The Issue

The issue in oil and gas is that it is unprofitable. There have been changes in the industry in the past decades that remain unaddressed by the current bureaucracy who operate the industry. These changes, which include the move away from the scarcity of the resource base, to an abundance of the commodities in North America. Require new business models in which the oil and gas industry can operate. The bureaucracy will have none of it, and refuse to make any changes to their existing business model. They are fine with the status quo, as the structure of the industry serves their personal interests. Outside of the personal interests of the bureaucracy, no value is realized by anyone. Profits are the source of an industry's health. Other than paper profits that are derived by never recognizing the capital costs incurred in the exploration and production process. The industry is as unprofitable as an industry could conceivably be. Surviving on other people’s money for the past decade. A never ending downward slide in the quality of the capital that has been sourced by the industry has occurred since 2008. Relying mostly on junk bonds these past few years, this avenue may too be closed to them as the junk bond markets fall into distress as a result of the quality of their investments in oil and gas.

As a result of this lack of profitability governments are short changed on their tax base, investors realize no share in earnings and no upside in their investments, staff are cut and the service sector has their revenues slashed or are faced with cannibalizing their assets. Only the bureaucrats are happy. The changes that are occurring in the industry as a result of the shale discoveries are what makes all the difficulties ever present. The over production as a result of the shale discoveries will continue for as long as there are shale reserves. In natural gas that is best measured in centuries. At the same time the costs of these reserves are amongst the highest of any form of oil and gas resource. High costs, low prices and overproduction would lead most people to adjust their business model. The self interested bureaucrats have no motivation or desire to make any changes. They are fine, thank you.

We discussed the difficulties that the industry was having and how the bureaucrats needed to make the changes by adopting People, Ideas & Objects Preliminary Specification. It contains the decentralized production model that enables the “price maker” strategy for the oil and gas industry. Producers will suspend production that can not be produced profitably. A simple idea but one that can not be implemented in the current bureaucrats business model. What is needed is the budget to build the Preliminary Specification and for development of the user community. And at the same time have our service providers develop alongside of these. This change would solve the problems, for that there is consensus. There is consensus that this change will eliminate the need and the desire for the bureaucracy as well. Hence why no money has been forwarded to People, Ideas & Objects.

Information Technology is providing the means for many changes in many industries. The disintermediation of many industries has occurred, is ongoing and eventually will affect all industries. Oil and gas is not immune. However, I would suggest that the oil and gas instance is acute as a result of the unaddressed changes that have recently shaped the industry. It is a financial basket case. It will not survive for long in the manner that it is being operated. It is also the most important industry in terms of our advanced societies survival. A robust and healthy, or profitable oil and gas industry is necessary for the continuation of our species.

If we secured our budget today, we have many years of work ahead of us. Don't expect “instant” miracles from us. We have a significant undertaking to accomplish and that takes time. More time than the industry has money? Probably. It will be a difficult transition.

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. 

User Community Business Opportunity Part III

Members of the user community are business professionals in the oil and gas industry. Operating primarily in the domains of administration and accounting. You and your team from the service provider that you own and operate will provide the oil and gas industry with the management of their process that is your exclusive domain. Although there is no direct competition for the process you manage. There is significant indirect competition from all of the other members of the user community and the service providers that they own and control. The competition comes in the form of the means of automation, the manner in which work is divided between computers and people, how the division of labor is implemented in the service provider and the level of specialization they are able to achieve in the processes they manage. This is the competitive environment that you will compete in. You won't be faced with someone who shows up one day, taking your ideas, and establishing a similar service at half the price. The “me to” types of competitors are unable to provide any value or profitability to the oil and gas producers. Their focus is on the cost of the service and the oil and gas producers will not become more competitive based on the lower costs of the user community and service providers.

The simple fact that we won't license anyone to operate in your domain or in the process that you manage is the way that you can be assured that your focus remains on the competition at the higher level attributes that I mentioned. And without a license the people that may want to infringe on your territory will be unable to access the software needed to manage the process on behalf of the oil and gas producers. With the decentralized production model, the industry configuration of the user community and service providers enables the price maker strategy for the producers. This is the source of the majority of the value that is earned by the producers. There is also significant potential value to be earned through the user community and service providers applying their toolkit of a software development capability, further automation of the process, specialization and the division of labor. To have this focus distracted by having to compete in the short term on the price of the service, because someone wandered into your domain, can't, won't and will not happen with the licensing of the Intellectual Property that is the basis of this community.

One of the things that we are doing by establishing this community is we are in essence setting up a sub-industry. A sub-industry that resides between the technological industry and the oil and gas industry itself. Specialization and the division of labor evolve by way of filling gaps. There is a gap between the technology firms and the oil and gas producers. They don't speak each others language or understand one another's needs. SAP thinks producers should get closer to their customers. After 38 years in oil and gas I don't think I've ever met a customer of an oil and gas producer. Its this type of disconnect that we are resolving by establishing People, Ideas & Objects, our software development capability, the user community and service providers to fill the gap between oil and gas producers with the technological firms. We are focused on providing the oil and gas producers with the most profitable means of oil and gas operations. Which means we are business professionals first and foremost.

There is therefore a secondary requirement that the user community and service providers need to have as part of their toolkit. They need to understand the technologies that they are using at a very high level. It is highly probable that the user community participant will be, at times, entering the code base to make changes. This probably won’t go beyond XML however, to edit XML you need to understand the rest. Now nothing will immediately be changed as a result of the user community participants code changes. All changes by everyone will have to be processed by a committer on the People, Ideas & Objects software development team. There will be a process in place. In order to have this capability, of editing XML, the user community participant is going to have to know XML, Java and relational theory as well as most of the people who work in the technologically based companies. Oracle is a big part of our solution and they own most of these technologies. Therefore to collaborate with them is a necessary part of your role as well. To relay what the business needs are in the technology.

That is why we have asked that the user community participant have the background in technology that we are asking. If you don't have the understanding of those technologies there is time at this point to get them. Many universities offer courses in these areas and I highly recommend that people take the time to learn these technologies. I think know it will be a necessity when we get to where we're going.

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. 

User Community Business Opportunity Part II

People who are interested in becoming participants in our user community need to assess the risks that we described in yesterday’s post. Those risks include the high probability that People, Ideas & Objects may not obtain its funding. In order to assess this probability a potential user should make an assessment of the situation in oil and gas today. Are the producers earning the profits that they report? And is the situation of chronic and systemic overproduction sustainable? What will be the outcome of a continuation down this road? The people who may be interested in the Preliminary Specification as an alternative need to read the document to determine whether it is a viable solution. And if it is, assess if it is the means in which to resolve the industries difficulties. Are the calculations of the value proposition between the two different business models as stark as the $45.7 trillion reflects?

