is to organize ourselves to approach the next 25 years. In ways the bureaucrats are right, the future could be quite robust given the endowment of the oil and gas shale reserves. However, there are a lot of equity and debt holders that are looking at the industry with fear that the bureaucrats are so out of touch with the state of the business. If you think natural gas prices are bad today, wait until summer when they'll be far lower as a result of full storage capacity. Not even that will stop the production increases however. As we have indicated, the industry functions on an operating system that has no programmers and no system administrators. There is no one who can make any changes to the way things are being done.

Until the industry solves its profitability problems nothing will happen of significance in this industry. Why? Look at the reserve estimates of the oil and gas shale reserves. This overproduction will never stop until there is a means in which producers have the capability to shut-in unprofitable production. Such as the Preliminary Specification provides. Only then will the industry return to profitability and only then will the industry be able to source the capital and debt that is needed to build out the industry. And its a catch 22 type of problem. There won't be any capital for the producers to invest, yet the overproduction will continue nonetheless.

The point is that the industry has changed. The ways and means that it has to operate has to change as a result. We live in sophisticated times where Information Technology influences our organizations substantially. In order to make any change requires that we build the software to emulate the changes that we desire. Specifically for the reason that it is the software that runs our industries and companies today. However the bureaucrats are unable and unwilling to give up their franchise that is supported by this older software. Getting rid of the old software gets rid of the bureaucrats. That should really be considered a good thing if you think about it. Especially from a profitability and success point of view. And one in which we will be able to move forward with a dynamic, innovative and profitable oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

How We'll Be Successful

Standard operating procedure in the oil and gas business regarding technology providers is to issue a comprehensive Service Level Agreement (SLA) to define the parameters of the task at hand. This enables the bureaucracy to ensure that their needs are met in the project and that the deliverable from the technology provider meets their standard. In a comprehensive technology environment this is a reasonable approach to ensure that the purchaser of the technology is getting what they want. And in almost all instances the oil and gas bureaucrats, with their SLA’s, have been able to ensure that they get what they want from the technology providers. However as we indicated the other day. The industry is run by an operating system that has no programmers or system administrators to make any changes. And the industry is failing. So although the SLA’s have met their technical terms, the industry as a whole is a failure as we see with the inability to deal with oil or natural gas pricing, or any other issue that might arise. And here I am raising the bureaucrats “muddling along” strategy as its only mode of operation.

At People, Ideas & Objects we don't accept SLA’s. We don't believe in them and therefore don't accept them. If industry, a producer or an investor wants something contained within the systems that we develop. We provide the user community as the means in which they can have those requirements implemented, have those changes made, and operate in the software. This isn't something that can be defined down to a contract and implemented at one point in time. It is a constantly evolving capability. One where the input of the users, whoever they may be, have representation and input into the systems that they use. And as we indicated the other day. This is how the people will have the computers work for them. Not the manner in which computers currently have people working for them.

In terms of our success as an initiative in the oil and gas industry it won't be as simple as this change. The classic bureaucratic posture of issuing an SLA and therefore having the appropriate scalps to blame for any problems down the road is all part of the standard operating procedure. This blame someone else for not fulfilling the spirit of the SLA is an extension of the gotcha politics of the bureaucracy. To make the changes from a losing oil and gas industry where “its the other producers fault” for the problems. To one where everyone begins to see success in the industry as their responsibility. Will require everyone to approach the industry with a new mindset. Today’s mindset of accepting the failed state of the industry is wholly inadequate for the future.

This therefore is technically what needs to be done. The politics of making that change is also necessary in order to ensure that it happens. Key to facilitating this political change will therefore be the user community needing to be the focal point of the industry. This is fine to establish a committee and say they are responsible and make them authorized. The manner in which user representation has been handled in the past. But what they really need is the power to make these changes and ensure that the industry does become successful. And here is where the Intellectual Property comes into play. Through licensing the users within the user community, they are the ones with control over the Intellectual Property that makes up the Preliminary Specification and its derivative works. Our software developers will only look to the user community for its software development requirements. If the user communities vision of the industry requires that changes be made to enable x, then they will design x and implement x into the software through their own means, funded by People, Ideas & Objects. They are the ones who are powerful enough to make the changes and have them implemented. Therefore we won’t find ourselves in consecutive decades of producing chronic losses such as we are in the beginning stages of now.

