Our Oil and Gas White Paper, Part XII

    A quick note about software

All of these components of our competitive advantage require the software known as the Preliminary Specification to be built and operational. As we’ve learned in the Preliminary Research Report (2004), software defines and supports the organization. What we also learned at that time was the producers response to that knowledge was they would not change their software, and hence, there would not be a threat to the manner in which they managed the oil and gas producers. This has been the policy of the producers since that time and they’ve been able to ensure that they’ve been handsomely compensated at the expense of everyone else in society. We believe the current bureaucracies within the producers are only riding out the last few minutes of their prosperity before they exit. That would be consistent with the history of organizations going back to the 1930’s. Without the software to run the industry and producer firms profitably, as described in the Preliminary Specification, it will not happen. We have declared the economic concept of spontaneous order null and void as a result of the role that software occupies organizations in the 21st century. In order to change the organization you must change the software first. Otherwise any attempted changes will only see the organization regress back to the way that the existing software manages the organization. This provides further support for the defined software development capabilities that People, Ideas & Objects are offering with our user community who hold the power and control necessary to make changes to the software and services used in oil and gas. Without these oil and gas will remain stagnant.

Hosting of the People, Ideas & Objects Preliminary Specification applications and modules, and Oracle modules, will be via cloud computing architectures. This provides a more cost effective solution to the industries needs as the budget requirement for hardware and support will be on an as used basis. We will also have the resources and capabilities to meet the producers demands of our software during month-end closing etc. In addition throughout this sub-industry that we’re creating between the Information Technology firms and the producers. We will be using Google’s Apps for your Domain based applications and collaborative environment. These enable us to be far more flexible and productive in the tasks that we need to undertake.

These are a summary of the six aspects of our competitive offering for the oil and gas industry. They are structured to provide the producer and industry with a profitable operating base in which to approach the 21st century. However, what we know is that by using the Joint Operating Committee, the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. We enable our software to approach and undertake the administrative, accounting and operational issues that the industry faces today and for the future.

Security & Access Control

What we have with using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer. Is the interactions of many producers and suppliers who are involved in the day to day commercial and strategic concerns of a Joint Operating Committee. What we need to concern ourselves within the Security & Access Control module is that the right people have the right access to the right information and data with the right authority at the right time and at the right place.

Throughout the Preliminary Specification we discuss one of the premier issues of the oil and gas industry. That being the demand of the earth science and engineering effort is increasing with each barrel produced. This is best represented in the steep escalation of exploration and production costs involved in oil and gas. At the same time the critical earth science and engineering resources are somewhat fixed and are difficult to expand in the short to medium term. Add to that, an anticipated retirement of this brain trust in the next twenty years, the depression we are in is stalling the careers of recent university graduates, the expected production profile of the North American continent and the problem becomes of critical concern.

There are few short term solutions to the short fall in geologists and engineers over the next twenty years. It takes the better part of that time to train them to operate in the industry. What we do know are several “things” that are being applied in the People, Ideas & Objects Preliminary Specification. Key to a number of concepts application are what we call the Military Command & Control Metaphor. Which is a method developed in the Security & Access Control module of imposing command and control over any and all Joint Operating Committees, working groups, producer firms or organizations the producer may need to add structure to.

The concept of specialization and division of labor is well known as a principle of economics that brings about greater amounts of economic productivity from the same volume of resources. Given that the volume of earth science and engineering resources are known for the foreseeable future, specialization and the division of labor will provide us with a tangible means in which to deal with the productivity of the oil and gas industry. In today’s marketplace to approach a heightened level of specialization and division of labor, particularly from a scope and scale point of view, without the use of software to define and support it would be downright foolish.

The pooling concept is the solution to the current desire that each producer firm acquires the earth science and engineering capabilities necessary to deal with all the needs of their “operated” properties. This creates unneeded “just-in-time” capabilities for these scarce scientific resources. When each producer within the industry pursues this same strategy substantial redundancies are built into the industries capabilities. Redundancies that are left unused and unusable. What is proposed through the People, Ideas & Objects software application modules is that the producers operational strategy avoids and eliminates the “operator” concept and begins pooling technical resources through the partnership represented in the Joint Operating Committee. That way the redundancies that would have been present in the industry can be made available to the producers and used by the producers through an advanced specialization and division of labor.

What these concepts require therefore is what the Security & Access Control module is designed to provide. The system must provide the right access to the right person at the right time and the right place with the right authority to the right information. With the Military Command & Control Metaphor there will also be the manner in which the technical, and all the resources that have been pooled from the producers, interact with an appropriate governance and chain of command within a Joint Operating Committee that spans many producers.

Oracle’s products provide a strong layer of mission critical capabilities in the Security & Access Control module. Although this comes with additional costs, I am certain that no one will argue with the quality and secure knowledge that these products bring. I also am proud that I maintain the two ugliest websites in this blog and our wiki. This is for two reasons the first being, I’ve provided a solution to what I see as the issues to oil and gas without any support from the producers. On the contrary it has been a protracted and ugly fight since August of 2003. If the best ideas are being expressed on the ugliest websites I hope the bureaucrats are adequately humiliated. Secondly these sites are both hosted by Google. Which provides me with a technical infrastructure that is more or less impenetrable from a security point of view. Our websites are not generally allowed past the producers firewalls but they also are not subject to any denial of service attacks or malicious behavior. As far as I’m aware we have a 100% up time record. By using Oracle and Google in the configuration for the sub-industry and also the delivery of our products we gain the same kind of advantages from a security and access control point of view.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part XI

   4) Innovation for Profits

As the fourth element of our competitive advantage of providing the innovative oil and gas producer with the most profitable means of oil and gas operations. We focus on innovation as the way in which to enhance the profitable nature of the producer and to ensure that the consumers cost of energy is as low as it can be. Innovation for profit, particularly from the science basis of the business, is the successful perspective for the 21st century oil and gas producer. It is within the DNA of the Preliminary Specification how the processes of innovation are identified and supported that enhance the ability of the innovative and profitable oil and gas producer. From Professor Giovanni Dosi.

In the most general terms, private profit-seeking agents will plausibly allocate resources to the exploration and development of new products and new techniques of production if they know, or believe in, the existence of some sort of yet unexploited scientific and technical opportunities; if they expect that there will be a market for their new products and processes; and finally, if they expect some economic benefit, net of the incurred costs, deriving from the innovations.

With an inventory of oil and gas assets that are non producing. The dynamic, innovative, accountable and profitable oil and gas producer will have readily available properties to focus their innovations on.