This is a difficult assessment that needs to be made by each potential participant in the user community. I am putting out a vision of the industry based on what I think the issues are and how I think they should be solved. I expect that people who are going to participate in this software development, the user community and service provider, need to fully understand what it is we are doing and how we are going to do it. Organizing this will need to have many people on the ground knowing where to turn and how to get to the final destination. There won't be much hand holding, if at all. We will need people who are fully apprised of the direction we are moving and believing that what we are doing is in the best interests of society, the industry, producers, the Joint Operating Committees, the service industry and the people who are involved in oil and gas. Being fully informed and having an opinion as to our future is necessary for each of us to move forward.

This is not your traditional software development. Usually the decision is made to implement SAP, the “experts” come in and spend a few months talking nothing but acronyms, and then someone says we'll need some users. Its at that point the budget is breached and the software is turned on and the user is expected to figure out the new applications in isolation. At People, Ideas & Objects we are spending as much time as we need to develop this user community. Providing them with a comprehensive vision of how the industry should operate through the Preliminary Specification. Empowering them through the licensing of the Intellectual Property throughout the lifecycle of the applications. And ensuring that they are the ones that remain in control of the business models and critical aspects of the applications. This is very different software for a very different industry structure with a very different outcome. Providing the oil and gas producer with the most profitable means of oil and gas operations.

Until we are granted the funds we need to develop this software and support the user community. It is important that we continue to keep those that are interested in the user community as confidential and secure as possible. The bureaucrats would love nothing more than to punish people for their participation here. So they're always on the look out for anyone who would be so unwise as to volunteer their name. It will not be me who speaks their name in any way and for that you can be sure.

People have complained about the onerous process of making application to become a user community participant. Yes it is onerous. That is due to the significance of the role you will be taking in the process of changing the industry. The quality of people that we are looking for. And the difficulty in organizing these developments and the need for this information to help in the logistics of this development. The more we know about you the better we are able to make the appropriate assessments and the better we can place you in the appropriate areas. I know these take time, but time is what we have while we wait for the frustration level of the investors, or whoever will fund us, and give up on the bureaucrats. Contrary to what we are used to doing in oil and gas today, we are focusing on the long term solutions for the 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. 

User Community Business Opportunity Part I

Our user community preparation continues. We cannot begin development of the Preliminary Specification until we have the user community in place. Since the majority of the participants in the user community will be working part-time throughout our development. And will only commit full time to this project when the need for the service providers begin. Much can and needs to be done before we even get to any of those points. People, Ideas & Objects do not have their budget secured. Nor is the probability high at this point that we will have it secured. This project has a high risk of it forming. Nonetheless the organization of the user community can begin and involve nothing more than putting in place some of the pieces that will be needed when and if the time does come.

People, Ideas & Objects are relying on the user community to be the source of the quality of the software that we develop. We are looking for individual participation in the user community. Those people with the skills, experience, knowledge, ideas and understanding of the oil and gas industry from a hands on point of view. We will not be turning to the Accenture’s, KPMG or Deloitte & Touche’s of the business world to source our users. Our expertise must be derived from the people on the ground. This is a different approach to the way that applications have been developed in oil and gas before. We are building this community to include approximately 3,000 users in order to obtain the broad scope of the Preliminary Specification and achieve the diversity of understanding contained within the industry. Nothing of this size has been approached before.

The user holds a unique role in the ecosystem that will be developed for this software. Working with our developers to determine the wants and needs of the industry and then designing and implementing those within the application. We have budgeted one third of our overall costs to go to the user community. This community is a permanent fixture within the industry and will continue to develop new applications and prepare changes to the existing base. During any year we expect to incur approximately 600 man years of the user communities time in the development of applications. Therefore it would be reasonable to assume that this would average approximately one day each week in terms of time commitment during development from each user community participant.

The remainder of the time the user community participant is going to be active operating the service provider that they own. This will be closely tied to the area of expertise that they have within the People, Ideas & Objects application and the specific process that they have developed. They will provide the producers and Joint Operating Committees within the industry with the software from People, Ideas & Objects and the necessary services to support the process they specialize in. Each service provider will be responsible for a single process or subprocess in the application and will use the entire industry as their client base. This is a fundamentally different approach to the business of oil and gas. Since most of these processes will fall under the administrative and accounting domains, the people that are currently employed in the producers that are conducting those activities will be moved from the producers to being employed by the service providers. The payments made by the producers in terms of payroll and benefits to their former administrative and accounting personnel will now form the revenue base of the service providers.

The user community will be designing the Preliminary Specification processes on the basis of this industry configuration. The use of automation, specialization and the division of labor will be the competitive advantages of each of the service providers. Licenses for the service providers will not overlap from one process to another. Each firm will have the exclusive domain of the process they are licensed for. Some exceptions will apply particularly in the production, revenue and royalty accounting areas. It is this design that will be fundamentally different than what exists today. You may manage a simple process and the volumes of data that you deal with will be large. However that does not make the process management easier. I expect that the level of understanding and sophistication regarding each process will explode in terms of innovation and value add for the producers and Joint Operating Committees. And of course, we do all of this in order to make the decentralized production model the effective business model in the 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. 

500,000 Barrels of Oil Per Day

That’s one half of one million barrels of oil per day. The increase in production of the United States since the decline in oil prices began late last year. I have stated here many times that these bureaucrats can't, won't and will not ever change. And they only prove me right as time goes by. In terms of natural gas production it continues to increase even though prices collapsed five years ago. Shale gas production alone is up over 30 BCF per day since 2010 and the current U.S. production is 72 BCF per day in total. See any trends here? Shale is making oil and gas a business where there is an abundance of supply. However that supply is very expensive and very unprofitable. This new shale environment contrasts the manner in which the existing producers were developed. Then it was an era of low costs and scarcity of the resource. Have you ever seen a Leopard change their spots? Well you won't, and you certainly won't see a producer transform themselves from scarcity to an abundance business model with the current bureaucracy in place. You have to remove and replace them with a new business model that deals with the shale reservoirs. A business model like that of the decentralized production model of the Preliminary Specification.

A little off topic but relevant to the point of the bureaucracies. Does Fed Chairman Janet Yellen remind you of the 1984 analogy in the Apple Super Bowl ad. Droning on and never saying anything pertinent or of value. I have to ask, when is the women going to run into the theater and smash that screen with her hammer. As bad as her performance as Fed Chairman has been is the response of the business community in general. When did we hold a government employee as the key focus of our decisions. Somebody please smash the screen and break this mind numbing nothingness. Its difficult to see the producers lined up in rows in the theater watching Janet Yellen beak off about nothing. But how exactly did we start listening to economists again? It was September 2008 when they were saying the world economy was fine and all was well. That was the time they destroyed their credibility with me and I have ceased to listen to them. It is a dismal science.