That leaves the question “who are the users in the user community?” That’s a good question. And with the position that the bureaucrats are taking it will apparently not include any of the producers. Which of course if they did join the user community, that might be the key to their future success.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Computers Working For Us

There are many things about People, Ideas & Objects Preliminary Specification that the bureaucrats dislike. One of them is the way that we plan to implement the system when the time comes. Traditionally an ERP system is implemented in a controlled environment where the system has priorities over the needs of the users. When there is conflict between these two elements the systems requirements override the users needs. Very simple in theory and in practice. This enables the ERP system to be controlled and implemented in a manner that is consistent with the technological point of view that the system was developed under. This has become a science as opposed to an art and people have become familiar with the practice and know what to expect and how to behave in the process.

These failures in terms of implementation function throughout the industry and have provided the metaphorical cement that keeps producers from making any changes to the way that they operate. The structure and responsiveness of these producers are somewhat the same as a robot that has been programmed to conduct two tasks. Produce at capacity and increase capacity. Ask it to shut-in unprofitable production and it will just start smoking. There is no ability or capability within the organizations to do anything other than the prime directive. This was fine when oil and gas was scarce. Now with everyone booking 2 tcf annually of additional gas reserves the need for change is evident to everyone, and no one can make any change. The industry has an operating system where there are no programmers or system administrators to make the necessary changes to the program that operates the industry.

User based systems are the solution to this rigidity and inability to deal with the situation on the ground. By having the user define and build the software that identifies and supports the organization the people are instructing the computers what to do. Not the other way around. If a change is necessary in the business model of the profitable oil and gas producer then the users can implement that change and have the industry operating under that business model in short order. The People, Ideas & Objects software development capability, our user community and the service providers will be able to make these changes and improvements on a constant basis.

This is the capability that will exist within the industry from now until the end of time. That is as far as I'm concerned. People, Ideas & Objects are organized in our Revenue Model to generate revenues based on the changes to the system from the user community. We are oriented to change unlike the current systems that are oriented to a point in time installation. We have the user community as a permanent established resource available to make the changes to the software. Our users are the only people that our software developers will listen too. Our users are also the critical founding resources of the service providers who are the manner in which the producers have their administration and accounting provided to them. They are the ones who will know what is and isn’t working. What needs to change and how that change needs to be implemented. And as members of the user community they will be able to make those changes at any time in the future through the permanent software development capability provided by People, Ideas & Objects. That way oil and gas producers won’t find themselves working against their best interests for decades at a time.

Someone has programmed the industry in the fashion that it has. Its losing money and is failing spectacularly. And we the people are unable to do anything about this. I suggest a change where we organize ourselves in a manner where the computers work for us. After all it makes a lot more sense in the long run, doesn't it?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

What's In It For the Investor

We've seen the Information Technology industry have another good run lately. Particularly Apple with its ability to disintermediate industries and build value on the changes that they create. Recent talk of production of a car in 2020 is only the most recent news from the firm. I’m sure they won't be making the car, however the Chinese might be doing that for them. What they will do is figure out the software that better organizes the industry and brings value for their shareholders. Disintermediation, the same thing that we are doing here at People, Ideas & Objects to the oil and gas industry.

People, Ideas & Objects and myself will do well financially as a result of this disintermediation. The users and the service providers, who are essentially one in the same will also be doing fine as a result of these changes. Having control of their own destiny in terms of their service provider businesses. However the real winners are the investors who are willing to step up now and actively direct their producer firms to fund the development of the Preliminary Specification. Everybody but the bureaucracy wins.

