Firstly, without fully recognizing the costs of exploration and production, the oil and gas production appears to be highly profitable. Which attracts more investment leading to more capital costs which increases the productive capacity of the industry which “appears” to also increase its profitability. In reality none of the investment dollars are being returned to the business when these capital costs are not recognized in a timely manner. Therefore the investors and bankers have to make up for the annual cash shortfall of the producers created when the commodity prices are unable to cover the entire costs of the business. The business is still incurring these costs, however the accounting is reporting that these costs are ballooning assets that hold some mythical value for the producer. Nothing could be further from the truth.
Do this for four decades and the hollowing out of all measures of value of the industry will be complete. Producers have been reporting profits when in reality, if all of the costs were considered, oil and gas has been a lost cause, supported by investors, for decades. The residual infrastructure does not have the capital or financial base or the performance capabilities, because the overproduction as a result of the chronic overinvestment has systemically collapsed the commodity prices. Then, add shale!
Certainly my thesis of the willful destruction of the industry, as noted last Thursday, is one possibility. It is very easy to run an industry when it generates no value. Producers would assert that prices being what they are is the cause of the difficulties in oil and gas. That the “market” is responsible for those prices being the other part of their argument. The Preliminary Specifications decentralized production model contains the price maker strategy that enables the producers to “make” the prices necessary to earn profits in the industry. And it would also be my assertion that the producer's role in society expands beyond just what the oil and natural gas prices provide. That they may have a role beyond partying when prices are high. Again, our relationship hasn’t been harmonious or lucrative for me but at least I can say I make an honest living.
In addition to the financial wreckage that is occurring the people in the industry have been destroyed and displaced as well. This will hold long term consequences for the industry in whatever form it takes in the future. People who have been educated in a discipline, who have dedicated themselves for decades to a producer and an industry shouldn’t find themselves out in the unemployment lines with unskilled labor. It is however the easy way to run an industry, once again.
Industry could have built the Preliminary Specification but passed on that opportunity, now the consequences of their inaction are being realized and the situation is their responsibility. The Preliminary Specification has been available in the market for a long enough period for it to have been adopted. That hasn’t happened because it is contrary to the best interests of those in the industry. It is counter to the vested interests. On a go forward basis they will need to rebuild the value that has been destroyed within the industry. If all of the North American infrastructure can’t stand on its own without significant capital investment each and every year, that hemorrhaging will need to be stopped first.
If it is believed that those who destroyed the industry. That passed on our solution to resolve the issues that were leading to that destruction. Will be the ones that come up with the means in which to right the wrongs, rebuild the value that has been systemically drained for four decades, and realize all the value we have identified that is available to the startup oil and gas producer in the next 25 years. Then pigs really do fly.
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.