If you think that bureaucrats will change and the business will become their focus again there is nothing I can do to convince you otherwise. There is more than enough evidence for everyone and anyone to determine that the oil and gas business is being fundamentally destroyed by the current bureaucrats. They have no plans, ideas or desire to fix what ails the industry. The only inspired activity they have shown in the last ten years is to engage me in battle. Other than that it is a self interested group who are doing nothing but ensuring that they are compensated well, their cabins continue developing, their pensions are vested and they have an escape plan for when it all does fall apart. In terms of the value generated for society little is being produced by the oil and gas industry outside of this and the value that the commodities provide the consumer.

It will be the individual actions of you the potential user community participant that breaks this monotony of destruction in the oil and gas industry. There has to be a group of people with the power and capabilities to make the changes in the industry to eliminate this 1984 scenario. The user community participant has the power to effect change in the industry. Using the tools of the Intellectual Property that is derived from the Preliminary Specification and the software development capabilities of People, Ideas & Objects. As well as your key role in the ownership and development of the service providers who will deliver the software and services to the producers and Joint Operating Committees. It is you the user who can make the industry dynamic, innovative and profitable again. Your participation is needed. If I haven't convinced you yet, pull up YouTube and search for Janet Yellen. Force yourself to watch a half hour of any of her speeches and then read this again. The only thing that I can guarantee you is that the bureaucrats won't, can't and will not change. And production will be up another 500,000 barrels by this time next year.

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. 

Not a Technologically Focused Solution

Its a difficult thing to state as the head of a software development firm. That we are not a technologically focused solution. There are many of those solutions in the marketplace and the bureaucrats are pleased to be working with those providers, and losing money doing so. We are living in exciting times from an Information Technology point of view. It is the beginning of the Information Technology revolution that we are experiencing in this day and age. There have been many attempts to implement these technologies into the marketplace of oil and gas producers. Most have failed due to a focus on the elements of some technological breakthrough that was going to solve the producers difficulties. All these other applications were attempting to make it so, however the technologies were too immature to undertake the load that they needed to carry. And technology is not part of the solution.

If we are not a technology focused software company then what exactly are we doing in business. People, Ideas & Objects have always focused on the producer firm and most particularly the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. If you read the Preliminary Specification we have included some discussion of the specific Oracle applications we will use to support our modules. This is to give the reader a better understanding of the overall technological architecture of our product. But the Preliminary Specification deals specifically with the issues and opportunities of the Joint Operating Committee and producer. It details the “what if” we did use the Joint Operating Committee as the key organizational construct of the producer. “How” and “What” would the producer, Joint Operating Committee and industry operate? This question is answered in the Preliminary Specification. It is about the ways and means of how people will work in the business and in the industry. It is not about technology.

The second aspect that proves our claim that we are not a technologically focused solution is that our primary focus is, and always will be on the user, or as we call them the user community participant. They are the ones that we have endowed with the power and control over the Intellectual Property that makes up the Preliminary Specification. Anyone who wants or needs to make a change in the software that runs the industry, there is only one group in which they need to see, the user community. Our developers will respond to the user community only. We are deaf, dumb and blind to all others. This commitment to being user community focused runs throughout People, Ideas & Objects. Review of our Revenue Model will show you that the ability and capability of this focus will continue. Our capital structure will not be compromised or redirected away from the user community focus. A difficult requirement which affects our development budget and the manner in which we are structured. This renders the shares of People, Ideas & Objects of little value as they will not be sold. And therefore my compensation comes about as a result of the Intellectual Property royalties that I earn. It is in our genetic code that the capital structure will not circumvent or reprioritize our direction away from the user community focus.

We provide the oil and gas producer with the most profitable means of oil and gas operations. That is the guiding principle of People, Ideas & Objects, our user community participant and the service providers who are involved in the community. This is what we sharpen our pencils for. The industry has to become dynamic, innovative and profitable. In order to do that it must be able to change the organizational methods it operates under. That requires that the industry acquire a software development capability consistent with what People, Ideas & Objects are providing. Our user community and service providers are a big part of that technological offering. However, they are also the other half of the equation. They are the service oriented part of the necessary solution to the success of our software. Technology is not going to resolve these problems. Its going to be the people who have the Information Technologies that are made available to them. And that is what I have done with People, Ideas & Objects. I have secured the Intellectual Property necessary for this ecosystem to operate. I have endowed the user community with the power and control of that Intellectual Property. We are now developing the user community, and as soon as our budget is secured, we will develop the software development capabilities to fulfill our value proposition to the 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. 

Commodity Prices

It’s been a bad week for oil and gas prices. It would seem to me that the bureaucrats who used the recent strength in these commodity prices, when in March they moved from $50 to $60 in May. While at the same time they were trying to convince their shareholders that all would be well “next year” at their annual general meetings. Selling this impossible scenario as the theme to cover for their poor performance of 2014. We have also recently learned that those “earnings” that were sold to the investors in the 2014 annual reports, were supported handsomely by $90 hedges. Now not only are the prices going down, again, and substantially, but the producers hedges have been expiring and they are fully exposed. There must be something about chronic overproduction of commodities that prices just fail to appreciate.

Its not that I feel any great enjoyment at the misery that is being experienced in the oil and gas marketplace today. People are getting laid off in the producers, service industry and elsewhere. Investors are losing significant money, and as we have documented in this blog, they are losing far more than what the producers are reporting. It didn’t have to be this way but bureaucrats will be bureaucrats. Natural gas prices have been declining for over five years. Plenty of time for the Preliminary Specification to have been developed. Its just that for that niggling fact that the Preliminary Specification does eliminate the calcified bureaucracy as the only reason that it hasn’t been developed.

The fact is though that low commodity prices are the greatest gift that I could ever ask for. I can now say that I got lucky. It provides the justification to go through the changes to make the Preliminary Specification the manner in which the industry operates. Our value proposition is the reason why and secondly, these bureaucrats will never change. They can't and won’t. We have seen a level of disintermediation in other industries such as the makers of cellular phones. This past week Microsoft says for all intents and purposes they are out of the smartphone business. Nokia, which they bought were the dominant brand less than ten years ago. Its not just these industries that have been disintermediated. Look at all the industries that are now being lined up to have the process undertaken by some upstart. Uber, AirBnb and Lyft are what are now called Unicorns. Private companies that are able to raise money on the basis of billion dollar valuations. Something that has never been seen before. And there are now over 100 of these beasts.