In many ways this is the first opportunity for the investor class to participate in the Information Technology revolution. It is they who will be the ones who are the recipients of the earnings that the producers will be able to earn once the Preliminary Specifications decentralized production model is the business model that is used by the industry. Our value propositions present value is $5.7 trillion over the next 25 years. Those incremental revenues and subsequent earnings would flow to the investors if they had the foresight today to trigger the funding for People, Ideas & Objects Preliminary Specification.

Our system would also be used in an aggressive strategy of purchasing oil and gas assets from the soon to be bankrupt producer firms. As it seems that is where we need to be headed with the current bureaucracy. Having those newly acquired assets loaded onto the Preliminary Specification, and then in turn producing profits for their new owners. Changing what is a failing business asset into a jewel is how real money is made and that is the opportunity that is being presented here through our offering.

I was shocked to read in a Bloomberg article of the following losses being reported by some of the oil and gas investors. The article entitled “Biggest Winners and Losers of the Oil Price Crash.” Noted the following.

Oil losses and year over year profits for David Rubenstein’s Carlyle Group (down 65 percent; Rubenstein shown here), Leon Black’s Apollo (79 percent drop) and Henry Kravis’s KKR (down 94 percent). The private equity gang had invested heavily in the industry during the boom years. 

I’m afraid to say that I don't see things getting any better for these funds. The losses that are being realized by these investors are going to be recurring as the ability and capability of the current bureaucracy to change is non-existent. They will not, can not, absolutely will never change their business model. It is impossible for them to do so. It has been five years in the natural gas business and they are at record production and soon to be record inventories. In 1986, the last time they had oil price declines. They suffered through it with systemic losses for 15 years. Without any changes made to the business during either of these past two instances, what has changed and what will be the difference as a result of the current oil price declines? Nothing. A shifting of drilling targets and throughput will not make any material difference to any of the metrics of the industry. If anything it will only help to focus the producers on the task at hand. Increasing their daily deliverability.

Investors have one option to make the changes to their benefit in the oil and gas industry. And that is to fund People, Ideas & Objects Preliminary Specification and realize the value proposition from the decentralized production model.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

We're on Trend Here Too, Part II

As promised we have the McKinsey article that shows that People, Ideas & Objects is on trend in terms of the technological aspects that are occurring in the marketplace. Specifically the Preliminary Specification will see the movement of the administrative and accounting resources of the producers move from the producers themselves to the service providers. This will change the dynamic of the industry in fundamental ways. Making the administrative and accounting resources an industry wide capability that is variable based on production. What is also included in these resources is of course the IT resources of the producer firm. People, Ideas & Objects being a cloud computing solutions provider, these IT resources will also be handled by the service providers, which includes us. Additional IT resources will be held within the producer firm in order to manage the earth science and engineering applications. However, from an administration and accounting point of view these will be managed through People, Ideas & Objects, the user community and service providers.

To the McKinsey article. It seems like there is little love being dispersed to the IT people at most corporations today. The article speaks to a general dissatisfaction with the job that IT is doing in corporate America.

On the whole, executives’ current perceptions of IT performance are decidedly negative. Beyond providing basic services and managing infrastructure, just one-third or less of respondents say their IT functions are very or extremely effective at a wide range of tasks. Even within IT, the shares reporting effective performance are small (Exhibit 1). The results also indicate fading confidence in IT’s ability to support key business activities, such as driving growth. In the 2012 survey on business and tech­nology, 57 percent of executives said IT facilitated their companies’ ability to enter new markets. Now only 35 percent say IT facilitates market entry, and 41 percent report no effect.

From People, Ideas & Objects point of view IT is a critical element of a producers strategy. It is not enough to own the oil and gas assets, today you need to have access to the software that makes the oil and gas asset profitable. In a sophisticated world that we find ourselves in you can operate in the cave man style of hiring bureaucrats. Or you can employ software to identify and support advanced specialization and division of labor such as the Preliminary Specification does. This is the role of IT in an organization today.