    5) Lower Costs of Exploration & Development

The oil and gas industry needs a dynamic, innovative, accountable and profitable service industry in order for it to be dynamic, innovative, accountable and profitable. In the brief moment that we’ve had “good times” in the industry, producer firms accused the service industry of being greedy and lazy due to the high field costs that were being experienced. Today the service industry has had their activity levels slashed and their accounts receivable extended for up to 18 months by the producers. A situation that puts their organization, unnecessarily, in jeopardy. There is substantial conflict between what is required and what exists. The Preliminary Specification works to mitigate this conflict by addressing the issue of how the producer firm deals with the generation and management of ideas in the service industry. Currently the producers ignore and abuse the rights and ideas developed by the vendors that they use. And as time has passed, the number of companies that have initiated new products, services and competition have dwindled. Leading to the situation where the producers have a limited number of very large service industry participants who have the pricing power on their side during the alleged “good times.”

It is through the Preliminary Specification that the producers begin to respect, sponsor and support the ideas generated by the service industry. Oil and gas producers do not compete on the basis of drill bit manufacturing technologies. It is on the basis of the respect by producers of the service industries Intellectual Property that will enable service industry representatives to respond with new and innovative products, services and competition. Through a variety of interfaces in the Resource Marketplace and Research & Capabilities modules the producers are able to participate and lead the creation of new and better products and services by clearly expressing their needs and allowing the service industry to respond.

When the oil and gas industry has a dynamic, innovative, accountable and profitable service industry supporting the oil and gas industry then the profitability of the oil and gas producer will be enhanced, further contrasting People, Ideas & Objects business model to what the current bureaucracies may be using today.

    6) Earth Science and Engineering Resources

The Preliminary Specification recognizes and supports the dynamic, innovative, accountable and profitable oil and gas producers competitive advantages of their land and asset base, and their earth science and engineering capabilities. It is through the use of innovation, specialization and the division of labor that we leverage the earth science and engineering resources of the producer firm. As with the fourth and fifth point above, investments in innovation are undertaken with the express intent to return a profit. Innovation on the sciences of oil and gas are part of the producers competitive advantages and are therefore the express purpose of the modules within the People, Ideas & Objects Preliminary Specification.

In terms of specialization and the division of labor, the producer firm must approach the issue of the pending limited base of earth science and engineering resources. Pending due to the retirement of the brain trust of the industry, the lack of new hires from the universities, the expected throughput increases in North America and the ever increasing demand of geology and engineering with each incremental barrel produced. People, Ideas & Objects have developed the pooling concept to eliminate the unused and unusable surplus capacity of these resources that are trapped within the silo’s of each bureaucracy. In addition we have used specialization to reorganize certain skills within these professions to service providers who can specialize in the specific skills. It is with the pooling, specialization and division of labor that the demand for engineers and geologists will be more manageable. This organizational structure is identified and supported throughout the Preliminary Specification.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Third Friday

Our Oil and Gas White Paper, Part X

This post reflects my approach to writing this paper, and the difficulties that I’m making for myself. The randomness of the order and presentation to this point is not necessarily what it will be in the final edited position paper. There is significant material that needs to be included in this paper. And the means in which the full scope of this material is not necessarily top of mind when it’s written. The following number of posts is a rewrite of the Preliminary Specifications Executive Summary. I will also be rewriting the Abstract and Preamble during this process.

The Preliminary Specification is a twelve module ERP (Enterprise Resource Planning) software system designed for the dynamic, innovative, accountable and profitable oil and gas producer. It uses as its key organizational focus the Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the industry. By moving the compliance and governance of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee we achieve a speed, innovativeness, accountability and profitability that is necessary for at least the next twenty five years.

Keep in mind while reviewing the Preliminary Specification that it is People, Ideas & Objects claim that we provide the oil and gas producer, as our competitive advantage, the most profitable means of oil and gas operations. And we do this in the following six fundamental ways.

    1) Our Value Proposition

The Preliminary Specification provides the most profitable means of oil and gas operations. We have quantified the value of the difference between our system and the status quo at $25.7 to $45.7 trillion over the next 25 years. These are as a result of the ability of producers to avoid any losses on operations by knowing precisely which properties are losing money and which ones are profitable. Something quite remarkably they are unable to determine today. Then they’ll be able to shut-in any losing properties leading to the dynamic that is discussed below in item 3.

    2) Specialization and the Division of Labor

If we review the Preliminary Specification there is a defined restructuring of the industry that takes place throughout the modules. The oil and gas producer is a stripped down version of itself that has the C class executives, earth science and engineering resources, land, legal, and minor support staff. And that’s it. The rest of the administrative and accounting resources of the producers are reallocated and provided by service providers. And each of these service providers are focused on one process, or one element of a process using the industry as its client base. So for example there would be one lease rental payment processor that handles all of the industries lease rental payments. Where the cost of the lease rental payment, and the billing for the lease payment service provider is billed directly to the appropriate Joint Operating Committee, not the individual producer. We are moving from the reliance on producers fixed administrative and accounting capabilities to a reliance on the industries variable administrative and accounting capabilities.

The advantages of moving to a system and methodology such as this is its lower cost and efficiency. The costs associated with the lease payment processor would be a small percentage of what is incurred by the industry today. By focusing on the most efficient way to process lease rental payments, and only lease rental payments, the service provider would become specialized and reduce the time and effort in administering these tasks to a small component of the costs incurred today. Around 1776, in Adam Smith’s pin factory, his research yielded a 240 fold increase in productivity from the changes that he made in the process of making pins. Having the lease rental payment process, and most particularly the administrative and accounting processes of the oil and gas industry subject to this type of analysis, complete with a software development capability as proposed by People, Ideas & Objects, similar results in productivity would be attained. All economic growth since the late 1700’s can be attributed to enhanced organization through specialization and the division of labor. Society today requires software to define and support any enhanced version of specialization and division of labor. People, Ideas & Objects software and our software development capabilities are critical capabilities for the oil and gas industries performance and future growth.

    3) Capability to Remove the Marginal Production and Become Price Makers

With the high costs associated with exploration and production, and particularly shale, it’s no surprise that producers are reporting losses on operations. What is surprising is that producers have done nothing to mitigate the chronic and systemic overproduction that has caused the decline in oil and natural gas prices. The reason for this chronic overproduction is the producers have to generate the revenues to cover the overheads they incur in what is called the “high throughput production” model they employ. This model has the overhead costs of the producer firm being incurred whether there is production or not, and as a result, it makes their operation a high cost operation, even at full production. At lower production volumes it skews their earnings and their overhead costs appear out of place.