Oil and gas is being disintermediated by People, Ideas & Objects Preliminary Specification. We are developing the software, the user community and service providers that will remove and replace the bureaucracy from its comfortable position in oil and gas today. We will be changing the organizational structure of the industry to one in which the producer firm can compete based on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. We are using the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. It is the legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the industry. When we align the seven frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. We achieve a speed, accountability, innovativeness and profitability in our producer organizations. We also enable the decentralized production model that provides the individual producer with the price maker strategy needed in today’s shale enabled oil and gas business.

Key to this transition is the user community that we are in development of. It is these people who will be the critical resource that makes the Preliminary Specification the software that it can be. Software that isn't defined, designed and developed by the user is useless. And that is why we have endowed our user community with the power to effect the changes necessary in the oil and gas industry.

We can continue on in the losing ways of today's oil and gas industry. I’m sure we can all assume what will be said by the bureaucrats next annual report season, or even the next ten after that. They are on record that the business was going to improve and they had it under control. Well it doesn't look so to me. To learn what is really happening map the last five years of natural gas prices as being what the future holds for oil prices. That’s what is going to happen until People, Ideas & Objects budget is funded and we are able to bring this solution to the marketplace. With our value proposition creating upwards of $45.7 trillion in incremental value over the next 25 years, I would think that it's time.

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 Not the Government's?

Many people have suggested that the various governments in North America. That are in oil and gas regions have a net benefit as a result of People, Ideas & Objects value proposition. Which is correct in terms of both royalties and taxes. There would be much to be gained in terms of these government's getting behind People, Ideas & Objects and funding some of our budget. It would be reasonable to assume that at least one third of the value that we generate would be redirected by producers to the various governments in the form of additional royalties. And the taxes that would be paid by the producers, based on the most profitable means of oil and gas operations, we can only assume it would be significant as well.

The problem with the idea of taking money from the government in order to fund our developments is that I will never accept it. There is nothing wrong with the money per se, other than the fact that we provide oil and gas producers with the most profitable means of oil and gas operations. And we are serious about that. Royalties and taxes are two of the highest individual costs that a producer incurs. The ability and the capability to reduce these costs to the lowest possible level at all times will be People, Ideas & Objects, the user community and service providers focus. We therefore can’t be conflicted by the fact that governments were, and are potentially continuing to fund our development needs. I feel it would be a conflict of interest for us to take their money.

I have mentioned a number of times that I had an audit firm before I started down this software development avenue in 1991. It was good work. Most importantly, I guess, I was good at it. My key client was the Alberta Government and I conducted audits on the natural gas producers in the province of Alberta. Confirming their royalty submissions to ensure that they were consistent with the regulations. I was assigned to work on Amoco and Imperial Oil (Exxon's) submissions which were the two biggest producers at the time. We all know Imperial’s love for meetings and their point of view about their bottom line. It was during this time I learned that there was many different ways of looking at the situation. I say that jokingly in that I learned the methodology of looking at things from the Imperial point of view.

Now there are regulations, acts and bureaucrats who offer opinions on what is what and that is how the world turns. And if you accept that as fixed then you are not doing your job. On behalf of the oil and gas industry I do not accept that the regulations, acts and bureaucrats opinions are fixed in terms of royalties and taxes. There can never be a point where they are fixed. The creative process of exploration and production demands that this posture be taken in terms of how these costs, the highest costs of the producer, are handled.

Based on my experience the differences are significant. I am no longer subject to any confidentiality agreements regarding any of the producers that I audited so I am able to state anything and everything at this time. I don’t need to go into details but Imperial did not spend much on natural gas royalties. Sure they were the largest producer, and it seemed to me that they made sure they employed and deployed each molecule of natural gas within their operation four to five times before they sold it or ultimately consumed it. Figure that one out. Attaching the royalty only on the net, net, net, net sales of the firm. Receiving massive royalty deductions for their natural gas used in their heavy oil operations by deeming the source of the fuel from their own natural gas production. The point of this is that it makes a substantial difference. And one that we could not guarantee that we were undertaking on behalf of the producers if we were also receiving some of our funding from the governments that took those royalty dollars from the producers.

We will implement a capability that will replicate the “Imperial way” within the People, Ideas & Objects software development team, user community and service providers. One where our service providers who are managing a royalty or production related process can apply the regulations and acts in the best interests of the producers. But also look at the business from the point of view as to what the producer is doing and why the governments should be supportive of these activities. Negotiating and communicating with them to initiate better policies and procedures to ensure that the oil and gas industry develops in the appropriate manner and that we provide the oil and gas producers with the most profitable means of oil and gas operations.

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. 

The User Community Participant and Service Provider Business Opportunity

We discussed the ability of the U.S. to become the swing producer in both oil and natural gas. How this is the appropriate strategic position for the country to take and how that would operate with the decentralized production model and price maker strategy of the Preliminary Specification. These changes require a new and substantially different organizational structure. Key to this structure is the ability to turn all of the costs of the producer, including their overhead, into variable costs. This is done through the use of the user community and service providers. Today I want to discuss in more detail what that situation would look like and how people would interact with producers when they operate in the user community and as a service provider.

It is the user community participant who will have worked with our developers to design and determine the needs of the oil and gas producers and Joint Operating Committees in terms of their data and process management needs. Going through the lengthy process of considering what those needs are and creatively developing and designing the specific solutions. This community has been estimated and budgeted at almost 3,000 part time participants with 600 full time resources per year being utilized by our developers. It is these user community participants who will be the principals who have organized the service providers. These service providers will then take the area that they have specialized in their software development with us and begin the task of creating the service that supports People, Ideas & Objects and provide the software and services to the Joint Operating Committees and the oil and gas producers. It is in these service providers that the current administrative and accounting resources of the industry will be reallocated to. There they will work for the user community participant who will also continue to work part time on an ongoing basis with the People, Ideas & Objects developers to continuously improve the applications and services that they provide.

The reallocation of the current administrative and accounting resources will also bring across the revenue stream to the service providers. The estimated value of that revenue stream is a large portion of the current G&A costs of the North American based producers. And I have estimated that the service provider's revenue stream would be in the range of $40 to $60 billion annually. Our budget for user community participation in the initial development stage is $667 million. This is over the multi year effort. There are significant revenues that the users and the service providers are able to generate. We support our user community participants with the budgeted $190 / hour fees. We however expect that our user community participants will make the necessary commitments and investments necessary in establishing the service provider organizations. It is also anticipated that there will be many processes under management by the People, Ideas & Objects application modules. However, we expect to see many of the user's partner with one another in order to establish stronger and more viable service providers.

