To: The Board of Directors, Our RFP Response (Summary & Conclusion), Part XIII

 To resolve the current difficulties that plague the North American oil and gas industry demands that we organize an approach to how it’ll be resolved. That is the work that People, Ideas & Objects, our user community and their service providers propose to do with input from the oil & gas, service and all the tertiary industries involved in the greater oil and gas economy. The new organizational structure will be the derivative software product of People, Ideas & Objects Preliminary Specification and the services of our user communities service providers in this overall ecosystem. Software is what defines and supports the organization in today’s society. Serendipity and creative destruction have been hamstrung by the fact that software also constrains an organization in proverbial cement based on its current process management definition. To make any organizational or process change has to be orchestrated through the software first in order to have the change take effect. Otherwise the organization will quickly regress back to the software definition of what the process is. This is the consequence of our dependence on Information Technology and is what we’ve called a modern day software bug. One that has cost the industry its prosperity as bureaucrats took this knowledge, never changed the organizations ERP software and therefore secured their methods of personal aggrandizement. 

Let's revisit two hypotheses that People, Ideas & Objects have asserted about the state of affairs in North American oil and gas. These are what we call our Managed Industry, and Abandonment Hypothese. Throughout 2020 we documented the material personal risk that officers and directors of the producer firms had incurred as a result of the catastrophic destruction they created. We’ve attributed this destruction to chronic overproduction of oil and gas, or as we describe it, unprofitable production. Which has occurred systemically throughout North America as far back as July 1986 and ever present since. This was the issue that prompted me to get involved in building ERP systems for oil and gas in 1991. All that was needed was to shut-in any unprofitable production. People, Ideas & Objects solution to this issue was finally completed in December 2013 in the form of the Preliminary Specification. 

I’ve been writing about components of our Preliminary Specification since late 2005 and at no time did producer bureaucrats make any effort to mitigate the damages they were causing. Upon the realization of their personal risks, officers and directors were noted by Reuters on June 9, 2020 to have increased their officers and directors liability insurance coverage by 75%. In late 2020 investors began litigating many of the producers for related issues. Exxon became the subject of an SEC investigation into the overreporting of assets, particularly in shale. The SEC was also rumoured to be issuing subpoenas to many of the shale producers for similar reasons. Businesses understand that overreported assets beget equal and commensurate overreported profitability, attracting disproportionate volumes of investors who in turn create overinvestment leading to the inevitable overproduction and the continuation of unprofitable production. This was done through a number of accounting shenanigans that we’ve documented throughout the history of these writings. Producer bureaucrats were only concerned with their “take” and not with the business of the oil and gas business. This became evident and obvious in the downswing that began in 2009 with shale gas volumes destroying the natural gas marketplace. Investors bailed on the industry in 2015 and nothing but lies, excuses and the naming of any and all viable scapegoats as the only action that we’ve seen since then. In summary the personal jeopardy that officers and directors have attracted in this process has been significant. 

At the same time that the industry experienced a cash and working capital crisis due to the exit in 2015 of their investors. Chronic unprofitable production demands new investors resupply the spending machine. Without investors to fleece, all means of accessing cash was used to maintain the operation. Initially, selling of oil and gas properties was the most lucrative as there was a ready market with some producers continuing with some alleged “liquidity” derived through increasing their bank debt. All of the industry's cash resources were eventually consumed by the producers' excessive overheads and the volume of properties for sale eventually overpowered the markets cash, collapsing the assets prices that were being offered for oil and gas properties. Which is odd, the oddity being that it was that same behavior and characteristic shown earlier during the collapse of the oil and gas commodity prices. Asset prices remained in positive territory but no one had any money to buy them at the fire sale prices. I believe this was part of the justification for the write downs of oil and gas properties in 2020. Creating a catch 22 scenario for bureaucrats where they’d destroyed their entire business model of building balance sheets and were in need of some method in order to rehabilitate their asset values and firms quickly. 