In the Preliminary Specification we have employed the “decentralized production” model. As we mentioned in the second point above, the service provider charges for their services directly to the Joint Operating Committee the costs of their accounting or administrative service. If the property is shut-in due to low deliverability, high costs or other reason then there is no charge incurred for the overhead item by any of the individual service providers as they’ve conducted no work on that property, and neither the producer or the Joint Operating Committee are incurring any of the accounting or administrative overhead during times of shut-in production. Therefore the only costs that are not covered during times of shut-in production are the costs of capital. The producer can therefore shut-in unprofitable production based on an accurate, detailed accounting and attain their highest level of corporate profitability by not having their losing properties diluting their profitable ones. They can save those reserves for a time when they can be produced profitably. Those reserves will not have to carry the incremental costs of subsequent monthly losses that need to be recovered in the future. And finally, by keeping that unprofitable production off the market those commodities will find their true marginal costs.

If producers across the industry follow this process then oil and gas prices would not have the significant declines that we’ve experienced in the last number of years. If the downswing in oil and natural gas prices were averted by way of a reduction in unprofitable production volumes, the total revenues and profits of the industry would provide for profitable operations everywhere and always. People, Ideas & Objects believe we have a responsibility to use oil and gas resources effectively, and that implies that we at least produce them profitably from an appropriate accounting basis. Producer bureaucrats claim this is collusion and have used that as an excuse to lose effective control of the financial, operational and political frameworks of the industry. They will not listen to the fact that making effective, independent business decisions based on actual, factual accounting that determines profitability is not collusion. As a result they have destroyed the industry and are unable to provide an alternative strategy or plan to deal with the issues and opportunities they face.

 The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part IX

Service providers are independent and are not concerned if its Exxon or a startup that is the owner of the property that they’re billing for their services. Understanding that the service providers will be limited to the data elements that will be necessary for them to manage the process they’re responsible for, it is doubtful they’ll know which client it is they’re charging when they issue their billing to a Joint Operating Committee. Their concern is the efficient and effective management of the process that they’re exclusively responsible for. If a producer does have an issue with their service they’ll know who to contact, the user community member that heads up that service provider. That member of the user community will have the power and the tools necessary to deal with the issues and opportunities that the industry may have as a result of any changes or defects in the software or process the service provider manages. As we always say in today’s current software environment, who do you go to see when your current software solution is not as it should be?

Consolidation within the industry is a symptom of creative destruction. Startup oil and gas producers have been extinct for many years now. Another symptom. We see Anadarko throwing in the towel and many of their fellow intermediates believing, hoping, and anticipating, that they may be the next intermediate to be poached. Shell, BP, Exxon and Chevron will survive because that is what they do. That doesn’t make them efficient. If Exxon undertook the development of a system to provide the industry with ERP applications would Shell, BP or Chevron be interested? Of course not and the same would go for any of them. It is the independence of this sub-industry that People, Ideas & Objects are creating and their independent approach to the technical aspects of the accounting and administration of oil and gas that makes it useable by each and every producer no matter what their size or configuration. Startups won’t care that Exxon uses it and has, as a result of their production profile, paid the majority of the software development costs through our coin holders levy. The independent nature of our “sub-industry” is an attribute that all producers, that is the ones that will still be around, will appreciate when our coin holders have funded the Preliminary Specification.

The giddy nature of the producers during AGM’s is something we’ve seen each year. We’ve also seen strong stock performances, particularly in 2019 due to the high price of oil and what I suggest is the previously dedicated allocation of stock buybacks. We’ll know which one of these attributes is responsible for this bullish activity when the second quarter of 2019 is reported. The global oil price may be high but natural gas prices are not. In fact differentials in North America are creating continental oil and gas prices that are truly shocking. For the producers shares to rise on the basis of oil and gas prices would assume that the producers are realizing global prices and we know that is a false assumption. Differential are also not a short term trend as it is implied when the producers do nothing about them or to even recognize them. A few weeks ago in the Permian natural gas prices dropped to their all time low of $5.95. That’s correct negative $5.95. Paying people that much to take your gas is a viable solution to what ails the industry. It is also understood that within the Permian and North Dakota there are 1.5 bcf of gas that is being flared on a daily basis. That’s enough gas to fuel all of Texas’ residential requirements. So yes, your producer firms are on the job and yes, it is almost 100% certain that any bullish share activity is attributable to the one buyer authorized to purchase their own shares.

Chevron purchased Anadarko in order to increase its footprint in the Permian. They expect to increase their production profile there to 900,000 boe / day. So yes we now know that the lessons of the oil and gas investors have been fully heard, understood, comprehended and implemented. Nothing of the sort, the purchase of Anadarko disproves that in a myriad of ways. First Anadarko has lifetime earnings of $910 million based on the specious reporting conducted throughout the industry. If you took our recommendation of the pro forma adjustment of what the real earnings situation would be, our adjustment is to correct for the unrecognized capital costs of past production by moving 65% from property, plant and equipment to depletion, we believe these are the unrecognized capital costs of past production and are not assets, Anadarko would then have a pro forma, cumulative, lifetime adjustment in the amount of $17.7 billion. An amount that is twice as much as their current shareholders equity of $8.5 billion. Therefore they have a lifetime retained loss of $9.2 billion, after all the investors money was destroyed. This is what you paid $33 billion for? The fact is the industry is valued based on reserves. The purpose of the industries activity is to create reserves. Profitability is unknown, unheard of and irrelevant to the producers. Its all about cash flow of which Anadarko had $6 billion in 2018. Earnings will come after all the reserves are built out and the properties are all engineering marvels that make it on to the cover of Scientific American. No these losses are culturally ingrained and are the results of the methods the industry operates on and have been in place since the late 1970’s. No one in power today understands the situation is in crisis, otherwise why would they spend $33 billion? In order for bureaucrats to make the necessary changes to deal with the losses they don’t see or realize are happening, these necessary changes will never come about as a result of the culture and organizational stagnation that exists. They just don’t understand and for the industry to make the transition is counter to the bureaucrats best interest. Creative destruction is therefore the only solution. What we are experiencing in Chevron’s acquisition of Anadarko is an understanding between the bureaucrats who manage these producers, that the value will be based on reserves. That way the ponzi schemes can continue to report that they’re generating value. Why else would you spend $33 billion?

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part VIII

In addition to recognizing the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Preliminary Specification contains three modules that are Marketplace modules. The Petroleum Lease, Resource and Financial Marketplace modules all establish markets in which the oil and gas industry have traditionally operated in. Each of the Marketplace modules share a Marketplace Interface that enables producers to interact and conduct the commerce that they undertake as a producer. These interactions are fully integrated within the ERP system of the Preliminary Specification allowing producers, service industry and government agencies to buy, sell, trade and assign land, products and services etc. The Joint Operating Committee and markets are what replace the bureaucracy of the corporate empire that exists today. Centralization as a theme in corporate America has waned and decentralized models are enabled through the speed and availability of the Internet. It is the contrast between our decentralized industry and producer structures that frighten the bureaucracies of the existing producers with the termination of their command and control, but let's not forget the healthy compensation they receive for losing all that investor money.

