Perception of Financial Status, Part I

 North America must confront a fundamental change in how oil & gas is produced—and the consequences of failing to organize the industry accordingly. Shale transformed the pursuit of scarce discoveries into the commercial challenge of managing abundant resources. Yet producers attempted to accommodate that abundance within a business model built around scarcity. Our argument is that the resulting emphasis on production, without sufficient discipline over profitability and capital recovery, has created financial weaknesses that compound with every subsequent investment.

We need leadership prepared to rebuild the industry around shale’s characteristics and society’s requirements. The objective must be to sustain profitable North American energy independence while providing the energy foundation for the next quarter century of economic development. Abundance is an extraordinary advantage, provided the industry can produce it profitably and finance its continued availability.

Oil & gas is a basic necessity of modern society. An industrial transformation driven by Information Technology and Artificial Intelligence makes the obligation to provide affordable, abundant and reliable energy more consequential. Meeting that obligation requires producers capable of recovering their investments, maintaining their operations and financing the technical capabilities and service industry on which future production depends. Allowing those capabilities to deteriorate while celebrating production records would constitute a profound failure of responsibility.

Europe’s experience with dependence on Russian energy demonstrates the economic and political exposure that can accompany reliance on foreign supplies. Russia’s use of energy as an instrument of political pressure helped precipitate the European energy crisis of 2022, with severe consequences for households and businesses. North America should recognize the strategic value of its own resource base and the importance of maintaining the commercial capacity to develop it. Council of the European Union

People, Ideas & Objects has pursued a vision consistent with these obligations. Synallagi business models, architecture and design address how producers, Joint Operating Committees, our user community and service provider organizations can organize around reserves preservation, performance and profitability. Its purpose is to connect technical decisions to their financial consequences and give commercial accountability the authority necessary to influence those decisions.

Our price maker strategy establishes the commercial discipline: each producer evaluates the market price against the actual costs and required capital recovery of its interests in each property and well. Profitable production proceeds. Unprofitable production is withheld or suspended while the conditions necessary for profitability are addressed. Engineers and geologists gain the financial information needed to demonstrate the value of their work and direct their capabilities toward improving performance.

There is substantial work ahead to build, test and implement Synallagi. There is substantial value in the work already undertaken to develop a coherent organizational response. We believe this foundation can spare the industry years if not a full decade of repeating that effort. Industry support has yet to materialize at the level required to proceed. Continued delay postpones both implementation and the much larger rebuilding process that the system is intended to support.

The two EIA graphs below illustrate the physical scale of that challenge.

Between December 2023 and December 2024, crude oil production from existing Lower 48 wells fell from 11.0 million to 6.7 million barrels per day. New wells had to replace 4.3 million barrels per day, approximately 39% of the starting production rate. New production largely replenished the decline before contributing to growth. EIA: production declines from existing wells

The natural gas comparison is equally consequential. Over the same period, production from existing Lower 48 wells declined by 27 Bcf per day. That exceeds Canada’s entire average natural gas production of approximately 19 Bcf per day in 2025. The scale of the replacement requirement should dispel any impression that the gas decline presents a modest challenge. EIA: existing-well declines; Canada Energy Regulator: Canadian gas production

The financial question follows directly: does the production being sold generate the resources necessary to sustain this replacement effort? Repeatedly committing capital without recovering it competitively weakens the capacity to undertake the next round of investment. The technical achievement of maintaining production cannot answer that commercial question. What will society face when it does?

For more than three years, I’ve argued with industry over the revenue consequences of chronic overproduction. Our calculation measures North American natural gas revenues against a 6:1 heating-value-equivalent benchmark with oil. On that basis, the cumulative revenue shortfall this century has reached approximately $5.4 trillion. This measures the difference from the benchmark; it exposes the scale of the commercial question that this paper asks producers to confront.

The divergence has been substantial. In March 2024, WTI averaged $81.28 per barrel while Henry Hub natural gas averaged $1.49 per million Btu—a quoted-price ratio exceeding 54:1. EIA: WTI prices; EIA: Henry Hub prices

Critics question the relevance of heating-value equivalence. Consider this: the United States produced an average of 118.5 Bcf per day of marketed natural gas in 2025. Using our approximate conversion of six thousand cubic feet per barrel of oil equivalent, that represents 19.75 million barrels per day of oil-equivalent energy. Replacing that energy contribution on a heating-value basis would require almost 20 million barrels of oil every day. EIA: U.S. marketed natural gas production

That is the magnitude of the resource whose commercial stewardship is at issue. North America needs an industry organized to preserve its reserves, earn competitive profits and finance its own renewal. Leadership must accept responsibility for establishing those conditions. The first step is to organize the industry where profitability governs production and generates the internal resources needed to rebuild.

To continue without addressing the issues identified in this paper would compound the failures that brought us here. I believe the consequences would extend far beyond producers and their shareholders, placing North America’s energy security, economic strength and quality of life at increasing risk.

Energy Independence Requires Financial Strength

North America has the resources, talent and capacity to pursue another period of extraordinary economic development. Artificial Intelligence may expand what its people and businesses can accomplish, creating opportunities whose scale we are only beginning to envision, understand or appreciate. People, Ideas & Objects, our user community and their service provider organizations are optimistic about that future. Realizing it will require dependable energy and an industry financially capable of providing it. Energy independence, and the freedom of action it supports, must be sustained through continuing investment and renewal.

Can oil & gas producers meet that challenge? Shale has demonstrated remarkable production potential. The question is whether producers, their wider industrial structure possess the financial strength, capacity and confidence to develop it sustainably. Increased demand would test the commercial foundations supporting the entire productive system. North America cannot assume those foundations are sound merely because production continues.

The industry’s technical achievements deserve recognition. Visit a major processing facility or examine the engineering behind a modern well and the complexity becomes tangible. Chemical processes, subsurface knowledge, equipment and skilled people have been brought together to accomplish extraordinary things. People, Ideas & Objects has consistently recognized that achievement. Our critique concerns whether the commercial arrangements governing it recover the investment, reward the participants and preserve the capacity to continue.

We argue that a culture developed in the decades following the 1986 oil-price collapse in which spending, production growth and operating cash flow became accepted evidence of business success. Capital could be described as money “putting cash in the ground,” and an expanding asset base as a balance sheet being “built.” Yet neither description demonstrates that the investment will return a competitive profit within a period sufficient enough to justify having made it.

When we discuss shutting in any unprofitable oil & gas production. In a North American market where prices have been stabilized by appropriate production management. It would be anticipated that no more than 2 - 5% of unprofitable production may need to be shut-in. What is shut-in may also be a single well with an unprofitable anomaly in a 50 well unit that for some reason doesn’t perform. We are not involved in the operational concerns of the drilling and completion decisions. We are not involved in any of the operations of engineering and geological involvement. We are providing a resource in the form of actual, granular level, factual, standard and objective accounting information for them. A tool that they’ve been without for too long and one that can support their dynamic performance related decision making.  Accounting has a role in business and yes, we are asserting that role, however that is not something that is a threat or concern to how engineers and geologists conduct their work. 

In a North American market where producers consistently apply commercial discipline to their production decisions, we anticipate that the numbers of wells required to be shut-in could be relatively small. Our working assumption is approximately 2–5% of total production, with the actual amount determined by the economics of individual wells and properties. A shut-in decision might concern a single well with an unresolved cost or production anomaly within an otherwise profitable fifty-well unit.

Synallagi provides the financial information needed to identify and investigate those exceptions. Decisions concerning drilling, completion, reservoir management and field operations remain with the engineers, geologists and other professionals responsible for that work. They gain an additional resource: actual, detailed, traceable accounting information prepared through standardized, objective methods. This allows them to connect technical decisions to financial outcomes, identify opportunities for improvement and determine whether remedial work can and does restore profitability.