What the bureaucrats are increasingly focused on is the upgrade to Windows 10 and the role out of a new network topology. IT hardware, software and services of the organization. In terms of implementing those components in a manner that will enhance the organization's profitability, there is no hope of them going beyond the Microsoft claims of the value of Windows 10 in your organization. What is increasingly disturbing is that the McKinsey article is saying that they need to involve themselves in strategy. And that they are also doing the job of supporting the technology poorly. McKinsey should be careful they may find more and more bureaucrats will be cancelling the subscription to their research.

What is needed is a new approach. The industry is failing. Chris Grisanti stated on Bloomberg that the last supply side pricing decline was 1986 and it was sustained for 15 years. I remember those days and it was not something that the industry wants to relive. If you think that producers will soon change their mode of operation check back in 15 years and see if they have. 15 years is what they went through with previous low oil prices without making any strategic or tactical changes. They are certainly well prepared to do it again. Who is going to stop them? Unless I'm mistaken and the sole purpose of the oil and gas business is to generate losses.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

We Are on Trend Here Too

I have two articles today that show that we are on trend in terms of the implementation of our technological infrastructure. The articles are from McKinsey and from Forbes. Both speak directly to the type of activity that we are applying here at People, Ideas & Objects to the oil and gas industry.

The first is the Forbes article which was published on January 27, 2015 and is quoting Mark Hurd who is the CEO of Oracle. As you are aware we are using Oracle as our infrastructure provider and recently made the decision to use their cloud based offering to support our development environment, and the hosting of our software to the oil and gas industry. Here is how they think the market will develop in the next few years.

He said that Cloud applications will account for 50 to 60 percent of the total enterprise application market within 5 to 6 years because of advantages related to speed of development of new functionality, easier implementations and much, much easier upgrades.

This is not a significant revelation to anyone and I think he might be underestimating the size of the marketplace changes in that short period of time. The important element of the discussion in the Forbes article comes later when he talks about the unique requirements of cloud computing and what kind of approach that requires companies to take.

Steve Miranda, the Executive VP of Development at Oracle, said that because of these advantages, “It is not a question of ‘if,’ it is a question of ‘when,’ all new applications (from all enterprise vendors) will be delivered in the Cloud.”

Miranda made the point that to fully leverage all the advantages inherent in the Cloud, applications need to be rebuilt from scratch rather than just hosting existing applications.  In particular, the Oracle applications were rebuilt to: first of all, support frequent updates, through the use of more metadata; and secondly, to reduce the need for customization by building out Platform as a Service (PaaS) capabilities that allow extensions to the SaaS-based Cloud applications to be built and thus allow for protected upgrades.

Industry and producers need to rewrite their applications in the coming years “from scratch” in order to realize the value of the coming new technologies. At least that is how I interpret those statements. And I agree with the statement. The current crop won't do for the future. What better way to do that application rewrite than with a value proposition who’s present value is in the $5.7 trillion range.

I like to keep these posts down to small bite sized format. Have each day with something tangible for my readers to digest. Therefore to add the McKinsey article here would violate that need. So I'll be putting that up in Part II tomorrow.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why is Our Budget so Large

In a world where there’s a $3.99 app for that. It seems odd that People, Ideas & Objects needs such a large budget in order to build the Preliminary Specification. Why not just an app on a phone and be done with it. If that were the case you would have the choice of 3 or 4 apps to choose from already. The difficulty is in the level of change that we introduce into the industry. The impact of that change and how it affects the people that work within the industry. The wholesale changes that we are making to the producer firm and the industry. And the need for these changes to be made in order for industry to function profitably in the future. This requires the level of commitment in terms of the financial resources detailed in our budget. However, this commitment is supported by the value proposition that is realized once we make these changes.

The change dynamic that we introduce is that the Preliminary Specification identifies and supports the industry standard Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. When we do this within our system, everything within the industry is affected by this change. Not one element of the producer or the industry is unaffected by moving from the current corporate model to the Joint Operating Committee. It therefore invokes the need for a complete review of all aspects, the interactions and systems that are used by the producer firm, service and oil & gas industries. People, Ideas & Objects becomes an operating system for the industry. That is a very appropriate description of what the Preliminary Specification does.