What is generally known and understood for the past number of decades is that the knowledge and skills necessary to make a pencil isn’t and can’t be contained within one individual. Whether this is the case or not is unknown, which in a way implies its validity. People, Ideas & Objects budget involves 5,000 man years of effort for the development of the Preliminary Specification based on the user communities definition and participation. These developments will be made on top of the commitments and investment that have been made by Oracle to develop their generic accounting and ERP systems that form the base of the Preliminary Specification. The number we are recruiting for our user community is approximately 3,000. A number that I believe we need in order to develop an understanding of the industry and how it fully operates. These people will have to be well versed in their knowledge and specialization of how the industry operates. Their contributions will also need to be reviewed and confirmed by other users. The end product of the software will need to be tested within the industry to ensure that if functions as it’s designed to.

These attributes need to be done carefully and thoughtfully. We are not recreating the failing systems that support the industry today. We are designing, developing and delivering software that supports the business model in the Preliminary Specification and the way in which work needs to be conducted within the industry. It will be a creative and innovative process that the users will use to solve the issues they will face during the development process, and to discover the solutions that will meet their needs. It will be the users as the principal in the service provider organization that will manage a process that they’re most familiar with. Although the process may be simple and easy to use, the scope and scale of the data that is produced across the industry will demand that they comprehend these new data related implications within their process design. Here is where their competitive advantages of quality, specialization and the division of labor, automation, innovation, integration and leadership will begin. Once our software and services are operational they will constantly iterate the process through their access to our software developers via their principals membership in the user community and their hands on understanding of what works and what doesn’t in the process that they manage.

When we consider the number of organizations that will be permanently working on the development and betterment of the software and services contained within this sub-industry, as I choose to call it, we will find that its diversity, scope and scale is designed to match the difficulties of the tasks that we are approaching. We are not taking our responsibilities lightly. However at the same time we are not conducting rocket science. We have assessed that oil and gas, both the industry and producers are failing. We feel that the difficulties of our competitors has limited their opportunities to address these oil and gas industry issues. The producers starvation diet will do that. The technologies that are employed in the industry, their level of integration and innovation in which they’ve been implemented are steeped in the software vendors legacies of the 1980’s. The maturation of the Information Technologies that People, Ideas & Objects are using in the development of the Preliminary Specification, our budget and our approach will be able to successfully achieve these tasks.

People, Ideas & Objects is more accurate and valid today than when we first proposed the use of the Joint Operating Committee in August 2003. It is far more valid since the final edited version of the Preliminary Specification was published in December 2013. Producers have and will continue to fail spectacularly so. Their future is the most comprehensively difficult that they’ve ever faced. Yet their preparation and approach is to continue to muddle along and do nothing. Essentially what they’ve done for the past four decades. A time in which they learned, through specious accounting, that “they made bags of money without even trying.” When in reality the value was slowly seeping out of the industry in what is a ponzi scheme. That the producers value as represented in their big beautiful balance sheets only goes up each and every year is validity to their argument that they are good business people. It’s just that capitalizing all the money that you spend and holding it on your balance sheet for decades makes you look that way too.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Easter Monday

Good Friday

Our Oil and Gas White Paper, Part VII

Our solution, The Preliminary Specification, our user community and service providers

People, Ideas & Objects claim is that the oil and gas industry in North America has not been profitable for over four decades. Serious accounting issues have overlooked the lack of real profitability and the slow and steady erosion of any and all value out of the industry. This has manifest itself into a deluded population of oil and gas producers that believe they’ve been successful, however their investors have been withholding support for the past number of years. The development of shale based reservoirs has accelerated the trajectory of their decline and we see now that the cashless producers have no understanding or appreciation of the issues, People, Ideas & Objects proposed solution, or for the commercialization of shale. The question that remains unanswered in many people’s minds is will shale ever become economic? A very dire situation that we’ve called for the full force of creative destruction to be used against the existing producers in the industry. We believe in addition to being an accounting issue, it has now manifest itself into chronic organizational and cultural issues.

The Preliminary Specification is ERP software that identifies and supports a reorganization of the producer firm and industries resources. Using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer we are able to shift the compliance and governance frameworks of the bureaucracy into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. This alignment brings about the speed, innovativeness and accountability that we seek in our producer firms. Once People, Ideas & Objects determined that the Joint Operating Committee was the necessary organizational construct for the future oil and gas producer and industry. I set about to conduct the research into what and how the producer and industry would operate when we made these changes. This was difficult work that took over a decade to complete and we were able to publish the Preliminary Specification as a workable model for oil and gas in December 2013. It currently consists of 12 modules and approximately 200,000 words that define what is necessary to resolve the issues and realize the opportunities that are present in the industry today, and the frameworks necessary to deal with those that arise in the future.

The key structural change that is made in the Preliminary Specification is the establishment of our user community and their associated service providers. These are a reallocation of the administrative and accounting resources that are currently employed within the oil and gas producers. By determining that accounting and administration are not key competitive advantages of the producer we can offload these tasks to service providers outside of the producer organization. That provides many key opportunities that enable the Preliminary Specification to operate in ways that the industry is incapable of doing today. What we’ll be doing in this process is converting all of the producers costs to variable costs based on production. If a property doesn’t produce a profit due to its low deliverability, high cost or other reasons it can be shut-in and its prior losses will no longer dilute the profitable operations from other properties. It will incur a null operation, no profit but also no loss. This property can then be moved to the producers inventory of properties that require the producers earth science and engineering innovations to return it to profitable operations. These shut-in reserves can therefore be saved for a time in which they can be produced profitably. These reserves will not have to carry and recover the additional losses as costs that would otherwise have been incurred if it continued to produce unprofitably. And the commodity markets will find the marginal cost based on only profitable oil and gas operations being produced in the industry. What we have essentially done is moved the producers fixed cost accounting and administrative capabilities to be the variable cost accounting and administrative capabilities of the industry, variable based on production.

Producers consider this collusion as a reason not to act and are unwilling to put the effort into making this industry a viable business. In fact what this is called is the decentralized production model which in the Preliminary Specification replaces what’s in use today and is commonly known as the high throughput production model. It’s not collusion and every other industry manages their inventories in similar fashion to ensure that they do not erode their pricing power. If making independent business decisions based on actual factual accounting of the determination of profitability is collusion, then we are in a strange new world indeed. Oil and gas commodities are subject to the principles of price makers. Producers believe they are price takers and therefore any action they take to increase or decrease production has no effect on commodity prices. One look at the recent history of the industry and we can see that OPEC has successfully removed production on more than one occasion and successfully rehabilitated the oil price. It would seem that producers believe that oil and gas commodities are price takers to ensure there is no need for them to act.