Accounting has an essential role in business, and Synallagi gives that role practical effect. Its contribution strengthens professional judgment by making the commercial consequences of operational decisions visible. Engineers and geologists can then demonstrate the financial value of their innovations, preserve reserves where production is uneconomic, and help generate the resources needed to finance further improvements.

Scientific Changes

Synallagi changes that relationship by bringing engineers, geologists and accounting into a shared culture of reserves preservation, performance and profitability. Using the Joint Operating Committee as an Organizational Construct places the producer’s competitive advantages in engineering and geology directly within the organization responsible for the property. This builds on familiar industry relationships while introducing two important opportunities for engineers and geologists personally.

The first is a broader range of employment opportunities. A geologist’s specialized knowledge may serve several Joint Operating Committees developing properties within the same geologic zone. A gas pipeline corrosion engineer may contribute expertise across multiple Joint Operating Committees and midstream operations. Their hyper specialized skills can reach the organizations that need them, expanding the opportunities available to each professional beyond a single producer.

The second is the opportunity to compete through the financial value their expertise creates. Synallagi and its service provider organizations offer new perspectives through which engineers and geologists can investigate opportunities, evaluate alternatives and determine the financial contribution of their innovations. Their curiosity and pursuit of technical improvement gain a commercial dimension: they can demonstrate how their work improves profitability, preserves reserves and strengthens the economics of the property. (Please see the benefits listed in the Crypto and Stablecoins section of this paper.)

Stronger financial performance can, in turn, provide the resources for further investigation, development and innovation. Engineers and geologists benefit from both wider opportunities to apply their expertise and a clearer means of demonstrating its value. Their contribution helps finance the next generation of opportunities for them to pursue. Oil & gas is a commercial endeavor. 

A faster drilling rig, a new pipeline or an additional gas plant can create substantial value. Management must establish what commercial outcome each investment delivers. Resolving a physical constraint can enable more production while leaving inadequate returns unresolved. We call that continuing accommodation of deficient economics “Muddle Through.” It substitutes another operational intervention for an examination of the assumptions governing the business.

Commodity Prices

In “Consider This… Markets as an Organizational Construct,” and its podcast, People, Ideas & Objects examined Friedrich Hayek’s 1945 paper “The Use of Knowledge in Society” and the role of market prices in communicating dispersed knowledge. “Producers need not reconstruct every variable influencing the market before making a commercial decision. They need the market price and a detailed understanding of their own production economics.”

Synallagi price maker strategy applies this principle at each well, property and producer’s interest in a Joint Operating Committee. Profitability governs the production decision: profitable production proceeds; unprofitable production is shut-in. Synallagi is designed to provide the detailed accounting necessary to make that determination through monthly financial statements incorporating actual costs, actual overhead and depletion determined under a competitive North American capital-recovery standard. This connects the commodity market’s price signal with the producer’s specific commercial circumstances and places profitability at the centre of the decision to produce. That discipline is fundamental to Synallagi purpose and the tangible portion of its value proposition.

Shutting in production does not necessarily require shutting in the entire property governed by a Joint Operating Committee. On a ten-well property, unforeseen circumstances may render one well unprofitable while the other nine remain profitable. Shutting in production from the affected well can improve the property’s financial performance, preserve its remaining reserves, and retain financial resources for engineers and geologists to investigate the problem and determine what is required to restore profitable production.

Detailed financial analysis may reveal an operating anomaly that would otherwise go unnoticed. A correction in the field could reduce costs and restore profitability without interrupting production. Adding financial analysis to the engineers’ and geologists’ toolbox provides another means of identifying problems, evaluating remedies and demonstrating the value of their innovations. Their technical expertise gains a measurable financial dimension, strengthening their ability to generate the resources needed to finance further projects.

The illustration developed above makes the consequence of not deploying Synallagi price maker strategy visible. Second quarter reported values. It is reported 29 Bcf/day of Permian gas sold for negative $2.15/Mcf, with this paper's example of their assumed costs ($2.15 * 0.90) of $1.935/Mcf. Individual volume losses total -$4.085 per Mcf.

Below we assume the remaining 92.3 Bcf/day of U.S. gas sells for positive $2.15/Mcf at a 10% margin. The national scale reference is EIA’s first-half 2026 marketed production average of 121.3 Bcf/day. Applying those volumes and assumed economics over 91 days produces approximately $10.78 billion in second quarter Permian gas losses against $1.81 billion in profits from the remaining production. EIA production reference.

Under these assumptions, the Permian 2026 second quarter consumes the equivalent of approximately eighteen months of the remaining U.S. gas production profits. This is a gas-only illustration, excluding hedge settlements and associated oil and liquids revenues, rather than a measurement of national industry losses. It demonstrates how a loss-making segment can overwhelm the earnings of a much larger profitable segment. Production volume alone conceals that relationship.

These assumptions are highly favorable compared with today’s actual economics. Using the 1985 average natural gas price of $2.51 as the base, the inflation-adjusted equivalent today would be $7.82. On a heating-value-equivalent basis, natural gas would command $16.98. Today’s prices in the Netherlands and Tokyo for LNG imports are $27.82 and $27.23; deducting approximately $8.00 for shipping and refrigeration leaves $19.82. All prices are in U.S. dollars.

Producers’ shale production has effectively destroyed North America’s natural gas market pricing. Before shale, natural gas prices maintained a reasonably consistent relationship with oil prices based on their respective 6:1 heating values. That relationship deteriorated when shale production began, leaving an oil-to-natural-gas price ratio of 33.0 today and reaching a peak of 52.54 in March 2024.

Consider This… Who Will Pay for North America’s Energy?

 North America possesses an extraordinary oil & gas resource endowment. The larger question raised in our new paper, Consider This… A Perception of Financial Status, is who will pay to develop and sustain it.

Will investors and bankers be expected to replace capital that production has failed to recover? Or will the revenues earned from consumers cover the full cost of providing the energy on which their prosperity depends?

Energy prices matter to households and businesses. So does the financial capacity to maintain reliable supplies. An economy cannot preserve affordable energy indefinitely by consuming the capital, equipment, skills and organizational capabilities needed to produce it. Shortages, greater dependence on foreign supplies and constraints on the potential of Artificial Intelligence and an Information Technology industrial revolution would carry their own substantial costs.

This paper asks whether oil & gas has allowed its remarkable technical accomplishments to obscure its commercial responsibilities.

Engineers and geologists have transformed the resource base available to North America. Their achievements deserve recognition. The business surrounding those achievements must also recover its investment, earn competitive profits and finance the next generation of production. An industry capable of producing record volumes still has to demonstrate that it can pay for their replacement.

The “leaky bucket” analogy illustrates the challenge.

Between December 2023 and December 2024, crude oil production from existing Lower 48 wells declined from 11.0 million to 6.7 million barrels per day. New wells therefore had to replace 4.3 million barrels per day—approximately 39% of the starting production rate—before contributing to growth. This was the decline from the existing wells, not a 39% fall in total production. EIA: production declines from existing wells.

Keeping the bucket full requires continuing investment. The commercial question is whether the contents being sold generate enough money to pay for that effort.

The Permian demonstrates how consequential this question has become. In 2025, the region supplied approximately 48% of U.S. crude oil production, averaging 6.6 million barrels per day. Its production increased by 280,000 barrels per day, accounting for most of the country’s annual growth. That increase was achieved after replacing the region’s declining production. The net addition alone does not reveal the scale or cost of the replacement work beneath it. EIA: U.S. oil production in 2025

Natural gas presents an equally substantial replacement requirement. Existing Lower 48 wells lost 27 Bcf per day of production between December 2023 and December 2024. For perspective, Canada’s entire natural gas production averaged approximately 18.3 Bcf per day in 2024. The decline being replaced in the Lower 48 exceeded the output of Canada’s whole gas industry. EIA: existing-well declines; Canada Energy Regulator

By December 2024, total Lower 48 gas production reached 116.5 Bcf per day. Using our approximate conversion of six thousand cubic feet per barrel of oil equivalent, that represents roughly 19.4 million barrels per day of oil-equivalent energy. Its importance to the economy deserves to be matched by commercial discipline over its production.