The performance of shale never happened and the wholesale abandonment of that concept was completed without a whisper or second thought. Our July 2019 white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale'' provides the means to turn shale commercial. This was never considered a solution and therefore did not motivate the bureaucrats to action. It was summarily rejected as it required them to work. Besides, their directors never held them accountable for any of their past failures. Leaving the remaining life of an oil and gas producer to pursue the previously renounced and otherwise abandoned areas of conventional oil and gas, offshore, heavy oil or the arctic to pursue as the oil and gas frontier? Like shale’s renouncement, these areas were approached with no understanding or concern about their profitability until it was absolutely proven otherwise. And once unanimously proven across the industry they were abandoned with no remedial efforts to rehabilitate them and bureaucrats were able to pursue their next bright shiny object. Today their chosen new frontier is clean energy. An area proven to have never been profitable, even with government subsidies. An area where there are no plans on how to make them profitable. It has however the one redeemable feature of avoiding accountability for shales unprofitability. Reflecting the inherent lack of understanding and business sense of the entire bunch. After six years of investors withdrawal we’ve seen no change in their behaviors, attitudes or actions! These issues are culturally ingrained and the only method to rectify them are to rebuild the industry brick by brick, and stick by stick in the vision of the Preliminary Specification. 

We now add the method that was used to raise the value of property, plant and equipment and the value of the producers' share price. Making it appear like its good times in this “Managed Industry” and our hypothesis. This was done with two mechanisms. Consolidating producers at the higher “market values” of property, plant and equipment. High enough values that they would exceed what was on the books in 2019 and erase any public memory of the collapsed asset marketplace. These transactions would all be financed with shares of the producer firms. There’s never been a bureaucrat that would not dilute their shareholders and this of course went down without a second thought. The other leg of the transaction was to use the last dregs of their cash and more fully plumb the depths of negative working capital to expend what was left or remaining in the stock “buy-back” authority to participate in the “rally” that would happen in the acquiring company's stock. The proof that we would point to for our Managed Industry hypothesis is the following question. Why weren’t the consolidations valued at the current market price of the assets? The last element of the Managed Industry Hypothesis is the Abandonment Hypothesis which is where I think we are today. 

The Abandonment Hypothesis is simply a resumption of the past centuries management's activities during similar failures and that there’s nothing in oil and gas left for the bureaucrats, all the cookie jars are empty. It will take substantial work and effort to turn the industry around and they’ll admit that’s not their forte’. What’s obvious is they don’t know how or what to do. In a world such as theirs, focused inwards, they’ve acquired risk through the signing on as officers of the producer firms. A risk that will be with them unless they can dispose of it in some reasonable way. That is their focus of concern and where their obligations and priorities will lead them. With the rally in the producer's stock behind them, they'll need to exit the firm quickly and say they did so when the ship was sailing well and they had nothing to do with any subsequent failures. 

They say that gold is a dead asset. Meaning it doesn’t generate a profit, doesn’t generate any economic activity. Theoretically provides a hedge against armageddon. The same could be said of many commodities. Does that apply to the petroleum reserves that were once so coveted by these bureaucrats? The ones they’ve now been able to reestablish at the high valued paper assets on their well built, big, beautiful balance sheets? They’ve proven over the past four decades that none of these “assets” can be produced profitably and are now actively disproving that they generate any incremental economic activity. Without profits in their real form there isn’t much else. Past industry activity has been more or less just like when we were all kids and traded hockey or baseball cards. Some were seen as more valuable than others and that’s where the fun was. And just as we don’t deal in the trading card world anymore, do we want to live in a world where those who own gold today are the dominant power in society? Bureaucrats never saw the larger purpose in their activities, other than to secure the best baseball card or the biggest balance sheet. The paper stuff they deemed valuable.

Since OPEC+ resolved their production allocations there has been a capitulation in the industry. Post covid elation is turning to the reality of the situation and the difficulties the bureaucrats put the business in over the past number of decades. These officers were never held accountable for anything by their boards. Rubber stamping and back slapping were all the rage. Contrived initiatives that were allegedly shareholder driven, such as Encana's overwhelming need to split into an oil producer and a gas producer, or Exxon’s clean energy proxy war for board seats were never questioned with any logic or common sense. Until just a few years ago I was considered crazy for suggesting profits were an issue and needed in the industry. The level of conflict that has been created and exists between bureaucrats and myself is a healthy thing as far as I’m concerned. I’ll never be able to work with them again. But they’re leaving the industry and have nothing to do or say anyways. 