User community participation in the development of the People, Ideas & Objects software is of critical importance to us. As you can see they hold a specific role within the industry in terms of how the applications are created, developed, implemented and managed. Most importantly they hold the keys to implementing the necessary changes by being the ones who are in control of the Intellectual Property. This is facilitated through the license that they will have with People, Ideas & Objects. It is important to review the user community vision that we have and understand the power that this group holds within the industry and how it is exercised. They are omnipotent. And that is how we will make spectacular software. The first thing we have to do is to secure the intellectual property. And that has been done. The next thing is to enable a community of users to use that Intellectual Property in the manner that provides the oil and gas producers with the most profitable means of oil and gas operations. And as you can see we are doing just that.

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. 

The U.S. as Swing Producer

There has been some discussion that the United States has taken the role of swing producer away from Saudi Arabia. I happen to agree with this point of view and it is exactly this role that the U.S. should be taking in the world markets for oil and also the continental markets for natural gas. Shale has changed the dynamic of the business. It once used to be an industry based on the scarcity of the oil and gas resources. Now these resources, thanks completely to the shale formations, have changed the game to one in which there is an abundance of oil and gas. What should be clear to most within the industry is that oil and natural gas markets are being oversupplied by the producing shale reservoirs. What hasn't changed is the business model in which the industry and producers operate. The bureaucrats, who have a vested interest in the status quo will not, can not and won't change their business model to accommodate these realities.

Each day we are apprised of the difficulties that Uber or lyft, and AirBnb are faced with by the established taxi commissions and competitions for other innovative Information Technology products. When given a choice consumers use Uber, Lyft, AirBnb for the simplicity and convenience of the business model they employ. In Calgary for example Uber and Lyft are able to operate freely in the city. The only provision that city council has placed on them is that every ride must impose a minimum fee of $72.00. I am faced with similar, fill in your own expletive here, by the bureaucracy in the oil and gas industry. Our value proposition is valid and yet it doesn’t stimulate the types of movements in that calcified existence I call a bureaucracy.

So the U.S. is a swing producer. However the industry, run by the bureaucrats doesn’t operate it as a swing producer. A swing producer will remove production if the market is oversupplied. And will bring on new production if the market is in need of more supply. That is what a swing producer does. The bureaucrats only operate on the basis of the high throughput production model. Which is designed to operate at full capacity, at all times, in order to ensure that the high cost of the overhead are covered. Guess where the bureaucrats costs show up, in the overhead. So cutting production would force them to take a personal financial haircut in the manner that they are configured, and that is just not going to happen.

If the U.S. is going to successfully be deployed as the global swing producer it will need to be able to adjust its production volumes based on prices in the marketplace. The only manner in which to do this is to reorganize based on the Preliminary Specifications decentralized production model and price maker strategy. By doing so what will happen is that the prototypical producer will be reconfigured to contain the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remaining administrative and accounting resources are reallocated to service providers who are focused on one process or subprocess. They will have as their client base the entire oil and gas industry. Each month they will bill the individual Joint Operating Committees, not the producers themselves, for the work that they do within the Preliminary Specifications task and transfer network. If the property has no production for the month, nothing will be done by any of the service providers because nothing comes to them from the task and transfer network. Therefore no billing for any administrative or accounting overhead charges will be made to any property that is shut-in.

What we will therefore have achieved is to turn all of the producers costs into variable costs based on whether or not there was production that month. This will enable producers to focus on what properties they can produce at a profit based on the oil and gas prices that are available in the marketplace. This dynamic nature of the producers production profile, which is based purely on the decision to produce profitably, will also act as the U.S. swing producer status. Holding the rest of the world's oil production constant, the swing producer will increase or decrease their production based on whether the prices they can realize will produce profits. Its like its a business! Something that an oil and gas investor would be hard pressed to call the activities of the past few years. For if you look at it objectively, you are hard pressed to make out any logical reason for the activity of the North American based producers.

Technology is providing real value for industries of all types. People, Ideas & Objects Preliminary Specification enables the U.S. to become the swing producer. And that’s a good thing, but there is no way they are going to be able to exercise that market discipline with the current bureaucracy in place. People, Ideas & Objects needs our budget funded in order to undertake the development of the software, the development of the user community and the service providers in order to achieve this. It also won’t be an app that you can download to your smartphone. Understand that there is much work and difficulties for all concerned ahead and this will take time. So don't come to me and ask me what have I got. Oil and gas is a little more complex than operating a cab. What I have is the solution to the problem as described in the Preliminary Specification. And I own the copyright to that. No money, other than mine, has been put into this. So understand there is significant effort needed by all to make this happen.

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. 

And More Miscellaneous Items

Shell President comments

The President of Shell was on Bloomberg last week with Betty Lu to speak about some of the things that they were working on. He made an interesting comment about her comment that Shell’s production was actually lower ten out of the last twelve years. He stated, and I’m paraphrasing here. “That we are no longer necessarily concerned with our production volumes, as much as we are focused on the value that we provide.”

Bureaucrats should take note of this. Your days are going to be ending very soon. When presidents of major producers start talking in this fashion it might be time to start thinking about strapping that parachute on.

$44 billion in debt and equity financing in the first quarter

Bloomberg was also reporting that there were $44 billion in debt and equity financing in oil and gas in the first quarter of 2015. This shouldn't surprise anyone when you consider the length of time that the EU has been in negotiations with Greece. With no one being able to invest in Greece the stupid money has to go somewhere.

Bloomberg also noted that the proverbial shoe was about to drop on producers with the expiration of $90 hedging contracts. The producers apparently were able to get past their semiannual debt reviews with their banks because the hedges were still in play in the first half of the year. Now that they are expiring the “real pain” may begin to be felt by the industry. Which is probably the case as it was also noted that the rig count was up last week!

Oracle vs. Google

Last week saw the U.S. Supreme Court hand down their annual decisions. One decision that they didn't make was on Google’s appeal in the case of Oracle vs. Google. Google had lost an appeal by Oracle a few years ago which Google appealed to the Supreme Court. Since the Supreme Court won't look at it, and now with no further appeals, they will have to pay Oracle and settle the case.

This is a significant moment for software developers. Many, including Google, thought that the code they wrote was not necessarily subject to copyright provisions. That may be a simplification of Google’s claim. It is however, not a simplification of the way in which the Supreme Court obviously sees it. They feel that copyright does cover the software code and there is nothing in the case for them to see.

What Google did is they took the programming language Java, made some minor modifications to it, and called it Android. Now they have to pay Oracle for this abuse, the award was in the billions, and Google will have to license Java from Oracle. Good luck with that negotiation.