Our concern is that the financial bucket leaks as well. When production does not recover its full commercial costs, reserves are consumed while capital remains outstanding. Subsequent production must carry that unrecovered burden alongside the cost of further investment. Reported earnings do not, by themselves, establish that the money has been recovered within a competitive period.

I have been discussing this problem since the 1990s. Too often, the response still amounts to the same sequence of expectations: investors invest, producers spend, production increases, and the industry waits for better prices. Rinse, repeat. “We’re just waiting for the investors to return.”

The paper challenges that sequence and presents Synallagi as an organizational response. Its breakeven calculations identify the actual operating costs, overhead and competitive capital recovery required by each well, property and Joint Operating Committee interest. Its price maker strategy uses that information alongside the market price to support each producer’s independent decision about whether production is profitable.

Accounting supplies engineers and geologists with another essential tool: a clear account of the financial consequences of their decisions. That information can help them identify anomalies, improve performance, preserve reserves and demonstrate the commercial value of their innovations.

North America’s energy independence must include the ability to finance its continued production. That requires profitable operations, a capable service industry and the repeated recovery and reinvestment of capital. Waiting for a more favourable price cannot substitute for establishing those conditions.

I have written A Perception of Financial Status to make the problem explicit and present a proposed way forward. The objective is an industry capable of earning the resources needed to sustain its technical achievements and meet society’s requirements. The responsibility to begin that work rests with the leadership making today’s decisions.

A Day Off!

The numbers are getting a little slim, so I’m learning to cherish these birthdays. I’m taking my 68th off.

Back in May 1991, at 32, I never imagined I’d still be doing this at 68, or that the work would mean decades of living in such poverty. Yet here I am, and I'm more than willing to accept that I am wrong but I just can't reconcile that with the fact their investors have been similarly ignored for eleven years. 

So yes, take the chance if you see an opportunity to bring value to oil and gas. Producers record stands and I hope the officers and directors are appropriately shamed.

The Digital Revolution Will Not Wait for Oil & Gas

 Officers and directors of North American producer firms may soon find the pressure to act becoming impossible to ignore. For years, I have argued that the industry’s financial performance has been inadequate. Now a larger question is emerging: can the industry finance and deliver the energy the continent will need?

The expectations are growing. So is the distance between those expectations and an industry culture that remains committed to muddling through.

Some of the most candid criticism is coming from Canada, where distance to market, transportation costs and heavy-oil quality differentials can compound producers’ financial challenges. These circumstances demand a stronger commercial response. Instead, the familiar explanation persists: government prevents the industry from accomplishing what it otherwise would.

The government has plenty to answer for. So do officers and directors.

“We’re Not Running Fast Enough”

In a recent interview, Enbridge CEO Greg Ebel warned that Canada must move faster to compete for investment. His assessment was blunt: “we better run faster, and we’re not running fast enough.” He pointed to the relative attractiveness of American investment opportunities and the need for Canadian policies that support development. Enbridge interview.

His criticism is directed principally at the government. I hear a message for producers as well.

The United States has its own regulatory conflicts, infrastructure constraints and political obstacles. Those difficulties have hardly disappeared. Yet Ebel’s comparison exposes the commercial question Canada keeps avoiding: what must change here to make investment worthwhile?

People, Ideas & Objects has consistently argued that North American oil & gas needs to establish profitability throughout its production profile. The capacity to produce another barrel or another unit of natural gas tells us very little about whether producing it creates value, recovers the capital consumed and finances the industry’s future.

That distinction becomes decisive when the discussion turns to the Digital Revolution.

Governments, utilities and think tanks are beginning to describe the energy system they believe the future requires. Producers should be leading the commercial response. Too often, they appear to be waiting for someone else to remove every obstacle before they reconsider how their own businesses operate.

Enbridge has the scale and geographic reach to pursue opportunities elsewhere. Canadian producers should consider what happens when the capital and infrastructure they need follow those opportunities.

If the message still fails to register, no one should be surprised. At times, the Canadian industry appears almost comatose.

Before Declaring a Market Failure

The argument has become more pointed in Alberta, where a leaked cabinet report reportedly described TC Energy’s plans for its NOVA Gas Transmission Ltd. system as “misaligned” with anticipated demand. It also alleged a “market failure” that left important growth regions unable to access natural gas. The concerns included potential demand from AI data centres, oil sands projects and other industrial development. CBC report

I find the assignment of responsibility incomplete.

A regulated pipeline business needs a commercial foundation for expansion. Producers and customers must translate their expectations into credible requirements and commitments. The pipeline operator must develop projects, secure approvals and arrange financing. Someone ultimately has to support the cost of the capacity being requested.

A government forecast of future demand does not, by itself, accomplish any of that.

Nor would it be accurate to suggest the NGTL system has stood still. TC Energy reports approximately $15 billion of investment in the system over the past decade and continues to advance expansion projects. The dispute concerns whether the location, timing and scale of planned capacity will meet emerging needs. TC Energy’s NGTL system overview

That is a more useful starting point. Which projects need service? When do they need it? What commitments have been offered? Where does the process break down, and who is responsible for resolving it?

Those questions place producers, industrial customers, pipeline operators and governments within the same commercial discussion. Simply identifying the pipeline company as the failure risks allowing everyone else to escape scrutiny.

If Alberta expects an extraordinary expansion of energy demand, it needs an equally serious account of how that demand becomes financeable infrastructure and profitable production.

Who Is Paying?

On September 2, I responded on X to the Fraser Institute’s Strategies to Secure Canadian Energy Sovereignty. The paper advocates export diversification, additional infrastructure and changes to the policies affecting energy investment. Its authors emphasize creating conditions that attract capital. The authors’ summary

My frustration concerns the industry’s habit of treating another government strategy as the answer to its own commercial failures.

Are we back to five-year economic plans? The Soviet echoes become difficult to ignore whenever executives spend decades explaining why the government prevents them from acting, then expect the government to organize their future.

Investors’ demands for profitability and accountability should never have been difficult to understand. In my view, their retreat beginning in 2015 delivered a verdict that the industry has still failed to absorb.

Losing investor confidence is like having your engine seize on the way to your vacation. You can keep gripping the steering wheel, but you are going nowhere. Eleven years later, too many officers and directors still appear to be sitting behind that wheel, pretending to hurtle down the highway.

Now the government is supposed to draw up a strategy and make everything happen?

With whose capital? Whose resources? Supported by what underlying profitability?

Private capital can finance substantial development when investors can see credible returns. That is precisely why the industry’s ability to earn those returns matters. If producers cannot explain how their ambitions will generate value, transferring the discussion to Ottawa does nothing to resolve the underlying failure.

Call this self-serving gibberish if you like. Before celebrating another strategy, answer the question industry and government keep stepping around:

Who is paying for all this, and what profitable activity will sustain the investment?

That was the substance of my September 2 post. The question remains.

Energy and the Digital Revolution

Two developments offer a more constructive view of what could come next.

The first is Professor Philip Zelikow’s Hoover Institution presentation, American Energy: The Key to Success in the Digital Revolution. In less than six minutes, he connects the foundations of American industrial success with the requirements of the emerging digital economy. Watch the presentation

His historical argument brings together resource abundance, engineering talent, workforce education and an enabling political environment. Those capabilities allowed the United States to turn its natural endowment into industrial strength.

He then identifies three essential dimensions of the Digital Revolution: hardware, software and energy.

That third dimension should command the attention of everyone in oil & gas. Chips and software require a physical system capable of supplying the energy that makes them useful. Resource abundance creates an opportunity to build that system. Realizing the opportunity requires investment, infrastructure, technical capability and execution.

I recommend watching the presentation and following the Hoover Institution’s George P. Shultz Energy Policy Working Group.