Appealing to the directors is the last hope for the oil and gas industry for these organizations as they exist today. Shareholders deserve to be treated fairly and provided with an effort that is commensurate with what had been promised those many years ago. Profits. The service industry, those that are and have worked in oil and gas and the greater oil and gas economy also deserve the same. Real profits of a primary industry everywhere and always is the responsibility of those that are representing the shareholders and received their money to do so. Directors share the same risks that the bureaucrats have acquired in the process of this chronic mismanagement. Their risk is commensurately higher as a result of the risk of bankruptcy terminating the directors immediately. Courts are beginning to look to the directors and officers liability insurance policies as assets of the firm. Leaving the directors on the outside, funding their own defence and fully exposed. Directors may think the shareholders won’t sue if there’s no insurance proceeds available. Lawsuits have never been about the money.

People, Ideas & Objects RFP Response should be seen as an olive branch that will alleviate the directors personal litigation risks. Providing directors with the opportunity to explain to the judge that they took the steps to remediate the damage that occurred. When steps to mitigate the damage have been taken there’s nothing to litigate. Alternatively, explain to the judge why the RFP of People, Ideas & Objects was disregarded. And make sure to generate the arguments that can be used to refute the individual points made in this RFP Response and those in the Preliminary Specification. What our response was to those specific arguments. Or directors could tell the judge how their actions were effective and they didn’t understand our argument. That may be their best approach. If the courts perceive there's a consistency in each of the producers' destruction and throughout the industry they may find that curious. Who is the producer that has competitively drawn down their account of property, plant and equipment in the past decades? And now has a low cost of capital that performs in this environment?

This ends the RFP marketing series highlighting only the larger points of the Preliminary Specification. The rest is contained in the two hundred thousand words of its thirteen modules. If directors have found the dialog here too condescending then they should probably get used to it, or maybe after the past six years of waiting in the investors' reception areas and waiting rooms they already have. I’m putting the deadline of August 31, 2021 for a response to this RFP as the deadline for commitments by the producer firms. This follows with a 10% deposit of the producer's obligations by September 30, 2021 and the balance due by December 31, 2021. Any non-participating producers will trigger a reassessment of the participating producers for the shortfall in our budget. This should precipitate the need for participating producers to ensure their working interest partners in their Joint Operating Committees are participating in this RFP. These are and should be considered tight and final deadlines. After thirty years I’ve lost my patience and want to begin the development of the system. As soon as these organizations are no longer seen as viable, based on their choice to opt out, the better as far as People, Ideas & Objects are concerned, and the rest of the industry can commence rebuilding the industry brick by brick and stick by stick in the form of the Preliminary Specification. Allowing directors the time necessary to tend exclusively to their legal matters. 

Postscript. Some may feel that this series should have included the compliance frameworks of the various regulatory authorities involved in oil and gas. I disagree. Bureaucrats have had these handled well in their model. That didn’t aid them in any way to better manage the firm or increase their accountability. Just as it’s believed that you don’t let the tax tail wag the dog, I feel we should not allow any of the compliance frameworks to wag the dog either. In the Preliminary Specification compliance to the various regulatory agencies will be the fall out consequences of the decisions and actions that are taken by the producers. 

I’ll be taking a few weeks off from posting but am available and can be contacted at any time. Check our Twitter feed for a weekly summary of the number of calls, emails, discussions and commitments that industry has engaged with me. When I post just the word "nothing" I'm sure you'll understand my point. I’ll be returning on August 16, 2021 with our blog's first post on the second quarter result of our sample producers. And begin anew on September 1, 2021 regarding which direction we go from here.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (IT), Part XII

 I personally have been working on bringing ERP systems to the oil and gas market for thirty years. Our first attempt in 1991 failed in 1997. This initiative began in 2003 and there have been other failures. There are few ERP providers available in the market today and nothing else that is a dedicated development towards oil and gas with a tier 1 provider. The benefit that I’ve gained from this latest initiative is that copyright law is now upheld in all marketplaces and I’ve secured what it is I’ve developed. My point in this is to suggest that oil and gas companies have mistreated the vendors of oil and gas ERP systems development in the three decades I’ve been involved. Much as it has mistreated the service industry, its investors and bankers, not saying anything about their current and former employees. The need to financially support these initiatives from the primary revenues of oil and gas sales is now a result of this mistreatment and a reality that has yet to be realized by producers. Just as there are no oil and gas producer investors, there are no investors that are interested in anything associated with oil and gas. 