At the same time we are only moving the compliance and governance frameworks of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee. This is the paperwork that consumes the bureaucracies time and energy today. Once we have attained this alignment within the People, Ideas & Objects software the producer and the industry will realize a speed, innovativeness, accountability and profitability over the current situation. It is those frameworks of the Joint Operating Committee that are the foundation of the industry and it those frameworks that none of the current ERP systems identify or support. It is the result of our research that we were able to determine “what” and “how” a producer and industry would operate, that People, Ideas & Objects can bring you this offering. This is the cornerstone of our Intellectual Property and available only here.

Others may be able to determine other ways in which to organize the producer firm and the oil and gas industry. If so they can spend the time and energy that I have spent in developing People, Ideas & Objects Preliminary Specification. This multi-decade investment will pay off when the industry funds the initial development costs through Intellectual Property royalties to myself, and corporate profits for the firm. These are the costs of business in the 21st century. These Intellectual Property costs are also contrary to what the industry has been willing to pay for in the past. However, they have a choice, to continue on with their losing ways or realize the value proposition that we offer by funding our budget.

Therefore it is change on a wholesale level throughout the industry and Intellectual Property which are the real costs that make our budget the high cost that it is. There is nothing that can be done about either element of these budget categories and I'm sure it will cause much discussion and pain for the bureaucrats to ever have to fund this. In the mean time we can just keep score with the amount of money they are losing, the loss in their market capitalization and their loss of hope for the future. Its important to remember that bureaucracies never change. It is impossible for them to do so. That is why we are appealing to the oil and gas investor to direct their producers to fund People, Ideas & Objects so that they can remove the bureaucracy and replace it with the Preliminary Specification, our user community and service providers.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Some Issues Past and Present

Over the past number of weeks I have suggested that the volume of discussion regarding the profitability situation in oil and gas is rather poor. That there is very little in terms of the issue and certainly no one is discussing any solutions to the problem other than idling rigs. Which of course did a world of good and has ceased the decline in natural gas prices over the past five years. One thing you should note about this lack of discussion. Is that the bureaucracy has not offered any criticism of People, Ideas & Objects Preliminary Specification. You would think that a system that was unable to solve a problem or be unable to function would be riddled with holes from the criticisms of those that were challenged by that system. It would seem to me that there is no discussion as there is no criticism of the People, Ideas & Objects Preliminary Specification that they can offer. I wonder why that is?

One thing that can be stated for certain is that I have been at this for a long time. It’ll be 24 years in May 2015. Each of these years has been a great adventure. The turning point for me to start this firm was in May of 1991 I was doing an audit at Imperial Oil and suddenly I saw an opportunity that was so obvious, so possible and so complete that I had to take the chance to make that opportunity real. It really has been an attempt by myself to communicate that vision of what I saw in May of 1991 and make it real.

Another turning point came when I had to find a topic for my thesis for my MBA. Thinking that it would have to have something to do with this business I thought hard about what it was that was so different in that vision of 1991 that is different from today’s industry. And it was the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. I therefore wrote my thesis on that basis and set up the hypothesis for a long term research project. If the Joint Operating Committee was the key organizational construct of the dynamic, innovative and profitable oil and gas producer. “What” would it look like, “how” would it function, and “how” and “what” would the industry operate? That was May 2004 and this research could be done in a couple of quick sprints and that would be that.

The final edited version of the Preliminary Specification was published on December 20, 2013. That was only eight years and seven months. So a quick sprint is the equivalent of four years and three and one half months. The key was we now had a product. One that solved the administrative, accounting and operational issues and opportunities of the industry now and for the future. One that provides the industry with a dynamic, innovative and profitable footing for its long term health, and for society and individuals too. What was personally so difficult was the work was hard. The hardest work I could have ever imagined. A million things didn't work. And what made it harder was the fact that I was run out of town when I published the May 2004 Preliminary Research Report which was my master’s thesis. This told the bureaucracy I was gunning for them and they fired the first of many shots from then on. So although I don't pretend to hide my dislike of the bureaucracy here, it is personal. This could have been a lot easier.