My conclusion is straightforward. Energy will help determine which economies can realize the benefits of the Digital Revolution. Oil & gas producers have an opportunity to make a substantial contribution. They also have an obligation to demonstrate that they can sustain it commercially.

When governments and think tanks are articulating the opportunity, while governments and pipeline companies argue over the capacity to serve it, producer leadership should be unmistakable.

Where is it?

Brick by Brick and Stick by Stick

Consider Alberta and California as two different expressions of economic opportunity. Alberta possesses an extraordinary energy resource base. California has built a concentration of information technology businesses and expertise closely associated with the development of Artificial Intelligence.

Both illustrate the importance of turning resources, knowledge and investment into productive activity.

For Alberta, the relevant question is how effectively its resource wealth becomes enduring economic value. Calling energy an economic engine is easy. Keeping that engine productive, profitable and capable of financing its next stage of development requires considerably more.

I have argued for rebuilding this industry “brick by brick and stick by stick.” The emerging demands make that proposition increasingly difficult to dismiss.

The “muddle through” culture consumes attention, capital and time merely maintaining itself. Attempting to build the capabilities required for the Digital Revolution within that culture could absorb the very resources needed to move forward.

People, Ideas & Objects Synallagi, our user community and their service providers offer the basis for a different approach: reserves preservation, performance and profitability.

That means developing the information and operating capabilities through which producers can understand the economics of their properties, recover their capital and make independent decisions about when production creates value. It means treating profitability as the commercial foundation of reliable supply.

An industry expected to support a major expansion of economic activity must be capable of financing its own continuing contribution.

The Value Still in the Ground

The second constructive development concerns investment.

On April 7, 2025, I published Oil & Gas Arbitrage: The Market Finds a Way. The argument examined the opportunity to acquire oil & gas assets during periods of weak commodity prices and preserve exposure to their longer-term value. Read the paper

There are two related sources of potential gain.

First, higher realized prices can increase the expected future net cash flows from an existing reserve base. Because costs do not necessarily rise in proportion to revenue, the effect on value can be substantial. Its magnitude depends on the asset’s costs, production profile, development requirements, fiscal terms and the duration of the price improvement. The upside can be substantial: under the right cost and valuation assumptions, even a 10% increase in commodity prices could double an investment’s value.

Second, a stronger price outlook can make additional volumes economic to recover. Under the applicable technical and commercial criteria, that can support an increase in estimated reserves.

The geology has not changed. The economic boundary of what can be developed has.

Natural gas that cannot justify development at one price may become commercially attractive at a substantially higher price. The investor can therefore benefit from both improved economics on existing reserves and the potential development of additional resources.

Those additional volumes still require capital and execution. Their value depends on the producer’s ability to develop and operate them profitably. Reserves estimates, economic valuations and the accounting carrying value of an asset are also distinct measures.

This is why preserving the resource and improving the business that manages it belong in the same investment argument.

On September 14, Carlyle-backed Avenrock Energy announced an agreement to acquire Parallax Energy, establishing a new Western Canadian light-oil platform focused on Alberta’s East Shale Duvernay. The transaction remains subject to customary closing conditions and regulatory approvals. Carlyle’s announcement identifies long-duration resources and improving market access among the region’s attractions. Carlyle announcement

I see that investment as consistent with the broader opportunity described in my paper. Carlyle’s own rationale stands on its announcement.

Acquiring the assets establishes the opportunity. Operating them profitably determines how much of that opportunity becomes lasting value.

The Digital Revolution is raising the stakes. The resource exists. Capital is making choices. Officers and directors need to decide whether they will continue defending the culture that brought us here or begin building the capabilities the future requires.

Now is the time to start the development of Synallagi.

Consider This... AI is the Killer App of IP

A technical glitch (user based) left this in Monday's spot for publication, as draft. It is the last post of this series and is not out of sequence by publishing it today.

 Artificial Intelligence: Intellectual Property as the Killer App

George Sivulka, CEO of Hebbia, made an important distinction in this presentation:

• Individual Artificial Intelligence breeds chaos.
• Institutional Artificial Intelligence fosters coordination.

Isolated AI produces answers or actions, while institutional AI produces governed orchestration. Consider the number of AI Agents that may soon be operating within a producer firm. What types of Agents will they be? Who will authorize them? What information will they be permitted to access? What will they be expected to produce, and who will be accountable for the consequences?

AI Agents deployed independently throughout an organization represent the individual Artificial Intelligence Sivulka described. Each Agent may appear useful in isolation, yet collectively they can circumvent established processes, duplicate existing capabilities, produce conflicting information, and introduce considerably more risk than value.

The resulting questions are not theoretical.

• Was an AI Agent granted the database access it required, or was its usefulness limited by incomplete access? Did it obtain information beyond what was authorized? Is its output accurate, complete, and relevant? Can the result be recreated consistently? Is there an authoritative source against which it can be validated?
• What happens when an existing system presents more comprehensive and trustworthy information? Which result is correct? Which is reliable? If the two presentations are inconsistent, can either one be trusted?
• That is not coordination. It is managed chaos—assuming it is managed at all.

From Individual AI to Institutional AI

Institutional Artificial Intelligence does not mean merely providing every employee with access to the same AI platform. It means placing Artificial Intelligence within a defined operating environment governed by established authority, business processes, information structures, security, accountability, and Intellectual Property.

Before an AI Agent is permitted to act, the institution must be able to answer:

Who authorized the Agent?

What business purpose is it authorized to serve?

Which information may it access?

What transactions or processes may it initiate?

Which decisions may it support, recommend, or make?

How will its actions and sources be recorded?

Can its output be reproduced and independently verified?

Who reviews exceptions, errors, conflicts, and unintended consequences?

Who remains accountable for the result?

Without these answers, an AI Agent is not an institutional capability. It is an individual experiment operating inside a commercial organization.

That distinction becomes particularly important when Artificial Intelligence is introduced into accounting, administration, operations, and Joint Operating Committee activities. Will an AI Agent’s output be accepted for regulatory purposes? Will other members of the Joint Operating Committee rely upon it? Can its calculations be proven? If proving the result requires someone to reconstruct the entire analysis manually, what efficiency has the Agent actually created?

If the output is not sufficiently reliable for regulatory, contractual, accounting, or operational purposes, is it limited to supporting decisions? If so, what kinds of decisions? Surely consequential strategic or operational decisions cannot be based upon information whose authority, completeness, and reproducibility remain uncertain.

Artificial Intelligence is too valuable to be deployed without these determinations.

Artificial Intelligence Is Not a Substitute for Information Architecture

AI Agents, Palantir, Databricks, and similar technologies are increasingly treated as essential items that corporations must be able to mention to investors. Technology history contains no shortage of products and movements adopted as evidence that an organization was operating at the frontier—only to be replaced or forgotten shortly afterward.

Artificial Intelligence should not become another corporate fashion.

Its greatest value is not in gathering poorly organized data from incompatible systems and presenting management with a collection of possible answers. Search engines have been locating, aggregating, and organizing vast quantities of information for decades. Artificial Intelligence can do considerably more, but only when the underlying information and business architecture permit it.

The more important question is why existing oil & gas systems cannot prepare the required financial and operational information today.

Has the data been captured in its primary form? Is it properly normalized and organized within an appropriate database? Has the industry become dependent upon aggregated information because the original operational detail was never retained? Have management and operational accounting fallen behind financial reporting because the systems lack the information necessary to support them?

There is no technical reason for this condition to continue.

Field data capture, Internet of Things devices, automated processes, and transaction-level information can provide more complete, accurate, and timely financial and operational data. Artificial Intelligence can then operate upon that foundation. It should not be expected to compensate for the absence of one.

AI applied to poorly structured information may produce an answer faster. It does not necessarily produce the correct answer.