People, Ideas & Objects source of our software quality is our user community. Software that is not based on user input is useless in our opinion. Our user community will consist of approximately 3,000 individuals who will contribute their understanding to the model of the Preliminary Specification. That way we'll know that we’re providing the highest possible quality of software to the oil and gas industry. Each of our user community members will also be the principal involved in one of approximately 3,000 fully independent service provider organizations. There they’ll be provided with an exclusive license to manage a single process that the user community member’s contribution during our development was determined to be a critical component. Service providers will therefore not be competing on the basis of price. No one will hold another license for that process and without access to our software no one can come in and offer a similar service at a lower price than what the licensed service provider can. Service providers compete on a fundamentally different basis which include their competitive advantages of quality, specialization, the division of labor, automation, computers working for us not the other way around, innovation, leadership and integration to name just a few. These competitive advantages are inconsistent with having their flank constantly abused by repeated price competitors. Our service providers will be provided with the exclusive license to ensure they continue to focus and achieve their full competitive advantages. Besides the service providers are a cornerstone to building our $25.7 to $45.7 trillion value proposition for the oil and gas producers.

The mechanism in the Preliminary Specification that creates the null operation at a property is as follows. If the property is shut-in it will produce no data that goes into what we call our task and transfer network. If nothing goes through, the service providers will not receive anything in which they will act upon, process or generate their billing from. Therefore the cost of calculating and recording the butane sales for the property will be reported as zero and none of the service providers will have done any work that month for that property. Therefore the null operation is created, no profit but also no loss because all of the producers costs are variable. The service providers have the entire oil and gas industry inventory of properties as their client base. At anytime it may be that 15% of these properties are shut-in. If that is the case, and the service providers will have budgeted and planned for the possibility of that scenario, then they can accommodate this temporary 15% drop in their revenues. Enabling for the first time the situation where producers overhead costs are variable and indirectly controllable.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part VI

What we do know about oil and gas is it can be percolated down to its two attributes of temperature and pressure. The Information Technologies that are developed and scheduled for deployment in the next two years will have a dramatic effect on the operational control of the industry. 5G and the common discussion around the Internet of Things will become a reality where the ability to remotely monitor and control any and all aspects of the oil and gas operation will begin to become more of a reality than it is today. It will be available for far less cost, be more robust than what is done today and these operations, with the Preliminary Specification, will follow on through to the financial statements of the producer through advanced automation of administrative and accounting processes. To undertake the scope and scale of the issues in oil and gas many producers are converting themselves into software developers. This is an extension of what has gone on for many decades. Each CIO within the producer has a budget that fuels their empire and develops their own unique solution. Cobbling together hundreds of disparate applications in order to provide for their organization, they criticise People, Ideas & Objects or anyone for that matter, that we would be unable to undertake such a large scope and scale for the entire industry. Yet when we compare our budget to the budget in which they’ve cobbled together their solution, we begin to understand the reasons that each and every producer is and will continue to fail. Aggregating these individual producer budgets into one ERP solution would have been efficient and effective and far less costly than what is incurred today. If I am unable to complete our tasks with our budgeted resources, that remains a possibility. What we do know is that the producers current approach has failed. Our approach is to standardize the administrative and accounting processes within the industry so that each individual producer does not have to incur the time, energy and money necessary to develop these non-competitive attributes of their organizations. Each producer building the same unshared and unshareable administrative and accounting capabilities, which includes IT, are consuming the industries profitability.

So far we’ve talked very little about the technologies. It’s not about any specific technology anymore it’s about the business and more specifically how the business and industry will be structured in order to be profitable. As many people as there are in the world without software we wouldn’t be able to function without it. We stand on the shoulders of many giants. And yet, at the same time it is estimated that the impact of Information Technologies on the productivity in the economy has been minimal. Which may be the case. However what we also know is that for the past few hundred years the only manner in which productivity has expanded is through the further specialization and division of labor. These are the principles that we’ve used to solve many of the issues in oil and gas. Specifically the service providers are derived from our user community members and focus on one administrative or accounting process and use the entire industry as their client base. Eliminating the need for each producer to build their individual unshared and unshareable administrative and accounting capabilities which are exactly the same as each and every other producer. This requires the full stack of Information Technologies that exist in the marketplace today, and will need to be done in innovative ways. Then we will begin to see the real productivity gains in terms of the application of Information Technology through higher profitability of the oil and gas industry, lower administrative and accounting costs and better and more timely information.

We note that People, Ideas & Objects Intellectual Property consists of the following categories. The research that was conducted in determining the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Preliminary Specification and its derivative works. The work of the user community, how this is acquired is discussed in the user community vision. The software code that is developed and of course the binaries that are used within the producer firms, the service providers and elsewhere. The licensing of the user community, service providers and the granting of the exclusive rights of access to the binaries on behalf of the producer firms by our coin holders. Yet you will notice I have not stated that we’re a software development firm. We have dropped that aspect of our organization as a result of the logistical difficulties and what we feel would be the unnecessary time consumed in developing a capability that we have budgeted for 600 developers. For us to grow from nothing to having all of the developers singing from the same hymn sheet, then mold them into the state of the art team that would be needed for this task would be too long in terms of the timeline that the industry has. Each year the value proposition of our software and services can be in the high triple digit billions of dollars. We feel it would be inefficient for us and the industry to pursue something that may take upwards of four to ten years to do.

It is my personal opinion that no one has the wherewithal to challenge Oracle in terms of the quality of their software offering. What Larry Ellison and his team have done has made all others pale in comparison. It all has to do with the database in my opinion and that is where Oracle most particularly excels. If the data is wrong or the database is unable to conduct the operation correctly it doesn’t matter about much else. Performance of the overall system is another attribute of the database. The demand on these applications at times can be heavy. Oracle is light years ahead of anyone else and to me it appears that no one is even trying to compete anymore. IBM has repackaged their database offering as IBM DB2 and is a cloud offering. It has to be number two in the marketplace with number three being any number of pretenders. Microsoft included. IBM had a large lead as the creator of relational theory and rode that to dominance for many decades. I believe Oracle now has at least a decade on IBM DB2.

We have always configured the Preliminary Specification on the basis of Oracle’s Database, Java, Oracle Fusion Middleware and Oracle Fusion Applications. These also have been packaged as cloud offerings which we’re very pleased with. And there are many more peripheral applications that are provided by Oracle included in the Preliminary Specification. In our initial budget we also had the assistance of Oracle Consulting providing their software development services in terms of accelerating our delivery times. We have now dropped the software development aspect of our firm, chosen our distinct competitive advantages and will be handing Oracle the work of the development of the Preliminary Specification and our user communities contribution.