The bureaucrats might be concerned that I will quit my pursuit of this project. Why when we’re just a few quick sprints away from completion. Compared to the early days, life is just a breeze. There was so much missing in 1991, like the Internet and the Information Technologies that we are using now. Fully mature technologies that weren't even thought of back then. This vision from 1991 only became technically practical in the past five years or sooner! The issue for the bureaucrats is that the only impediment to our future is them. And we have overcome much larger difficulties in these past 24 years.

Nonetheless our friends the bureaucrats have destroyed the business so fundamentally it makes this work more valuable. Did I ever mention that we have a value proposition in the trillions of dollars. Run it yourself. Take the present value at current rates of an annuity of $350 billion and you come up with around $5.7 trillion that industry can earn by using the Preliminary Specification through to 2040. But don't tell the bureaucracy, that will only upset them.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Scaling Up and Down a Producers Productive Capabilities

There are few solutions being discussed in the oil and gas industry regarding the commodity prices. This week we have had a look at what the shale based reserves unique characteristics are. And spoke about the motivation of the producer to involve themselves in increasing their levels of shale based reserves. When shale based wells are drilled the producer is rewarded with substantial reserves to increase the value of their firm for their shareholders. The downside is the commodity markets continue to be flooded with more production that collapses the prices producers receive on those reserves. The motivation to increase their reserves will continue to persuade producers to keep drilling no matter what the commodity prices are. What is needed is a method of production allocation of those reserves to ensure that only those properties that can be produced profitably are put on production. That way commodity prices will find their marginal cost and lead to a healthier industry.

With People, Ideas & Objects Preliminary Specification high levels of drilling activity will be undertaken. When producers shut-in production they will have an inventory of shut-in properties in which to focus their innovative energies to bring their costs down, increase their underlying reserves or increase their production throughput. Then when they achieve one of those objectives they will be able to return the property to profitable production and increase their daily deliverability. This is how a producer needs to operate. And with the decentralized production model the producer will be profitable at any level of their capacity. Whether they are at 50%, 80% or 100% of their capacity, as long as they hold to the principle of only producing profitable properties they will have a profitable operation. Unlike today where at 100% capacity, all producers are creating massive, systemic and terminal losses with a business model that has ceased to function.

The People, Ideas & Objects Preliminary Specifications decentralized production model functions in a manner that is consistent with the characteristics of the shale based reserves. If shale exists in the marketplace, with its unique dynamics, a new business model must provide a means for the producers to use. The decentralized production model gives the producers this business model by reorganizing the producer firm and the industry resources in a way that enables the producer to operate profitably at less than 100% capacity. By reducing the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remaining and quite sizable administrative and accounting resources are reallocated to service providers who focus on one individual process and have the entire industry as their client base. They then bill for their services, based on activity, to the individual Joint Operating Committee. Making the administrative and accounting resources an industry wide capability that is a variable cost to each Joint Operating Committee.

As a producer operates their properties based on the profitability of the production. Those that are located in the shut-in inventory are not billed anything from the service providers for any administrative or accounting costs. Since those properties are idle they are not creating the work for the service providers and as a result, no work and no billing is generated for any of the service providers for that month the property is shut-in. The property will record a null operation, no profits but also no losses. Only the costs of capital involved in bringing the property from the shut-in inventory back into production will be incurred. This relieves the burden of what producers are doing today by producing at capacity. Producing profitable properties and unprofitable properties which wipe out the profits of the firm.