Artificial Intelligence Within a Transaction-Focused ERP

Synallagi (The Greek word for Transaction.) is a transaction-focused Enterprise Resource Planning system. Artificial Intelligence introduced into this environment can provide substantial benefits, including improved analysis, automation, exception management, planning, coordination, and Autonomous Asynchronous Transaction Orchestration.

It also creates consequential risks.

A producer’s responsibility does not disappear merely because an Artificial Intelligence system initiated a transaction, issued a request, prepared a purchase order, generated a Work Order, or performed another automated or autonomous action. The organization must continue to govern the authority, purpose, limits, and consequences of every action undertaken through its systems.

This creates a distinct challenge for future Enterprise Resource Planning systems. Artificial Intelligence must be capable of operating with greater autonomy while remaining subject to defined commercial authority, business rules, security, verification, and accountability.

If Synallagi appears complex, it is because these complexities already exist within the oil & gas business. Synallagi addresses them directly through software and through the specialized service provider organizations established by our user community. That software and those services are People, Ideas & Objects’ response to the operational difficulty of the industry and the technological capabilities society now demands.

Ignoring these risks would be foolish. Preventing Artificial Intelligence from creating value because the risks were never addressed would be equally so.

Intellectual Property as the Institutional Framework

Artificial Intelligence requires more than data and computing capacity. It requires defined knowledge, authority, processes, relationships, limitations, and expected outcomes.

That is the role of Intellectual Property.

Intellectual Property provides the guidelines, guardrails, frameworks, security, and operating definitions governing who may do what, where, when, why, and how. It establishes what an AI-enabled process is intended to accomplish, what it is prohibited from doing, and the conditions under which its output may be accepted.

Licensing our user community and their service provider organizations ensures that the Artificial Intelligence they deploy through Synallagi performs the functionality expected and authorized within their licensed areas. The applicable Intellectual Property defines the process management embedded in the software and the authority under which that process operates.

There is no more and no less.

Within Synallagi, Intellectual Property and Artificial Intelligence have a bidirectional operational relationship:

Intellectual Property provides the business models, process definitions, knowledge, authority, and constraints upon which Artificial Intelligence operates.

Artificial Intelligence applies, extends, and operationalizes that Intellectual Property through analysis, automation, coordination, and autonomous activity.

Intellectual Property is therefore both the fuel and the guardrails for Artificial Intelligence.

This is how individual Artificial Intelligence becomes institutional Artificial Intelligence.

Artificial Intelligence combined with Intellectual Property makes Orchestration both possible and operational.

Intellectual Property Organizes People

Intellectual Property is not merely a technology asset. It is a means of organizing people around defined knowledge, rights, responsibilities, and commercial purposes.

Copyright protection reflects a principle embedded in the United States Constitution: progress is encouraged when people have recognized rights in the works and ideas they create. Those rights allow knowledge to be developed, protected, licensed, commercialized, and distributed through durable organizational structures.

Intellectual Property will retain its value for as long as people continue to have bad ideas, good ideas, ridiculous ideas, brilliant ideas, and ideas whose value becomes apparent only after years of work.

Artificial Intelligence does not diminish the importance of those ideas. It increases the speed and scale at which they can be tested, refined, implemented, and distributed.

Much of the increase in the Western world’s standard of living can be attributed to specialization and the division of labor described by Adam Smith. Successive generations have found better ways to provide products and services faster, at higher quality, and at lower cost. Steam engines, internal-combustion engines, moving assembly lines, automation, software, and now Artificial Intelligence have extended that process.

The enduring source of progress, however, is not the tool alone. It is the organization of people and knowledge around productive purposes.

One of corporate America’s less-discussed weaknesses is its tendency to accumulate knowledge within organizational silos until that knowledge becomes inaccessible, commercially unusable, or obsolete. Artificial Intelligence, software, and new organizational models make those silos increasingly vulnerable.

Engineers and geologists no longer require the institutional scale of established producers to develop sophisticated operating capabilities. New producers can be formed around specialized knowledge, clearly defined Intellectual Property, software, Artificial Intelligence, and algorithms. With the appropriate commercial and organizational structure, these scientists can outperform larger competitors burdened by outdated ideas, systems and methods.

The reset is already underway—from organizations that hoard knowledge to individuals and communities capable of converting knowledge into operating capability.

Synallagi as an Institutional Environment

People, Ideas & Objects established Intellectual Property as one of Synallagi three principal competitive advantages. Our user community and our research are the other two.

Over the past several decades, Intellectual Property has enabled us to establish a distinct position within the Enterprise Resource Planning industry. It provides North American oil & gas with a structure, business model, plan, vision, method of addressing its persistent difficulties, and competitive framework of enduring value.

The details of what works and what does not will be determined by our user community during development. The broader institutional environment, however, is already defined through Synallagi’s nine Organizational Constructs, the seven frameworks of the Joint Operating Committee, its eleven modules, Oracle Cloud ERP, and the body of Intellectual Property governing their relationships.

Together, these components establish a shared direction.

When someone within the oil & gas industry asks how a particular activity should be undertaken, that person should be able to understand intuitively where the work belongs, which authority governs it, what information it requires, and how the need should be communicated to others operating within the same environment.

That common understanding is institutional coordination.

The Killer App

In the early 1980s, people purchased personal computers without knowing what practical purpose they would serve. Asked what they intended to do with them, many offered the same answer: store recipes.

Businesses were equally uncertain. A departmental personal computer might be shared among ten people and then carefully dusted each evening while providing little material value.

Lotus 1-2-3 changed that. The spreadsheet gave the personal computer an immediate, compelling commercial purpose. Word processing followed, and the expensive electronic recipe holder became an indispensable business tool. The term “killer app” came to describe the application that made the underlying technology essential.

Artificial Intelligence is now searching for its killer app.

Within Synallagi, that killer app is Intellectual Property licensing to our user community and their service provider organizations.

Our Intellectual Property licensing architecture gives Artificial Intelligence a defined commercial purpose. It determines what knowledge may be used, which processes may be performed, who may authorize them, what limitations apply, how responsibility is allocated, and where the resulting value belongs.

These mechanisms constrain risky or unbounded behaviour while enabling the desired degree of analysis, controlled automation, and Autonomous Asynchronous Transaction Orchestration.

Artificial Intelligence is a powerful new animal with multiple personalities. It can produce extraordinary value when applied appropriately and for authorized purposes. It can enter areas of consequential impact without sufficient forethought. It can also be used in ways that are plainly inappropriate.

Society has never before placed tools this powerful, affordable, and broadly available into the hands of so many people.

The difference between chaos and coordination will not be Artificial Intelligence itself. It will be the Intellectual Property, authority, architecture, and institutional discipline within which Artificial Intelligence is permitted to operate.

Artificial Intelligence + Intellectual Property, Makes Orchestration Possible and Operational. 

1. Constraining Abilities and Behaviors

Intellectual Property considerations impose hard and soft limits:

Access controls, segregation of duties, and sensitivity tiers: Synallagi permission models treat valuable IP as protected assets. AI inherits the same constraints as our user community and service providers; AI cannot elevate privileges or combine roles in ways that would violate IP-protection or embedded compliance policies dictate.

These constraints keep AI from becoming an unbounded actor operating in unknown and unconstrained ways within producers, Joint Operating Committees or other organizations Synallagi may be operational.

2. Harnessing Behaviors Through Intellectual Property-Grounded Guidance

Orchestration aligned to IP domains: Synallagi operates within scoped knowledge and tool access that mirrors the IP and Joint Operating Committees are organized. Orchestration enforces high-level business intent while remaining inside their IP-defined boundaries.

3. Enabling Controlled Automation and Desired Asynchronous Autonomy

The same Intellectual Property-centric controls that constrain the system also create safe operating envelopes for autonomy:

Risk-tiered human-in-the-loop: Routine, low-risk tasks can run fully autonomously. High-stakes actions involving large commitments, decisions, allocations or data sharing will trigger configurable thresholds that route to human approval or dual-control. Any proposed write or external action is checked against IP-protection policies, monetary limits, categorical rules, and anomaly detectors before execution.