Artificial Intelligence, Machine learning and other pie in the sky dreams of the producers can’t be implemented until they get the base of their systems operational. Flying to the moon in Orville and Wilbur Wright's plane is going to be difficult. Maybe it would be possible but why would you try? Some producers are crediting Artificial Intelligence with building substantial value for their firm. As we’ve seen most producers are profitable, but where’s the cash? The role of IT in the producer firm and industry are far beyond what we’ve seen in the past. Today is a time when a different approach to the future and the long term are necessary. Information Technologies make fundamental changes to the outcome and profitability of industries. Picking up the latest tool and waving it around doesn’t.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part V

There is no consideration of an oil and gas future without discussion of the Information Technologies that are available in the marketplace today. The maturation of these over the past five years, from an ERP systems point of view, has been spectacular. What can be done in terms of what is available today is far beyond what has been implemented in oil and gas to date. My personal assessment of the systems that are in use by the oil and gas industry is that they have failed the oil and gas producers. In a world where software defines and supports the organization, when those oil and gas organizations and the industry as a whole has failed, and has failed to adjust to the issues that are causing systemic failure, then that has to be assessed as a resounding software failure as well. There are many reasons for the failure of the software vendors. Key among them is the financial abuse they’ve experienced at the hands of the oil and gas producers, their alleged clients. The software vendors products have therefore atrophied and their skills have degraded to the point where they are unable to appropriately service the industry and we have today's failure. The key point to note is that producers did not sacrifice any money on providing better management or information of their business, in order to drill the maximum number of wells possible.

The result of this history has demanded that People, Ideas & Objects take a different approach to our funding. We seek to raise the funds that we need to complete our developments in advance of our software development commencing. (Please see our ICO) This is in order to ensure that we do not become “blind sleepwalking agents of whomever will feed us.” Habermas. We must proceed to our completion without interruption and without undue influence from groups who seek compromise with the bureaucratic ways of the past. Creative destruction is at hand and we need to ensure that the configuration of the industry is true to the Preliminary Specification as its model with the user community filling in the details. Compromising to meet the current needs of the capital markets, or the bureaucrats in today’s producer firms will be unacceptable a decade from now. Our approach to the oil and gas marketplace is fundamentally different than that which has been provided to the producers by our competitors in the past. We have configured our organization as an Intellectual Property, Research and User community based provider. These are our distinct competitive advantages. We believe, fundamentally, that there is only one business in the very near future. And that is the software business. Just as the record store is now the iTunes app all industries will be operated in the same manner. Such that it’s not enough to own the oil and gas asset but also have access to the software that makes the oil and gas asset profitable. We see today that our competitors have not provided this, and the producers are systemically unprofitable.

Software is the app that users see. Software is derived from Intellectual Property, therefore all industries will be based on the software’s Intellectual Property. This has been our strategy from the beginning. In the 1990’s Intellectual Property was more of the wild west, if you saw something you used it. Now it has to be respected and as a result the implications in business are dramatic and those with the Intellectual Property have many opportunities they did not have before. In terms of the impact on the people who work in oil and gas the same can be stated. Intellectual Property will be the basis of their employability and value in the marketplace. Education being the base of their Intellectual Property they’ll begin with the development of their unique skills from there. What’s different today is that they’ll also have access to some form of contractual Intellectual Property that enables them to generate their value. Without it, they may otherwise be unemployable. The three forms of Intellectual Property that they may have in terms of their employment is the development of their own specific capabilities based on the Intellectual Property they’ve developed. Secondly they may acquire the rights to Intellectual Property on the basis of a license in a commercial relationship. This is the nature of our user community members and their service provider operations in the overall People, Ideas & Objects community. Or lastly they will work for a firm who has the Intellectual Property itself or have acquired it as a result of a license. Today’s producer bureaucrats are displeased with this element of our offering and are unaware of the world in which we now exist. It is their archaic system of centralized command and control that will be unable to compete in the future and have none of the requisite capabilities (software) in which to do so.

When it comes to capabilities People, Ideas & Objects has also configured our offering on a different basis than our competition. We are a change based software development capability for the oil and gas industry. Our user community is endowed with the exclusive rights to change the Intellectual Property that makes up the Preliminary Specification and its derivative works. Therefore the oil and gas industry, producer and each and every person in the industry will know who to contact in order to make a change in the software of the system. Who do they call to have changes made in their systems today? Our developers only listen to our user community members for the information they need to develop the software. Making our user community the power and control of the oil and gas industries accounting, administrative and business model leadership and implementation. This allows us to make the changes to the system as required in order to avoid any and all issues that arise and realize the opportunities. Industry will no longer be provided with static software configurations that hold the industry in the current business model that loses money chronically and absolutely. Undoubtedly at some point the Preliminary Specification would create its own similar issues to the difficulties being experienced in oil and gas today. With this change based software, user community and service provider offering the means in which to avoid that is inherent in our offering.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part IV

We need to provide a new future for the oil and gas industry in North America. One that is prosperous for all, from the shareholders, the people who work for the producers, the service and support industries and for those in the general economy. Profitability is the only manner in which an industry such as oil and gas can prosper, but at the same time provide the consumer with the most affordable means of energy. Profitability will fuel innovations in a competitive environment where producers are actively able to focus on their competitive advantages of their earth sciences and engineering capabilities, and their land and asset base. What has happened in the past four decades is unacceptable for all concerned. We’ve seen nothing but boom and bust throughout the industry with all of the value that should have been built, and all that was built before, destroyed. The culture that has developed from all of this knows no difference and there is no common sense evident in the industry anywhere. I’m only being honest when I say that we’re moving away from the existing producers and using creative destruction to rebuild the industry in the image of the Preliminary Specification. The situation currently provides no future for today’s producers, I am not of the belief they’ll survive. It would be foolhardy therefore for me to accept their money and suggest that I can do anything for them. They needed to call me five years ago.

Therefore the future is a blank canvas in which we’ve etched the outline of what and how we’ll operate the industry based on the Preliminary Specification. It deals with the issues that are prevalent today and deals with them constructively. The thing that most people would find odd about these issues is that all of them are related to accounting. The chronic, massive and deliberate distortions and deceptions that have gone on for four decades have covered over the lack of profitability and therefore the lack of value (de)generation. Whoever said accounting wasn’t important doesn’t understand business. There are many people who are responsible but none of them will be held to account. We can leave this past and the associated issues by regenerating the industry with the participation of many like minded people who share our concerns. Our future is never written, however, the Preliminary Specification is a workable model that has been formulated through ten years of research. It is the start that the industry needs. It is designed to be based on a subsequent collaborative development of thousands of people to fill-in the various components of what is required to ensure the producers are dynamic, innovative, accountable and profitable. It is also the only idea that has been tested through time. The regeneration of the industry is therefore provided with a headstart in making the future real in both oil and gas, and the economy in general.