Although I feel highly productive today, that will not be the case in thirty years. Who’s coming into the field with the scope and scale of opportunities that are being presented in the marketplace that these producer bureaucrats have created. What Intellectual Property will they bring, and conversely after consideration of People, Ideas & Objects et al, what IP can they bring? It may be surprising to learn that there are other industries that are dynamic and exciting right now. I can conclude that I am stuck with the consequences of my choices and am able to live without regrets of what I’ve done. I doubt those that follow me will feel the same after they’ve put in the three or more decades of effort necessary to generate that first penny of revenue from oil and gas producers. And that assumes People, Ideas & Objects will make it to that point. Conversely, who do I go to if the Boards of Directors fail to act and fund the Preliminary Specification during this RFP marketing process? Alternatively, the better question may be who do producers go to for funding in the future when it’s proven directors don’t care about investing in their organizations profitability?

Throughout our writings we have alleged the accounting conducted by producers over the past four decades, and particularly the profitability reported, is specious. That overhead and other costs are handled inappropriately. Raising serious governance issues that have now resonated throughout the investment community and elsewhere with similar concerns. This accounting allegation of ours is that the specious accounting conducted throughout the industry is best obscured through poor ERP systems. Governance over the quality of the accounting and the companies systems has become an issue at the level of the board of directors in the past year. People, Ideas & Objects would state, finally. However, in addition to the accounting, the ERP systems that are used throughout the industry are woefully inadequate. There are no tier 1 ERP systems providers selling oil and gas systems today and more importantly, outside of People, Ideas & Objects et al no interest. It has not been the case that there was no opportunity for producers to participate in the development of these systems. SAP provides ERP software to some of the senior producers but SAP does not have an oil and gas based application. The workarounds in SAP to accommodate the oil and gas industries unique characteristics are horrendous. SAP’s specialty are large manufacturing concerns like Ford who need to interact with tier 2 and tier 3 suppliers “just in time.” To bring wheel nut part z in d volumes to production line x at y time. SAP’s sale to Ford is more profitable for them than all the revenues they could ever earn from oil and gas. Please read on page 17 of our White Paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale'' about some of the history of ERP systems providers in oil and gas and how they’ve been mistreated which led to the tier 1 providers exit. A purpose built oil and gas ERP system will need to be developed on a tier one systems vendors platform in order to implement a governance model that will satisfy the investment community. That has been specifically discussed and asked by the investment community. People, Ideas & Objects uses Oracle Cloud ERP. The unquestionable leader in ERP systems according to Gartner. In May 1991 I contacted Oracle to commence joint development of oil and gas ERP systems. It was in 1992 we signed an agreement to do so and I feel Oracle threw their entire weight behind the project. This is the project that orchestrated my first failure in the oil and gas ERP market in February 1997. My point here is that not only myself but all the ERP systems vendors have been here doing the job that was necessary. Without financial or any other form of support from the producer bureaucrats. It’s odd how bureaucrats have prospered, accounting is as specious as it is, ERP systems providers aren’t involved due to the lack of financial resources and the industry is such a spectacular failure. Except on a clean energy basis which has all those oil and gas revenues that should have been used for the service industry, investors, bankers and in self serving fashion I’d mention ERP systems providers. All of those people who worked on a good faith basis to build those oil and gas revenues. Bureaucratic betrayal has always been such.