Auditability and reversibility: Full logging of AI decisions, data accessed, and actions taken supports both operational control and later IP enforcement (e.g., proving independent development or detecting leakage).

Intellectual Property supplies both the distinctive knowledge that makes the AI valuable inside Synallagi and the legal and technical boundaries that keep it focused and accountable. The result is automation and autonomous behavior that is powerful enough to deliver the “killer-app” productivity gains while remaining inside the enterprise’s desired control surface. Without these IP-defined definitions and constraints, Artificial Intelligence becomes less useful and unacceptably risky.

Intellectual Property gives Artificial Intelligence something authoritative to know. Artificial Intelligence gives Intellectual Property the capacity to reason. Orchestration gives both the ability to act.

Conclusion

The next generation of Enterprise Resource Planning systems is being built today. North American oil & gas will participate in this environment in one form or another. The question is whether the people who will develop, operate, and depend upon these systems will build what they need for themselves—or accept whatever the status quo chooses to provide.

The choice is between an institutional system such as Synallagi and an alternative best compared to the Department of Motor Vehicles: centralized, procedural, slow to change, and more committed to preserving its processes than improving the results of those required to use them.

Persistence may be the one attribute current producers have working in their favour. They will continue to “muddle through.” How they will do so is increasingly difficult to understand. The commercial world has changed direction, while the industry’s unresolved problems become more restrictive, expensive, and crippling each day. As producer risks increase, the responsibilities, rewards, and opportunities available to individuals diminish, while the explanations offered by officers and directors become more elaborate.

Persistence is not a strategy.

If a 1920s vision of organizational efficiency is considered adequate for the 2020s and beyond, then “muddle through” remains the appropriate choice. Synallagi offers a different vision: markets and producers organized through the Joint Operating Committee, supported by our user community, specialized service provider organizations and an Enterprise Resource Planning architecture capable of adapting continuously to changing commercial conditions.

For individuals deciding where to invest their careers, knowledge, and future, the contrast could not be more stark.

Artificial Intelligence will intensify that choice. It is a remarkable technology whose eventual consequences may exceed anything we presently anticipate. Will it produce changes comparable to another Industrial Revolution? Almost certainly.

Its low cost, accessibility, and ease of use will place extraordinary capabilities in the hands of individuals and institutions alike. That prospect conflicts directly with organizations satisfied with a century-old operating model. Those organizations nevertheless retain one considerable advantage: they control most of the industry’s institutional and financial resources today.

They have also observed what happened to industries that were disintermediated, reorganized, or as we describe them, “refactored their organizational charts” before them. They have learned how to defend their authority and preserve their position. We should expect them to use the resources they control to do so.

The means through which individuals maintain their independence—from both DMV-style institutions and Artificial Intelligence controlled by others—is Intellectual Property. More precisely, it is enforceable access to Intellectual Property, clearly defined licensed authority, and the ability to convert knowledge into operating software and commercial capability.

Our user community can define what it knows to be accurate, embody that knowledge in Synallagi, and apply the resulting capabilities throughout the industry. Its members can then combine Synallagi’s explicit knowledge with the tacit knowledge accumulated within their service provider organizations, benefiting both producers and themselves.

That is the Synallagi vision: unified Intellectual Property ownership supporting distributed authority, innovation, specialization, and commercial independence.

It is a compelling alternative to the DMV model. It is also a choice each individual must make. For my part, I am grateful that I made that decision long ago.

This installment of the Consider This… series of papers has described Artificial Intelligence as the killer application of Intellectual Property. Possessing Intellectual Property has always been valuable, but the practical question remained: what are you going to do with it?

For years, Synallagi was stored in a database originally used for recipes. The Intellectual Property existed, but its ability to act remained limited. Artificial Intelligence changes that. It can interpret, apply, extend, and operationalize Intellectual Property at a speed and scale that were previously impossible.

The relationship is reciprocal. Artificial Intelligence makes Intellectual Property dynamic; Intellectual Property gives Artificial Intelligence its form, structure, purpose, authority, and limitations.

Without that structure, organizations may attempt to manage their risk by restricting the number of AI Agents they deploy and containing the fallout when those Agents produce conflicting information or exceed their authority. That is not an institutional solution. It is merely limiting the amount of chaos.

Within an oil & gas Enterprise Resource Planning environment, Artificial Intelligence must operate through defined business processes, authorized information access, verifiable results, accountable transactions, and enforceable Guardrails. Intellectual Property provides those conditions. It turns Artificial Intelligence from a powerful but unbounded tool into a reliable institutional capability suitable for financial, administrative, and operational use.

People, Ideas & Objects’ Synallagi—together with Autonomous Asynchronous Transaction Orchestration, our user community, and their service provider organizations—provides that institutional solution for North American oil & gas producers.

Synallagi is wrapped within an Intellectual Property framework that enables producers to meet emerging challenges, realize new opportunities, and eliminate persistent, systemic, and financially damaging problems. It aligns technology, knowledge, authority, motivation, and accountability within a coherent commercial architecture.

The result is what we describe as "A New Discipline" for oil & gas.

It is founded upon a revised culture of reserves preservation, performance, and profitability. It enables producers to increase their speed, capabilities, capacity, success, and achievements as the marketplace changes. Most importantly, it reduces Organizational Latency—the time between recognizing an opportunity, determining what must be done, developing the required capability, and achieving a successful result—to a fraction of what it is today.

The future is being built now. The only remaining question is who will build it—and for whose benefit. People, Ideas & Objects, our user community and their service provider organizations have the Intellectual Property in the form of Synallagi with Autonomous Asynchronous Transaction Orchestration. Intellectual Property gives Artificial Intelligence something authoritative to know. Artificial Intelligence gives Intellectual Property the capacity to reason. Orchestration gives both the ability to act. 

Artificial Intelligence Is the “Killer App” of Intellectual Property—Making Orchestration Both Possible and Operational.

Debate # 41, AI + IP = Orchestration

 Consider This… AI + IP = Orchestration — The Debate

I’ll begin with the usual caveat: producing these podcasts can feel like herding 100 cats into the same room. Some compromises are inevitable, and at a certain point we publish what we have. The presenters’ ever-changing pronunciation of Synallagi captures the challenge perfectly. Their first attempt is almost correct—a hopeful start—before things deteriorate, rather comically, as the debate progresses.

One substantive correction is necessary. Towards the end, the presenters confuse our user community with our developers, using the terms interchangeably when discussing the Targeting Framework. Throughout this podcast, references to “developers” should be understood to mean our user community.

The compensation system we have specified applies to our user community and their service provider organizations. Our primary development work is with Oracle, with the objective of delivering Synallagi as quickly and to the highest standard as possible. People, Ideas & Objects’ developers and other employees receive standard competitive salaries.

In addition, we levy a 15% assessment on income generated by the user community through the Targeting Framework to fund our employee bonus system. This aligns our employees’ interests with those of the user community and service providers. Because our work supports development across Synallagi, the bonus system connects that broad contribution to the success of the community as a whole.

We do not have a share option plan. Given the specialized market for an oil and gas ERP provider, we question whether a future public listing would offer a meaningful basis for employee compensation. A bonus system tied to the Targeting Framework provides a more practical means of rewarding employees for helping the user community advance and bringing the entire project to completion.

With that distinction established, the debate offers another useful way into the Consider This… AI + IP = Orchestration paper. Sometimes, getting 90% of what you want means accepting a few imperfections—and correcting the ones that matter. We are building a substantial library of Synallagi content, and I find these podcasts an effective way to catch up quickly and appreciate the breadth of what we are developing.

Consider This... AI is the Killer App of IP

 Guardrails

The Synallagi Targeting Framework will be examined comprehensively in a forthcoming paper within our 21st Century Marketplace Vision series. For this paper's purposes, it is sufficient to establish the guardrails within which it must operate.