The most dynamic, innovative, accountable and profitable countries will be provided with the affordable energy they need. With 23,200 man hours in each barrel of oil, producers will need to educate the consumers on the value and role that oil and gas has in making a prosperous future a reality for all concerned. The remainder of the 21st century could be significant in terms of the value that is generated across North America if the energy industry that we’re now creating undertakes this obligation and opportunity responsibly. We know the oil and gas reserves are there, that is not the issue. Profitability is the first order of business in order to ensure a sound foundation in which to expand to meet the continents future demands. The Preliminary Specification provides the most profitable means of oil and gas operations. That has to be priority one in terms of the tasks that we undertake. Then we can begin to rebuild the industry and its associated infrastructure that will be necessary in order to increase the deliverability of the industry and ensure that all of North America is competitive and robust.

All of this does not come about as a result of a “muddling along” and “doing nothing” strategy and operating procedure so the producers can buy time while they wait for the next upturn. Where the next upturn only occurs as a result of destroying the previous low water mark in terms of production deliverability. Leadership in the industry will therefore need to be developed. This can begin by selling the North American consumers on the value and the role that oil and gas makes in their lives. Cease funding the contrary opinions that are political niceties and are inherently providing strategic conflicts to the industry. Specifically I mean the environmental movement. It needs to be understood that the Nazi’s had it right when they said “if you repeat the lie often enough, people will believe it.” All but four years of my life, the four that I have no memory of, I’ve lived in an unending series of imminent, environmental armageddons. I don’t walk around in a gas mask. I am still protected by the ozone. Acid rain hasn’t got me yet. The ice age is still intermittent here in Canada. And as long as I can remember, and certainly since its first declaration in 1989, I can’t tell if global warming has had any effect or not. You can call me a “denier” which is what I am, I’ve just been around the block a few times and can see the results when you get the children and nutjob congresswomen predicting the future out of fear. These ad hominem attacks on people who have alternative thoughts about the environment are only typical of the desire of some to move toward socialism and control the population with fear. Oil and gas has a job to do and a responsibility, they can’t shirk this or blame it on others such as the governments or pipeline companies. If China or Europe are the most powerful economies in a decade then we’ll have achieved what the democrats have always sought, a second rate United States.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part III

Oil and Gas Future

Over the past number of decades the producers have relied on what they called “market rebalancing” to deal with their overproduction of oil or gas. Relying on this mechanism requires no effort, other than the few calories it takes to mouth the words. It is a critical and successful element of the “do nothing” operating procedure used by all oil and gas companies. In other words, just wait until the production profile of the industry atrophies to the point where it meets demand. It is the willful destruction of the productive capacity of the industry. A policy that is as foolish as “profitability isn’t what producers seek.” Or maybe I have that backwards, I can never remember which one is the least intelligent of the two. We also find throughout North America oil and gas CEO’s providing financial resources and verbal support to any and all the ludicrous environmental issues that will see the elimination of oil and gas from the market place before we all die in as little as twelve years. This is where the backbone of the industry begins to sag precipitously. Logistical and political issues are the key difficulties of the oil and gas CEO. These are all derivative of the environmental causes they parrot willingly. They accept that there are no pipelines for their overproduction and will accept commodity price differentials that take 90% of their revenues. “Their value is in the oil and gas reserves they hold in the ground!” This is not a business it’s a science experiment! As long as there was investor money and there is someone to blame for their difficulties, that is all that matters.

The Elementary school kids are terrified that we’re destroying the planet for them and they won’t graduate high school as a result, they and the planet will be dead. What has become almost certain imminent demise in the next decade is believed by most people, yet no one acts. And where is the adult argument being put across by the oil and gas producers? There is none, and that is wholly consistent with the “muddle along and do nothing” point of view. This imminent environmental armageddon is a foolish thing to believe for an oil and gas producer, and an irresponsible approach for their role in society. What will they do when the demand for energy increases, point to the environment movement and say that “we thought we were all dead.” Or “where is the wind and solar that was the replacement.” This is the quality and depth of thinking that has been exhibited in oil and gas for four decades. If you find my writing too sarcastic I’m sorry, it's the only way that I can deal with the frustration of having to watch so much destruction occur across the industry while having what I believe to be the solution at the ready. “If demand for energy doubles in the future we’ll just get the money we need from investors and bankers. We know how to do it, the reserves are all in the ground.” The nature of oil and gas today.

Producers and the industry need to begin to assert their point of view in the discussion. Yes, there could be environmental consequences of the consumers use of hydrocarbons. Nonetheless the consumers can’t live without hydrocarbons and their need for them in the future is far greater than what it is today. Wind and solar as a replacement are as big a myth as the myths regarding the environment. We’ll discuss that more clearly in this position paper next. Producers drill wells. They leave everything else in the business to others. Pipelines are regulated companies that install the pipelines. They are the focus of environmentalist who receive financial and verbal support from the producers. The environmentalists actively demonstrate and obstruct the process to the point where it’s difficult for pipeline companies to get pipelines put in place. This as far as the producers in the oil and gas industry are concerned is the government's fault. What producers have done is handed a financially, logistical and politically complex and difficult bureaucratic process over to a regulated bureaucracy in the pipeline companies, to seek approval from the ultimate bureaucracy, the government. Producers leadership and management of the pipeline process is complete once the checks to Greenpeace are mailed.

What they need to be doing is informing the consumers of the choices they have to make. Accept that the environmentalists are right and start hiking to the outback. Or, understand that each barrel of oil equivalent has the mechanical leverage of 23,200 man hours of labor. I ran the calculation that states the annual global output of oil and gas is therefore equivalent to the output of 76 times the world's population. If consumers want to rely on alternative means of energy then there will be a wholesale downward swing in industrial capacity than what oil and gas provides today. Without oil and gas there is probably 95% overpopulation and the quality of life would be prehistoric. So let's keep scaring the kids because they are the thought leaders in society today, we know it’s not the producers. But that is the point of the exercise isn’t it. If the producers accept the children's concern for the planet then they’re absolved of the responsibility to ensure that oil and gas is provided for the future. If they find that they’re unable to provide for the demand they’ll be able to point to the children and say they thought they were serious and there was no reason not to believe the children.