Stanford and MIT on avatars

One of the more controversial elements of the Preliminary Specification is the Marketplace Interface contained within our Petroleum Lease, Financial and Resource Marketplace modules. This enables people to collaborate through the use of avatars in a virtual world. It is noted in a Wall Street Journal article that Stanford and MIT are using the same technologies that we are to provide their business students with the ability to collaborate through the use of avatars.

All of these miscellaneous elements that I have noted in the past two days. Are providing our user community with the facts that People, Ideas & Objects, our user community and the service providers time has come. If we could have our budget funded we could begin the process of building the Preliminary Specification, the user community and service provides and build industry real value by providing the oil and gas producers with the most profitable means of oil and gas operations.

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. 

Some Miscellaneous Items

A Subdued Stampede

The Stampede in Calgary is as much of a corporate event as it is a tourist attraction. We welcome the tourists each year to what we call the “greatest outdoor show on earth.” And as a visitor, I can only assume they have a good time. The town transforms itself into one party city. I for one have looked upon Stampede as a time to let loose and enjoy the weather and the festivities. This tradition has been upheld throughout the city since the beginning of time. Well over the past 100 years, our big flood of a few years ago, gave it the appropriately named “come hell or high water” as the theme. That flood was the countries biggest natural disaster, happening one week before the big event, and it didn't slow this town down. Apparently this year we will witness what does slow the Stampede down.

Cancellation of corporate events is the name of the game in town. It would seem the oil and gas industry wants to send a message to the new government that they are not happy with their plans for a revised tax and royalty regime. Since when did the bureaucrats concern themselves about the business of the oil and gas business? Optics? It doesn't look good to be partying so hard when the people need to be told that their choice in government doesn’t sit with them. So instead of partying, everyone will be present at their desks for the entire Stampede. No corporate breakfasts or festivities. That'll send the message.

Its one thing to sit down and make representation about how the industry is having difficulties financially. To engage the government to advise them and educate them about the industry. The New Democrats are now running a $40 billion government with many of the cabinet ministers never being responsible for much more than their local communities budget. A little help and encouragement might have been the appropriate direction. Particularly their leader Rachel Notley is of fine pedigree and seems capable and approachable. These bureaucrats however have fallen into their classic pattern of attack and bully to make it as difficult for everyone, and the bureaucrats importance is the key and only issue.

These bureaucrats don't concern themselves with the business unless they can exercise some real public relations value out of the issue. By ramping down the Stampede festivities they attempt to destroy an annual tradition so that they can look good in the eyes of, well I don't know who will buy in to the BS, or who will give them credit for being prudent about the business. If they were really concerned about the business they would be focused on our $45.7 trillion value proposition over the next 25 years and how they can make that real. Not in punishing everyone during Stampede week.

The Cloud Paradigm

Amongst our distinct competitive advantages, the cloud provides us with much value over the traditional decentralized IT infrastructure. Today, each producer is tasked with the needs of developing, maintaining and operating their organization with the IT resources afforded by their budgets. This may have been easier in the past when the organization was less dependent on IT, and when the IT infrastructure was less robust and mature. Now with so much dependent on these technologies the ability and capability to have the skills, talent and resources housed within the producer organization are exceeding the budgets that are provided to these departments. None of this activity is within the domain of a producer's competitive advantage of their earth science and engineering capabilities, or land and asset base.

Maybe the best example of this is in the area of security. Where cyber security has become the issue of the day and is occupying many hours and days within a producer firm. Each producer is having to spend this time and effort to ensure the firm's data and resources remain secure. Each producer is undertaking the same tasks and activities to ensure their systems are safe. With the cloud, or more specifically with People, Ideas & Objects, producers will be able to rely on the efforts of our software developers, our user community and the service providers to provide this security. By aggregating the resources of the industry we are able to focus our budget on items such as cyber security and devote more resources to the issue than what a producer can. This centralization theme works most effectively in our key competitive advantage of providing the oil and gas industry with a software development capability for the long term. A capability that will enable changes to be made in the business model when and if they are required.

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. 

No Posting Today

In recognition of the U.S. Independence Day.

No Post Today

Sandwiched between two stat holidays seems like a good time take another day off. 

No Post Today

In recognition of the Canada Day Holiday.

You Thought I Was Bad

I frequently make the claim that our value proposition. Which is based on a comparison of our business model vs. the status quo bureaucracy. Provides the oil and gas industry with an additional $25.7 to $45.7 trillion in incremental value over the next 25 years. Some people may find this to be too much of a difference to be valid. I say look at the facts of how our value proposition is calculated, and the sorry state of affairs that the oil and gas industry is in. Then you will see that this value is available by implementing the Preliminary Specification in a timely manner.

Even my claims are now being out done by none other than the number one consulting firm in the world. McKinsey Consulting are claiming in an article that the Internet of Things (IoT) will generate $4 to $11 trillion in value by the year 2025. That’s annually! Which makes my $1.0  to $1.8 trillion per year look pretty small in comparison. Its good to have such prestigious company in the same nuthouse that I occupy. Here’s what they had to say.

The Internet of Things—sensors and actuators connected by networks to computing systems—has received enormous attention over the past five years. A new McKinsey Global Institute report, The Internet of Things: Mapping the value beyond the hype, attempts to determine exactly how IoT technology can create real economic value. Our central finding is that the hype may actually understate the full potential—but that capturing it will require an understanding of where real value can be created and a successful effort to address a set of systems issues, including interoperability.

To get a broader view of the IoT’s potential benefits and challenges across the global economy, we analyzed more than 150 use cases, ranging from people whose devices monitor health and wellness to manufacturers that utilize sensors to optimize the maintenance of equipment and protect the safety of workers. Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy.

McKinsey are on the same wave length that I am in terms of the impact that the Internet is going to have on the business community. They are applying their analysis to all industries to come up with their much larger number. However the reasons that the value are being generated are the same. They note.

The digitization of machines, vehicles, and other elements of the physical world is a powerful idea. Even at this early stage, the IoT is starting to have a real impact by changing how goods are made and distributed, how products are serviced and refined, and how doctors and patients manage health and wellness. But capturing the full potential of IoT applications will require innovation in technologies and business models, as well as investment in new capabilities and talent. With policy actions to encourage interoperability, ensure security, and protect privacy and property rights, the Internet of Things can begin to reach its full potential—especially if leaders truly embrace data-driven decision making.