The Targeting Framework is intended to identify, evaluate, monetize, and distribute a portion of the incremental benefits generated through the knowledge, skills, experience, expertise, ideas, and innovative capabilities of our user community. These benefits may arise from reduced costs, increased revenues, improved productivity, better business processes, or entirely new operating capabilities developed by our user community and enabled through our software developers.

In a directly related matter. Intellectual Property as discussed to this point forms the foundation of what is and what is not undertaken within the producer firm and oil & gas industry through Synallagi. Where in fact Artificial Intelligence is the “Killer App” that makes Intellectual Properties value realized. And as we will see in this paper AI plus IP makes Orchestration both possible and operational. 

Guardrails: Protecting Value, Trust and Architectural Integrity

A seemingly insignificant improvement—such as a recurring $0.25 reduction in cost or increase in revenue—may mean little to an individual producer. Applied repeatedly across the 1.1 to 1.3 million producing wells in North America, however, that same improvement could create substantial industry value. The Targeting Framework would determine the portion of that value attributable to an innovation and support the distribution of an agreed derivative share to our user community members and service provider organizations responsible for creating, implementing, and sustaining it.

The framework cannot be permitted to assess its own success subjectively. A permanent base case of industry performance must be established against which subsequent developments are measured. Benefits must be calculated independently, objectively, verifiably, and consistently—both for the most recent reporting period and cumulatively from the time Synallagi becomes operational. What gets measured gets managed.

Oversight must therefore be entrusted to an independent body representing our user community, producers, and other appropriate participants. That body would govern the evaluation, calculation, monetization, allocation, distribution, administration, and arbitration of benefits. Its purpose would be to ensure that value is neither claimed without evidence nor withheld from those responsible for creating it.

This is the first guardrail: no demonstrated value, no distribution.

The second is that every innovation must operate within Synallagi’s established business models and architectural framework. A change producing an apparent benefit in one area cannot be accepted if it creates hidden costs, inconsistencies, or failures elsewhere. Synallagi is an integrated Enterprise Resource Planning architecture. Much as a building has its foundations, electrical systems, plumbing, and structural components must work together. Shortcuts taken during development will eventually be paid for by everyone who depends upon the system.

Innovation must therefore be initiated, refined, developed, tested, documented, validated, and supported before its benefits can be recognized. Errors will occur—often more frequently than solutions during the early stages of development. What matters is whether those errors are identified, understood, corrected, and converted into better methods. The objective is not the appearance of progress. The objective is completion: work that operates accurately, reliably, and consistently throughout the architecture.

The third guardrail concerns authority. Synallagi development will occur within an independent community of qualified, authorized, and licensed collaborators. Our user community will provide the business knowledge and functional direction. Software developers will provide the comprehensive technical capabilities necessary to convert those requirements into operating software. Service provider organizations will combine the explicit knowledge captured in Synallagi with the tacit knowledge accumulated through implementation, specialization, and continuing industry experience.

Each participant will have a defined role. No contributor should receive credit for value that cannot be attributed to their work, and no participant should be able to appropriate another person’s contribution. The applicable Intellectual Property, licensing, documentation, attribution, confidentiality, and derivative-work requirements will govern how innovations are developed and incorporated into Synallagi. These matters will be addressed more fully in the section that follows.

The fourth guardrail is transparency appropriate to responsibility. Synallagi should produce an industry scorecard comparing the established base case with the performance achieved after implementation. That scorecard would show the aggregate value created through the combined innovations of our user community across North American oil & gas. Each user community member would also receive a detailed accounting of the innovations attributed to them, the value those innovations generated, and the compensation earned as a result. As stated earlier what gets measured gets managed.

Transparency does not mean that confidential methods, individual contributions, proprietary information, or commercially sensitive details must be exposed publicly. It means that the calculations, decisions, and distributions must be sufficiently documented to withstand independent review.

The fifth guardrail is that compensation must remain connected to realized value. The Targeting Framework is not intended to reward ideas merely because they are novel, nor effort merely because it was expended. It is intended to reward demonstrated improvements that producers can implement and from which the industry receives measurable benefits.

This changes the basis upon which some work may be valued. Compensation has traditionally been tied to attendance, hours worked, or a defined organizational position. Synallagi creates the opportunity to compensate people for finding better methods, developing them with software developers, proving that they work, and distributing their benefits across the industry.

Artificial Intelligence will accelerate this change. Manual movement of data and repetitive calculations will increasingly disappear, while the value of judgment, domain knowledge, innovation, and effective implementation will increase. The implications for work, productivity, and compensation will be considered more fully in the Artificial Intelligence section of this paper.

These guardrails are not intended to constrain innovation. They establish the conditions under which innovation can be trusted, protected, commercialized, and distributed at scale. They align the interests of producers, our user community, service provider organizations, software developers, producer investors, bankers and the broader industry around a common result: independently verified improvements in reserves preservation, performance, and profitability.

The Targeting Framework must ultimately answer two questions:

• What measurable value has Synallagi created for North American oil & gas?
• And who is responsible for creating it?

If those questions can be answered objectively, accurately, and fairly, our user community will have more than an incentive to innovate. It will have a durable means of building businesses around its knowledge, converting individual expertise into industry-wide capability, and sharing in the value it creates.

The Tragic and Utopian Visions

In A Conflict of Visions: Ideological Origins of Political Struggles, Thomas Sowell distinguishes between two fundamentally different understandings of human nature: the constrained vision and the unconstrained vision, also commonly described as the tragic vision and the utopian vision. The constrained vision regards human beings as permanently limited in knowledge, judgment, and virtue. The unconstrained vision considers human nature sufficiently malleable and perfectible to permit society to be deliberately remade according to an ideal design. Basic Books, Google Books.

The danger arises when a utopian vision attempts to impose a perfect outcome upon imperfect people. By discounting human limitations, competing interests, dispersed knowledge, and unintended consequences, the pursuit of perfection can produce coercion, institutional failure, and precisely the harms it was intended to eliminate.

Synallagi subscribes to the tragic—or constrained—vision. It does not assume perfect knowledge, flawless judgment, or uniformly benevolent behaviour. It therefore relies upon defined authority, distributed knowledge, incentives, accountability, measurable performance, and institutional guardrails. As the discussion below demonstrates, Synallagi is designed to work with human limitations, not to pretend they can be designed away.

Motivation: Aligning Individual Reward with Industry Value

In our January 20, 2025 paper, “Catalysts for Cultural Change: The Leadership Role of People, Ideas & Objects User Community,” we outlined a compensation model for the individuals responsible for developing, completing, and continually improving Synallagi.

The underlying principle is straightforward:

What gets measured gets managed—and what creates measurable value should be rewarded.

People, Ideas & Objects must provide sufficient motivation for our user community to bring Synallagi into operation throughout the North American oil & gas industry. That motivation cannot depend upon promises of future opportunity alone. Members must be able to support themselves while Synallagi is being developed, receive meaningful recognition for completing the work, and participate in the recurring value their innovations create after commercial release.

This requires a layered compensation model.

During development, our user community members would receive basic hourly compensation and performance-based bonuses. After commercial release, the Synallagi Targeting Framework would begin evaluating, calculating, monetizing, and distributing the recurring value created by their innovations, automations, and autonomous developments. Members would also earn revenue through their service provider organizations, including fees for managing Joint Operating Committee processes and compensation for participating in the continuing development of the processes for which they are responsible.

Each form of compensation serves a distinct purpose.

Basic Hourly Compensation

Members of our user community would receive basic compensation of $50.00 per hour for their participation throughout the software-development process. Their work would include collecting information, identifying issues, analyzing existing processes, formulating solutions, defining business requirements, testing results, and designing the organizations through which those processes will eventually be delivered.

Our user community members are not software developers and will not be expected to write code. They will have access to a dedicated software-development team capable of converting their knowledge, ideas, and functional requirements into operating software.