We see the consequences, particularly here in Canada, when our primary industries are not profitable. The carry on effects down through the secondary and tertiary industries is highly detrimental, and the general economy suffers as a result of the lack of growth and investment. You have to remember though that this is the declared strategy of the producers to “muddle along, do nothing and rebalance markets.” Which is as we discussed the willful destruction of the productive capacity of the industry. We are one fifth of the way through the 21st century and we have an industry that fundamentally believes that there are good days and bad days. When the bad days arrive, that’s when you shrug your shoulders. To effectively manage the business beyond the ups and downs of the commodity price cycle takes a lot of effort and work. Something we’ve seen no signs of in the past four decades. The capacity to spend money, blame others and shuffle the rest into your own pocket are the only strategic competitive advantages of today’s oil and gas bureaucrat! There are lessons on these topics held at each producer every day.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Our Oil and Gas White Paper, Part II

Yesterday we began discussing our position paper. We pick up where we were discussing the results of 1970’s era SEC designated accounting changes that began a cultural change in the management of the producer, and the beginnings of the dependence on annual investor infusions and cash flow. Profitability became a foreign concept that was deemed of no value to the producer.

Why are these such issues today? The culture of the oil and gas industry is an issue due to the fact that the belief that value is generated in drilling is not backed up by the financial performance of these businesses. And when I say the financial performance I limit that to just include the cash. The industry became a massive call on investor funds each and every year. There never was or is any understanding that “business” should be self supporting. It was necessary that you “build the business” and this was represented by “building the balance sheet” which is the unanimous calling of the producers even today. Spending is the only capability and is the decided competitive advantage of oil and gas. As proof you can look at all of those reserves. The problem the producers don’t see is that you can’t and you never have produced any “real” profits from the reserves. The value that has been invested in the industry is sitting in the ground with those reserves as represented by the bloated balance sheets of property, plant and equipment. Reporting only the operating and royalties as costs, more or less, that's all the costs left after the majority of costs are capitalized, making the producer look profitable. The fact is everyone believed those bloated assets and profits. The profits were not just over reported as a result of not recognizing much of the cost of oil and gas exploration and production. Producers only deplete the property, plant and equipment account on the basis of taking all of the capital costs that were spent. Allocating these costs to the entire reserves base, and only recognizing the capital costs that would have been apportioned to the reserves that were produced that year. Leaving the capital on the balance sheet for decades at a time.

What we had in essence was a massively profitable industry based on the chronic spending of investors money. The amounts of recorded capital in property, plant and equipment weren’t assets, as represented in the specious financial statements of the producers, and rubber stamped by the public accountants who should have known better and done something about it. They were and are the unrecognized capital costs of past production. We believe any and all producers should be subject to a pro-forma accounting adjustment to consider the reality of this situation by moving at least 65% of property, plant and equipment to depletion. What we then find is that all of shareholders equity is eliminated in the industry and the banks are in financial jeopardy too. Oil and gas is a capital intensive industry implying that the majority of its costs are capital in nature. Just because the SEC defines the outer limit of what a producers property, plant and equipment account can be, that does not mean that each and every producer reaches that limit each and every year. The most competitive producer would strive to recognize their costs as quickly as they could and hold the smallest balance of property, plant and equipment.

When investors are told profits are as healthy as they’re reported in the industry over these past four decades. They rush in with their money in order to capture some of those profits. More investors lead to overinvestment in the industry which leads to the chronic, systemic overproduction that we see. The chronic problem that has existed in oil and gas since 1986 when OPEC first dropped the price of oil. $10 was their price and all the North American producers had to do was to pull back production 15% in order to rectify the price decline. What they did was nothing. Except for bring about the beginnings of the second cultural phenomenon that is systemic throughout the industry. Looking under each and every rock for the responsible scapegoat and crying “oh whoa is me” in the process. In seeing this it became clear to me that the configuration and structure of both the producers and industry could not reduce production. They’re not configured for that. It would only leave large portions of overhead uncovered and profitability would suffer. I therefore set out to build the software that was necessary to enable the industry to deal with the chronic overproduction that was occurring as a result of the chronic overinvestment created by the specious accounting and financial statements that were produced. That is the Preliminary Specification that provides the oil and gas producers with the most profitable means of oil and gas operations. Everywhere and always. We believe this chronic overproduction situation has created 28 poorly performing years out of the last 33. With shale it will be terminal.

Without real profitability. Without anyone searching for value outside of the reserves that were being discovered. Without any half decent reporting being undertaken anywhere. The value that was the oil and gas industry and the investment dollars put in has been frittered and wasted while the bureaucrats whistled by the tombstones. The industry is now worthless as it demands capital in order just to operate. The cash crisis created as a result of investor and banker withdrawal is slowly progressing towards it final demise. Cash was consumed, lines of credit were drawn, more cash was consumed, properties were sold for half of their recorded value, working capital is now diminishing at a remarkable rate. This has taken three years to become a serious problem throughout the industry. Now the tough part begins. Debts are slowly becoming due and the bankers are generally satisfied to this point to roll the debt over. Even to the poorest performers. As time passes and no plans, no strategy other than “muddle along and do nothing” become obvious as to its unanimous adoption throughout the industry. The bankers will become spooked and with the lack of action and diminishing cash, will bankers begin to want to see more cash? How long before this becomes material to the banking sector and rolling the debt over can’t continue? Then what, is that the day my phone rings off the hook?

People, Ideas & Objects have assessed that the beatings that we’ve been subject to since 2003 have been enough. That we are also unable to take on the task of saving those that have shown no propensity to save themselves, and have traveled down the wrong road for too long for us to retrieve them. Creative destruction is the tool we’re using to exercise the necessary changes in the industry. The scope and scale of changes that the Preliminary Specification necessitates demand an inertia that I no longer maintain, or may never have had. Therefore we have adopted other plans in which we will prepare the Preliminary Specification and the rebuilding of the oil and gas industry based on providing them with the most profitable means of oil and gas operations.

There is a long history of failures in the oil and gas ERP software market. It is a small market with possibly 150 producers able to purchase a system that meets their needs. Producers have used this fact to abuse the vendors by playing one off against the other and gaining the software product for just the service contract. Keeping the ERP vendor on a starvation diet was consistent with their thinking that accounting systems interfere with the drilling budget. People, Ideas & Objects, IBM and Oracle have all used the method of having the producers pay the upfront costs of development. In the late 1990’s Oracle left as a result of the frustration of trying to deal with the producers who had no appreciation or budget for the type of solutions that were needed. IBM owned the market leading application in Qbyte. There inability to raise any money for new software development, finding the same frustrations, led them to sell out of the oil and gas ERP marketspace in 2005. People, Ideas & Objects are committed to the oil and gas ERP marketspace. We have developed significant and necessary value the producers need. We however have had the same difficulties of IBM and Oracle. We are unable to deal with the producers who are incapable of saving themselves and are therefore working on what will be the systems, the Preliminary Specification, for the regenerated oil and gas producers from the ashes of these producers creative destruction.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.