It was in our May 2004 Preliminary Research Report that I noted the research of Professor Anthony Giddens and Professor Wanda Orlikowski. They’ve defined Structuration Theory and a Model of Structuration. Which suggests that organizations, people and society move together in lockstep. Any disparity in one of the three's progress will create conflict and potentially failure. Professor Orlikowskis model suggests that technology is part of society which of course has a disproportionate influence today. We therefore applied this research and showed that Information Technology was defining and supporting the producer organizations, but also constraining them. Therefore I have alleged on many occasions that the purpose behind the use of old, stale and for lack of a better description homegrown ERP systems are what the producers have relied upon and maintained to ensure their franchise was competitively unchallenged and financially unaccountable. This is not to disparage my competitors who have done remarkable work in impossible conditions. Bureaucrats purposely set out since May 2004 to not support any further developments of these systems by cutting off funding to People, Ideas & Objects and other ERP suppliers. What was a robust ERP marketplace in the 1990’s with over 20 providers leaves a dominance by P2 who are a consolidated accumulation of many other ERP providers solutions that were unable to continue profitably. Maybe an oil and gas consolidated mega-corp will work after all! At least from a survival point of view. And at the same time we’ve seen the maturation of the IT market ignored by these producer bureaucrats in the administrative and accounting areas. Whereas producers have declared frequently the latest version of Microsoft Windows was moving them forward on a renewed trajectory. Unknown and undetermined at the time if that was an upward trajectory. Today we better understand the intent and result of these bureaucratic initiatives. It’s always appropriate for producer bureaucrats to state the latest IT trend as to what “sounds good” from a progressive, aggressive oil and gas user of IT. These items include the Internet of Things, Artificial Intelligence, Machine Learning or whatever technology promises the biggest bang for the buck. Microsoft's capacity to provide these has waned in the past few years. Producer bureaucrats have metaphorical aspirations of taking on Usain Bolt's world records and Gold Medal haul at the Olympics. Objectives which are parotted during their Annual General Meetings. They know their boards have never held them to account, therefore there is no risk in them stating anything that may come to mind. 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (IT), Part XI

 We now move on to the next organizational structure that is redefining the way in which oil and gas producers operate in the proposed Preliminary Specification of People, Ideas & Objects, our user community and their service provider organizations. It is the Information Technology environment and the revolutionary impact that these have had on business in the past number of decades in terms of enhanced productivity, performance increases and leveraging value out of the business model. The promise of additional performance and productivity enhancements are just around the corner as these technologies have matured and are more integrated to provide their consumers with even greater value. The key technology today and the one that we’re leveraging in this community is the establishment of cloud technologies. Introducing a shared and shareable cost model across its users. This is how People, Ideas & Objects et al sees this change. Instead of incurring large capital costs to acquire capabilities, users are able to access their needs as a monthly operating cost. The shared and shareable cost model doesn’t just end there. The costs of providing those services are provided on a variable, or as used basis. The producer's users will be provided with the most recent applications and the quality of technology service and support is enhanced through a further definition of specialization and division of labor. Cloud computing is a new and better method of accessing the IT resources that businesses need and want. One that provides a lower overall cost, yet provides the full value of IT that would otherwise demand that each company invest in unique capacities and capabilities outside of their competitive advantages, and demand significant corporate resources and focus in order to build, achieve and maintain. People, Ideas & Objects see cloud technologies as revolutionary to oil and gas. Having oil and gas producers accessing the same state of the art IT capabilities, capacities and infrastructure at low, variable and affordable prices will enable the opportunity for producers to participate in the anticipated future performance, productivity and value enhancements that they choose to. 

People, Ideas & Objects et al sees a further extension than the IT infrastructure, software, service and support. We have adopted the shared and shareable cost methodology of cloud computing and applied it throughout the oil and gas administrative and accounting processes and functionality conducted in the Preliminary Specification software, user and service provider community. If we look at the difficulties of what, how and why producers are consistently unprofitable. We see the overhead costs that are incurred within each producer are what we consider to be the second issue causing a systemic lack of corporate profitability. Building the necessary administrative and accounting capacities and capabilities, particularly in this regulatory environment, is costly to achieve and maintain. It’s also incurred by each and every producer on an independent and isolated, or unshared basis with all other producers. These are not core strategic competitive advantages. They are not competitive advantages from any point of view or perspective of the oil and gas producer. Attaining state of the art administrative and accounting capacities and capabilities are not seen as a necessity or desirable part of the producer and probably rightly so. At least we could point to that as a probable cause to the state of affairs the industry is facing today. That attitude may now be a relic of the 20th century lingering about for its last few minutes. If anything, People, Ideas & Objects multi trillion dollar value proposition should show that the need for attention in the area of managing the business more effectively and efficiently are necessary, desirable, achievable and tangibly valuable. The shared and shareable business model will attain the variable administrative and accounting state of the art capabilities and capacities. However with lower variable costs based on the producers current, profitable production profile. 