The ability to scale up and down the producers level of capacity at anytime based on the commodity prices is something that will be necessary for every producer to assess each month on each property. If the commodity prices are unable to support the property, then it should be shut-in the following month until either prices recover, or the property has some innovation that brings it back to profitability. And when we calculate the properties costs in the Preliminary Specification it will be the actual costs. Not an estimate based on what an analyst thinks the margin is in the general area of operations. It will be the actual revenues, less royalties, less operations and include the administrative and accounting costs. The full costs of the property in terms of what it costs to produce. A fundamental shift from what is done today. Ask a producer what the specific costs are for a property down to the actual administrative and accounting costs and you'll get a deer in the headlights kind of stare back. Not one producer anywhere in the industry can answer that question. And that is kind of sad, isn't it? I'm sure they'll respond to you saying that their administrative and accounting costs are not that significant. And you can ask them what the “total” G&A that was capitalized last year. Then that deer just can’t jump out of the way fast enough.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why Don't Bureaucrats Do Something?

As an investor in the oil and gas industry. I would be concerned with the level of discussion occurring in the marketplace. That there is generally little to nothing being discussed anywhere regarding the business of oil and gas. There are a lot of talking heads that impart their understanding of what is going on. And it is clear from their recommendations and analysis that they have no clue how the oil and gas industry operates. They seem to be chirping what they heard some other analyst heard from another analyst. What is disappointing about this discussion from an investor point of view is that now is the time in which the bureaucrats have to be on their best behavior. Leading up to the annual report and annual general meeting season is the time when the investors do have some influence over the bureaucrats in terms of what is going to happen in the future. Once the annual general meeting is over. The bureaucrats can implement operating procedure number one and ignore anything from the outside. That is until about this time next year.

Since there is no discussion about the situation in oil and gas there is not going to be any changes made in the producer firms as a result of the losses that are being incurred from the low oil and gas prices. A continuation of the status quo will be the end result and maybe some wholesale layoffs will be announced just to make it look good for the historical record. A sad state of affairs in my opinion. What is needed is change in the business model of the producers or we'll see more of these losses and eventually, what I think will happen, the moving on of the bureaucracy to greener pasture in other industries, or wholesale volumes of retirements. When was the last time a bureaucrat stuck around to take a licken and push through the pain of the destruction they caused?

The effect that this leaves People, Ideas & Objects in terms of funding its budget is that it is “sol” for another year or more. The ability to foresee our project being pushed through by the bureaucracy doesn’t exist. It has to be done by someone with a vested interest. The investors are the only ones with that interest as they are being sacrificed in this environment. They are the ones whose heads are on the line. I don't expect them to put their own money into People, Ideas & Objects but to have them influence their producer firms to fund us. This can only happen when they have some influence over the bureaucracy. And that time is generally late January to late April. However there has to be a level of discussion ongoing in the marketplace about the scope of the problem and the need for a new solution before we can hope to be funded. And we are no where near that level of discussion that there is even an issue in the marketplace! Its a dead zone. Everybody must have so much money that no one ever has to care anymore.

Of course I've been in this situation before. And when the s*$% does hit the fan is when people turn to me and say “lets see what you've got.” Expecting me to roll a fully tested industry wide ERP system that is ready to go. I've made it clear that the budget needs to be funded. And that budget will go to the development of the system, user community and service providers. With the scope of that budget it is fair to impute that it will take some time in order to implement these plans and build these requirements. We do have several years of hard work ahead of us. Of course we all understand this. This is business. All businesses have budgets and plans and proceed on that basis. Businesses also have revenues to ensure that those plans are enabled. People, Ideas & Objects have never had the support of the bureaucrats. They see the end of their franchise in the Preliminary Specification, therefore we have never had revenues. So don't ask me what I’ve got expecting me to have much more than what is on display.

Then I'm sure we'll be funded in an appropriate time frame that provides us with the opportunity to solve the industry issues in a timely fashion. I'm just not certain that this is the year or the time. I could be wrong, but there doesn't seem to be anyone too worried about the state of affairs in the oil and gas business these days. Its like the bureaucrats don't care! Which is interesting don't you think? If the apocalypse does occur, they’ll just leave, but to do something productive to stop that from happening is beyond their scope of interest.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.