Put that down as another bold statement stated here for the first time. Add it to my long list of such statements. The war between accountants and engineers has been a classic battle raging on in oil and gas for these past four decades. Engineers, and to a lesser extent geologists, run the show. Those that are good at what they do rise to the top as they should. The business of the oil and gas business is an applied science and there can only be a scientist running the show. I’ve been in the business for 39 years and I can guarantee you that I would run an oil and gas producer into the ground in very short order. I don’t understand engineering. I’d like to understand engineering. My son is a chemical engineer, but he only laughs at my lack of understanding. It’s a discipline like no other, you either understand it or you don’t.
Which makes the engineer omnipotent in oil and gas. When an accountant raises a point about the inappropriate methods of capitalization policies in the industry. And the engineer knows that the SEC dictates the use of the ones the accountant is criticizing, the accountant only loses more credibility in the eyes of the engineer. Over four decades accountants have lost a lot of credibility in the eyes of the engineers in oil and gas. Mark this up as another disaster brought to us by the inappropriate policies of the SEC.
Profitability can only be achieved when the costs of production are recognized in a timely and appropriate manner. By deferring the costs of capital to the balance sheet for the life of the firm, which is what the SEC model does, you never recognize the real cost of production. Therefore your profits are overstated. In a capital intensive industry they are severely overstated. Making things in the industry appear much healthier than they are. The proof that this was happening was the evidence that the industry never generated any cash. The only cash that the industry ever had was the new money that came in from the investors and the bankers. The culture was that you would always have another share issuance each and every year. You had to in order to keep the doors open. Now the money doesn’t come in and the game is exposed for what it is and the credibility of the industry is shot.
The only way that I can see us moving forward is to adopt the plan that is inherent in the Preliminary Specification. Turn the industry into a profit generator. Real profits, not the funny accounting profits of the SEC. Fix the long term supply issues of the resource base of geologists and engineers and then use that enhanced capability to approach energy independence. In that way we can get out of this situation quickly and effectively. Move to a new basis of operation in the industry. And build for tomorrow.
The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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.