Until we stop dealing with the industry as just an engineering exercise and begin to start managing it as a profitable business we will continue with the status quo destruction. The number to remember is 17% of the shale based reservoirs are located in the United States. This can begin when the industry adopts the Preliminary Specification and as a result has the production discipline that is needed to correct the overproduction and oversupply. There will then be two types of producers in the industry. Both of which will be using the Preliminary Specification. The first group of producers will be the new startups that we will begin to see more of. And the second set will be the existing producers which we can now affectionately call the walking dead.
People, Ideas & Objects recommend that all future oil and gas development be done through startups. The strategic competitive advantages are phenomenal in comparison to the walking dead. Any investments into these startups provides 100% pure equity or debt exposure for the new investors. Whereas the investors face long lines of debtors and other equity interests in the walking dead that dilute their investment to negligible, if any, value. The other aspect is the cash commitments to these debt and equity holders in the walking dead will leave little or nothing left for any new investor. At best, any new investors cash will be used to pay down old debt of the walking dead producers. The walking dead’s competitive cost and payment structures are permanently uncompetitive.
Recently Blackstone announced the formation of two new startups in the industry, (here and here) using this startup strategy to their advantage and investing $1.5 billion. It's not that Blackstone are necessarily listening to People, Ideas & Objects it's just good business sense to do adopt this startup strategy. It is however true too that we have been in discussions with Blackstone since November 2015. This strategy also enables the startups to participate in the fire sale oil and gas property marketplace. Recall Chesapeake’s recent disposition of its Barnett shale assets for no cash consideration other than the opportunity to get out of their monthly cash drain.
This industry configuration provides the startups with the opportunity to leverage the existing operatorship capabilities of the walking dead. All at the minimum costs of the overhead allowances being charged. Giving the startups the time to build their own capabilities in the long run. The problem with this strategy is that People, Ideas & Objects assessment of our Revenue Model is based on the production profile of the producer. Meaning our revenue will need to come from the walking dead. Maybe I should find a better name for this class of producer and be more diplomatic. Never.
The walking dead have an obligation to their shareholders and to their debt holders. They have an obligation to their staff and the people that they conduct commercial operations with. I think their classification here is appropriate and they need to begin to operate their enterprise as a profitable business and not just an engineering exercise. The time for niceties passed a long time ago and it's time we all started to move forward. It would also be my opinion that those who would find this post offending wouldn't see the phenomenal business opportunity being spelled out here. So yes I do see the walking dead being the primary source of our revenues. It’s the only way they’re going to achieve profitable operations.
If industry was disappointed with my tone then maybe there is another way in which to deal with it. I have worked on the research, development and business regarding the Preliminary Specification since 1991. I have funded these developments myself personally since 2003 and have received nothing but a sound thrashing from industry since August 2003 when I developed the use of the Joint Operating Committee as the key organizational construct. I have been forced to make it a full time endeavor since that time as I am not welcome, or persona non grata in the industry. I believe I have built significant value for the industry and the industry is in the condition that it’s in due to the reasons that I have identified and solved in the Preliminary Specification. The person responsible for solving what can arguably be the most significant issue in oil and gas, ever, is persona non grata! I can be as harmonious as the next guy. I just want to build the software and solve this problem. Throw a little cash this way, producers have nothing to lose.
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.