Their role is creative and analytical. They must determine what Synallagi needs to do, why it needs to do it, how the resulting process should operate, and whether the completed software fulfills its intended purpose.

Basic hourly compensation provides members with the means to support themselves while performing this work. It also prevents the future opportunity offered by the Targeting Framework from being used against them. People cannot reasonably be expected to accept substantial professional and financial risk while receiving nothing more than a promise of compensation after commercial release.

At the same time, hourly compensation alone cannot provide the motivation necessary to complete a project of Synallagi’s scope. It recognizes time and participation; it does not fully recognize performance, completion, innovation, or the value ultimately created.

That is the purpose of the bonus system.

Performance Bonuses

Performance bonuses would provide immediate recognition for achieving prescribed outcomes during development. They are distinct from distributions made through the Targeting Framework.

Bonuses reward the successful completion of defined work. The Targeting Framework measures and distributes a derivative share of the recurring value subsequently created by that work in the marketplace. One provides near-term compensation for performance; the other creates the potential for long-term income from realized industry value.

The bonus system must recognize that performance occurs at several levels.

Project Completion Bonuses

Individual projects would be budgeted, approved, and administered by a project owner responsible for a Synallagi module, major process, or defined area of functionality, such as the Material Balance Report or Work Order.

Each project would have established requirements for functionality, quality, accuracy, timing, documentation, testing, and integration. A Project Completion Bonus would be earned when those requirements were satisfied.

This bonus provides the additional compensation necessary for members to receive the full value of the time, judgment, and effort invested in completing a project. It supplements the basic hourly compensation received while the work is underway.

Projects may be short or long and may require both synchronous and asynchronous participation. Several projects may operate concurrently. Work that cannot be completed within its requirements may need to be reassigned, and members who repeatedly cannot meet their responsibilities may need to reconsider their continued participation.

The objective is not activity. It is completed work that functions properly within Synallagi.

Module and Major-Process Bonuses

Every Synallagi module is responsible for a defined category of functionality and process management. Each module contains numerous specialized processes, functions, information requirements, integrations, and dependencies.

Project Completion Bonuses recognize incremental accomplishments. Module and Major-Process Bonuses ensure that members also remain focused on the larger deliverable.

An individual project may satisfy its immediate requirements yet leave the overall module incomplete. Members must therefore remain attentive to how their projects combine with the work of others and whether the complete module or major process operates as intended.

Team-Based Bonuses

Synallagi cannot be developed through isolated individual contributions. Its complexity, scope, scale, and required development speed would produce incoherent results if every participant concentrated exclusively on their own work.

Team-Based Bonuses would reward coordination, shared problem-solving, cross-functional support, and successful completion of the broader Synallagi platform. These bonuses may complement—and in some circumstances exceed—individual performance bonuses because the value of an integrated Enterprise Resource Planning system depends upon the success of the whole.

Some members will focus almost exclusively on their licensed domain. Others will contribute wherever additional effort is required to move a process, module, or the complete platform through its final stages. Both forms of participation are necessary and should be recognized appropriately.

When Synallagi achieves commercial release, a final Team-Based Bonus would be distributed among those whose contributions earned participation in that result.

Commercial release would also establish the point from which the Targeting Framework begins measuring the incremental value created by subsequent innovations, automations, and autonomous developments throughout the Synallagi ecosystem.

Profitability, Innovation, and Accountability Bonuses

The objective of People, Ideas & Objects and our user community is to provide dynamic, innovative, accountable, and profitable oil & gas producers with the most profitable means of oil & gas operations—everywhere and always.

Our user community is also expected to establish a culture of reserves preservation, performance, and profitability throughout the industry.

That responsibility requires members to search continually for better methods within producer firms, Joint Operating Committees, and the broader industry. Profitability, Innovation, and Accountability Bonuses would recognize work that materially advances those objectives during development and implementation.

The purpose is to reward people for changing how work is performed, resolving persistent problems, and creating capabilities that would not otherwise exist.

Automation and Autonomous Development Bonuses

Automation and autonomous development are not one-time undertakings. They represent a continuing effort to provide better-quality services faster, more accurately, and with substantially greater efficiency.

Automation and Autonomous Development Bonuses would motivate our user community to continue identifying activities that can be simplified, automated, or performed autonomously through Synallagi. The industry benefits from those improvements through lower overhead, improved execution, greater consistency, and better use of professional knowledge.

The cost of rewarding an individual innovation becomes comparatively small when distributed across the production profile of the North American oil & gas industry. Through Synnefa.ai—Synallagi’s cloud-distribution environment—producers would share the cost of maintaining a single industry-focused Enterprise Resource Planning system in a manner comparable to the cost-sharing economics of cloud computing.

Synnefa takes its name from the Greek word for “clouds.”

From Immediate Recognition to Recurring Value

Development-stage bonuses and the Targeting Framework must not be confused.

Bonuses compensate defined performance and completion. They provide relatively immediate recognition while Synallagi is being built and brought into operation.

The Targeting Framework begins with demonstrated marketplace performance. It determines whether an innovation has created measurable value, how much value has been created, who was responsible for creating it, and what derivative share should be distributed to those contributors.

This creates a direct relationship between individual initiative and industry value.

A user community member who identifies an opportunity, works with software developers to implement it, proves that it operates successfully, and distributes it throughout the North American producer population should participate in the value created by that work. The greater the recurring benefit and the broader its application, the greater the potential long-term value to the member responsible.

Completion is therefore not merely an organizational demand. It is the point at which future value can begin to be realized.

Incomplete work cannot be implemented. Unverified work cannot be valued. Poorly integrated work cannot be distributed safely. Shortcuts that damage the architecture delay or diminish the benefits available to everyone—including those responsible for taking them.

Motivation consequently becomes one of Synallagi’s operating disciplines. Members are rewarded for completing their work accurately, supporting the work of others, protecting the integrity of the architecture, and continually seeking new value after commercial release.

Building Independent Businesses

Our user community must ultimately be independent of both Synallagi and People, Ideas & Objects as operating businesses. Members cannot build their futures upon promise and hope. They require defined areas of responsibility, durable commercial rights, and several sources of income.

Based upon each member’s knowledge, experience, contribution, and area of specialization, an appropriate Synallagi domain would be identified and licensed to them. That Intellectual Property license would provide the authority necessary to operate within the domain and prepare authorized derivative works.

The license would also grant the member the exclusive right to establish a service provider organization for that domain. Through that organization, the member could combine the explicit knowledge embodied in Synallagi with the tacit knowledge accumulated through implementation, operation, support, and continuing improvement.

Their potential compensation would therefore extend beyond hourly payments and bonuses to include:

Fees earned while participating in incremental software development.

Process-management fees charged through their service provider organization.

Performance bonuses earned during Synallagi development and implementation.

Targeting Framework distributions arising from measurable, recurring industry value.

The long-term commercial value of operating within an exclusively licensed area of Synallagi.

Profitable Production Rights represent another component of Synallagi’s funding model. These rights will be made available to members of our user community at a 15 percent discounted price when available. Their limited adoption does not establish a failure of Synallagi or of Profitable Production Rights; it reflects the continuing failure of producers to act upon the opportunities available to them.

Motivation as an Operating Principle

The compensation model is designed to balance survival, performance, completion, innovation, and long-term value.

Basic hourly compensation enables people to undertake the work. Performance bonuses reward defined achievements. Project, module, and team bonuses align individual effort with the completion of the integrated platform. The Targeting Framework allows contributors to participate in the recurring value their innovations create. Intellectual Property licensing and service provider rights enable them to convert personal expertise into enduring independent businesses.

Together, these mechanisms answer the fundamental question confronting every prospective member of our user community:

Why should I accept the risk, make the commitment, and undertake what may be the most difficult professional challenge of my career?

Because Synallagi offers more than employment. It provides an opportunity to build, own, operate, and continually improve a specialized business around the knowledge and experience that an individual has spent a career developing—and to share in the industry-wide value that knowledge creates.