A little background into our name. In the late 1990’s Professor Paul Romer then of Stanford University came up with what has come to be known as “New Growth Theory” how economies grow in the 21st century. It used to be that if you wanted to grow the economy you should invest in financial capital, transportation or communications. These investments had the effect of enabling further growth in the economy. This theory has waned as the economy has become more advanced. Therefore a new theory for growth was needed. In essence Professor Paul Romer of New York University “New Growth Theory” is that you invest in People, Ideas & Things. I thought it would be worthwhile to adopt this as the name of the company and only converted the “things” to “objects” as we are object based software developers. Clearly this also ties in with the Internet of Things being a large part of Professor Paul Romer’s new growth theory. McKinsey now seem to be on to this as well. Here is Professor Romer’s concluding remarks in the Library of Economics and Liberty.

Only a failure of imagination, the same one that leads the man on the street to suppose that everything has already been invented, leads us to believe that all of the relevant institutions have been designed and that all of the policy levers have been found. For social scientists, every bit as much as for physical scientists, there are vast regions to explore and wonderful surprises to discover.

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. 

Intellectual Property

There is nothing more important to the membership of the user community, People, Ideas & Objects, the service providers and of course myself than the topic of Intellectual Property. It is how we function and operate in the 21st century. Just as Jeff Immelt of General Electric states “that every industrial company will become a software company.” Every software company is an Intellectual Property company. Therefore we begin on the basis of that foundation as the key asset of People, Ideas & Objects. A license agreement between the firm and myself granting the firm certain rights and privileges in terms of the development of my Intellectual Property. I am the rightful owner of the copyright of the Preliminary Specification, this blog and many publications that came before it. Most particularly the May 2004 “Plurality should not be assumed without necessity” that determined the Joint Operating Committee is the key organizational construct of the dynamic, innovative and profitable oil and gas producer. It is these works that make up the Preliminary Specification and how the industry, producers, the user community, service providers and the service industry participants would operate in a dynamic, innovative and profitable manner.

It is through the strength of this Intellectual Property that I will be able to raise the budget for our software developments and the user community. These funds will then be used to build the derivative works of software and other information from the current Intellectual Property. This will be done by the software developers and user community participants who will be paid from our budget. It is their knowledge, information, skills and Intellectual Property that we are purchasing from them to form a unified and consistent base of Intellectual Property. This base will be used on an annual basis to raise the funds necessary to support the software development and user community on an ongoing basis.

Under the terms of the license that I have provided People, Ideas & Objects, all derivative works from the Intellectual Property, in terms of ownership flow back to me. People, Ideas & Objects only hold a commercial license. The user community and our software developers will be granted individual licenses from People, Ideas & Objects that enable them to prepare derivative works from the Intellectual Property. And they will release their ownership of those prepared works back, through the People, Ideas & Objects license, to me, where through all of the licenses they remain available to all of the members of the user community and our software developers to use and prepare derivative works from. If we did not do this we would end up with a situation where the Intellectual Property would be scattered across the industry and producers would be subject to numerous cross licensing requirements and multiple royalty payments to multiple owners of the Intellectual Property. By keeping the Intellectual Property together under ones ownership control these issues are rectified and we are able to build off the value generated by everyone. In the 21st century, I believe your work will require you to own some Intellectual Property, or to have a license to some Intellectual Property, or to be employed by someone who does in order to make a living. Without access to Intellectual Property you will not have the tools to earn a living in the future.

The service providers are comprised of the user community participants who are the principals who make up the service provider firm's that will be established to form this sub-industry. These service providers will also be licensed by People, Ideas & Objects in order to access the software they will use to provide the oil and gas producers with the services and software they will need to operate their businesses.

There have been many attempts by the bureaucrats to breach my Intellectual Property. On each occasion they were discovered and ultimately refuted. And each time that there was an attempt foiled it only made my Intellectual Property stronger. Now it stands alone and is the solution that is necessary for the oil and gas industry to get back on track to profitability. We will probably fool around and waste more time at the expense of the industry. But one thing I can assure the bureaucrats, I have only begun to fight to make this real.

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. 

The False Narrative

I made the comment the other day that there has been a false narrative about the industry and its operations. That this narrative was being discussed in the press these past six months and I have noticed and been monitoring it. It may very well have been going on for much longer. These are some of the statements that I have noticed being made that seem to me to be self-serving and colorful.

Shale costs have been coming down from innovations and improvements in drilling. 

This little nugget holds one falsehood and one truth. The truth is evident from the falsehood. Once you have expended the costs in drilling a shale well, and have paid for these expenses they are assets under the current methodology. How then would these costs come down? Unless you never recognize the asset costs in your calculations. Then the fact that it used to cost $90 to produce shale and now only costs $55 shows that they only include the costs of operations and royalties, not capital or overhead.

The innovation and dynamic nature of the industry has production being shut-in and resumed on a constant basis, based on price. 

Not quite. You need the decentralized production model in order to do that. What the producers have today is the high throughput production model which demands full production to cover the costs of overhead. Most specifically the bureaucrats paycheck. Nothing has ever been shut-in due to the price being low, anywhere. The natural gas marketplace is all the evidence that is necessary to prove this falsehood. Shale gas has gone from 10 BCF a day in 2010 to about 42 BCF per day today. Remember the high throughput production model. This is not a dynamic industry. The Preliminary Specification wants to make it a dynamic industry and the bureaucrats in their desire to make what they are doing look good next to the Preliminary Specification will say anything.

We can make money at $55.00.

In many ways this is the same argument as the first falsehood listed here. There is a culture that is so ingrained within the industry that capital assets are sunk costs and they are not considered in current calculations. And therefore they never are. You can’t play the shell game unless everyone follows the same rules. And for oil and gas the rule is, don't mention the costs of the assets. And why would you, they never show up on the income statement anyway.

We are now one or two quarters away from the longest decline in oil prices ever. 

a.k.a. hold on a little longer, all will be well soon. Those that don't follow history are bound to repeat it. This is inconsistent with the history that I personally recall the industry having to experience. It’s also inconsistent with the time that the industry has experienced in terms of natural gas pricing. It’s been five years since the big declines started and they don't seem to want to stop. If you want to know what the future of the oil price is, look at natural gas prices. The fact that the bureaucrats are over producing and using the industry for their own personal gain is a common theme that I have been suggesting here.

Crickets

Those being the solutions, and the discussions of any difficulties or problems that the industry is currently faced with. Nothing, not a word. I can't remember the last time things were so peachy. I think the bureaucrats should give themselves a mid year bonus for managing the industry so well.

Big Data

I’m on record as stating that anyone that tries to sell you a big data solution should have you sprinting in the opposite direction. They are selling you technology you don't need and have no idea what your business involves. If big data is the solution to the shale problem, which I have heard specifically, that only means they will have a real solution in a few decades.

Buy Oil Stocks

All the pain has been experienced in the oils so far. You need to buy these companies while they're still cheap. I don’t give stock advice, but this seems to be irrational.

Lift the export ban

This is what Harold Hamm Chairman and CEO of Continental Resources said in the Wall Street Journal.

If America’s interest is stability of supply, peace and prosperity, then our current policy doesn’t work. There isn't a more urgent issue affecting the future of our nation and the world than lifting the ban on U.S. oil exports.

Lifting the export ban may help in bringing the differential to Brent Crude prices down. However, refiners are free to export refined products. Trading refined products exports for crude exports seems like a bad business idea to me. Refiners generate value do they not? And it's just one big market is it not? If the crude is exported it still counts in the same 93 million barrels of oil produced every day.

The only discussion and solutions to the overproduction and unprofitability of the producers is what you'll read here in this blog. People need to focus on the primary areas of this industry before it’s too late to do anything about these issues.

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.

Choice is a Good Thing

The choice that we provide the oil and gas industry could not be greater. On the one hand you have the status quo bureaucracy who are unable and unwilling to address any of the present or future issues within the industry. They are at the same time leaving any future business opportunities to whither on the vine. An industry where the overproduction and lack of profitability will lead to both future capacity and capability issues. With the Preliminary Specification you have the opposite. A prospective method and business model of how the industry could operate in the 21st century. A system, software development capability, user community and service providers who are focused on the dynamic, innovative and profitable oil and gas producer.

I suggested in my post before taking any time off that maybe the Preliminary Specification was too radical or too extensive of surgery to undertake by the industry. When you're tired and you need a rest you might say some things that you'll later regret. The Preliminary Specification is radical and extensive surgery for the industry to undertake. And it is the right treatment to cure what ails it. Nothing less is what the patient needs in order to heal and prosper in the 21st century. Does anyone believe that the bureaucracy has the legs to carry us much further?

The differences between this choice are significant. As a result of the differences, our value proposition is in the trillions of dollars. The present value of the incremental profits over the next 25 years are calculated to be $5.7 trillion. As a result of our ability to enable the producer price making strategy and the way that assets are capitalized. Capital is included in our pricing calculations. And as a result investors will see their capital returned to them over the next 25 years. So if the amount of capital is $20 or $40 trillion that needs to be spent to meet the consumer demands. It will be $20 or $40 trillion that will be returned to the investors with their profits. This is our value proposition. Depending on the amount being spent in capital expenditures in the next 25 years. We will provide incremental value of $25.7 to $45.7 trillion to the investors in this industry.

The primary way in which we do this is through the decentralized production model. Turning the oil and gas producer into a price maker and leaving the price taker strategy behind. By stripping down the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder of the firm's resources are reallocated to service providers who are focused on one administrative or accounting process, or subprocess and will use the entire industry as their client base. It will be the producers who focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. The service providers will focus on their key competitive advantages of specialization, the division of labor, automation and standardization. What is critical to this redesign is that each Joint Operating Committee, not the producer, will be charged for the administrative and accounting overhead charges from the service providers.

Then when the price of the commodity dips below what is necessary for that property to report a profit. A profit based on the revenues less royalties, operating costs, overhead and an allocation of capital. Note we have converted all of these costs into variable costs. Then that property would be shut-in in order for it to report a null operation. No profit and no loss either. That is because, while the property is shut-in, the service providers will have no activity in their systems to incur any of the service provider's processes for that month and there will be no billing for any administrative or accounting overhead. It is in this way that the marketplace has the marginal barrel of oil or natural gas removed from the market, the individual properties reserves are saved for the day when commodity prices are higher and can therefore earn a profit, and the producer reports the highest profits based on the commodity prices that are available. With the marginal production being removed from the marketplace, there will be shallower and shorter declines in the commodity markets prices.

There are many other ways in which we provide value to the dynamic, innovative and profitable oil and gas producer. The bureaucracy can't and won't, do this. It is physically impossible for them to make this level and scope of change. It has to come from the outside like People, Ideas & Objects, our user community and the service providers are providing. Only in that way can these changes be implemented.

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 the Focus on Profits?

It is our focus, our claim, our desire and everything that we do at People, Ideas & Objects, the user community and service providers to provide the oil and gas producer with the most profitable means of oil and gas operations. Is this appropriate? Should we be focused on other goals and objectives other than that dirty word profits. It would seem inconsistent in this day and age that we should be focused on profits. The world seems otherwise occupied on other pursuits like fairness and equity, and the oil and gas industry should follow those. I disagree, focusing on profits is the appropriate and only thing that we need to be doing in oil and gas. And that is why we will continue on this path, always.

To whose benefit does the development of an industry that focuses on profits provide. Simply everyones. And by that you can include everyone. The consumer, the investor, the employee of the producer, members of the service industry, governments, society and anyone who doesn't clearly fall within any of those groups. When producers earn profits they provide for the employees of the producer and those of the service providers that they use. This gives these people jobs and resources that enable them to fulfill their lives. They also pay a lot in taxes to their local, state and federal governments. Additionally new employees are hired to provide further growth and benefits to the overall economy.

Producers can take the profits that they earn, pay taxes, pay off debts, pay dividends to their shareholders and investors, and further invest in the business. Banks are then able to loan money to other borrowers and investors can invest in other businesses. Government, state and freehold royalties are paid to those leaseholders who are entitled to those payments. Producers can also invest in more innovative and productive areas of the production process making the total cost of the exploration and production process less costly. Society benefits by having a competitive producer environment, a healthy economy, and balanced government budgets.

In contrast today, what we have is a sink hole. Where money goes in and nothing comes out. Unless you count the benefits accruing to the bureaucratic class as a benefit to anyone other than a bureaucrat. Investors have been “building the business” in oil and gas for the past number of decades waiting for the day in which “things” will turn around and be prosperous. It sure doesn’t look to me like they can expect anything positive to come from this industry in the next decade.

Employees are told to deal with the situation as it is today or lose their job. Service industry providers are told to cut their prices drastically or have no business at all. Investors are told maybe next year. Governments are told that they need to continue to support the business because it is so important to them. In essence everyone is threatened and told to do with what you have and don’t mention anything about the overproduction.

We can turn this around. Where the oil and gas producer is provided with the most profitable means of oil and gas operations by developing and implementing the Preliminary Specification, creating the user community and the service providers. That way trillions of dollars will be added to the bottom line of the producers and then achieve the type of industry that is self sustaining and provides the consumer with the reliable and affordable energy that they deserve. Let's dump these bureaucrats and replace them by funding our budget.

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.