When we listen to customers who have implemented Oracle Cloud ERP applications within their organizations there are a number of consistent messages coming through that I find interesting. The first is that their roles as senior management and officers of the firms change to begin dealing with the prospective changes that are coming in the quarterly release or upgrades of the Oracle Cloud ERP offering. These are now in the area of around 200 individual additions per quarter. Note, additional changes will be made when the Preliminary Specification is operational in addition to this volume of Oracle changes. Based on the selection of which ERP solution is determined by the Board of Directors, how many of these changes will be the concern of the producers senior management or the user community and their service providers. The majority of these changes would be handled by the user community under the People, Ideas & Objects et al model and implemented, maintained and supported by the service providers. Input from the producers being funneled through to the user community, consolidated and optimized from the producers point of view. Let’s call this a shared senior management and officers role. Ensuring effective and efficient management of the producer's processes, both from a time, effort and cost perspective. Which brings up an important question. Who’s in control of this entire ERP ecosystem as proposed by People, Ideas & Objects et al? It’s the greater oil and gas economy and most specifically the producers who our users look to for input of any and all information. Our user community are deaf, dumb and blind to any others, however share my allergy to bureaucrats. Our developers are deaf, dumb and blind to all others except our user community. 

The traditional approach to having a unique ERP system that caters to the needs of a specific industry is to customize the vendor's application to do so. This is frowned upon by Oracle and recommended not to be done. People, Ideas & Objects have adopted this policy in our user community and service provider licenses. Stating that all customizations of the application are to be avoided at all costs. This certainly seems to be at odds with what it is that we’re doing. The point is subtle and is a unique characteristic of the Oracle Fusion Applications. Other than Workday they are the most recently written applications of all ERP systems. They were the first to be written in the Java Programming Language which introduces the full object model to those applications. The Fusion Applications are supported by the Fusion Middleware which is an enhanced Java Server with expanded function and process management that is generic and written by the Oracle Fusion developers. This is the base of the Oracle Fusion Applications. It is also the base of any “additions” that are written to provide industry specific application capabilities to the Oracle Fusion Applications. Enabling People, Ideas & Objects to embed the oil and gas industry features directly into the Oracle Fusion Applications as “additions.” This is opposed to the industry customizations which would traditionally sit on top of the ERP applications. Oracle’s method avoids a key difficulty in the environment where the needs of the users are dynamic and changing. Any system changes at the Cloud ERP, or Fusion Application ERP level are therefore not going to break any of the customizations that sit on top, as there will be nothing there. The new quarterly release of Oracle features will be embedded with the “additions” from People, Ideas & Objects and therefore, as they too are object based, updated as well with the new features or unaffected by them without any of our additional developer involvement. Yet, I am satisfied that our application code base is separate and distinct from the Oracle Fusion Middleware and Fusion Application code. Maintaining full control over the Intellectual Property that is a key source of People, Ideas & Objects competitive advantage. I have to mention another unique characteristic that will soon be available to the Oracle Fusion Applications and Middleware. A feature that they’re calling “Fusion - Future Zero Down Time.” Seems self explanatory. 

This next point is one of contention between the IT community and those within the business community. It is a method of implementation that is becoming increasingly the norm and the more successful method of ERP implementation. It goes by the name that captures it most effectively as “rip and replace.” I subscribe to it simply for the time element of the roll out of the Preliminary Specification when completed in its commercial release. Please note it is the domain of our user community and service providers who will be planning and conducting the implementations for each of their individual processes themselves and of course the producer firms. Time is the demand that should be focusing the minds of the producers on dealing with their shareholders issues of accounting integrity, accountability, tier 1 ERP systems use and the melting down of their financial position due to absolutely no capital structure. But that may be just one man's opinion. People, Ideas & Objects primary issue is that we are conducting this across the North American producer marketplace. Therefore the need to focus the energies of the industry on this task will need to be a priority. Both from a software development point of view and an implementation. Otherwise in this man's opinion the industry will just melt down and oil and gas will have failed in its primary role of providing affordable energy to the North American consumer. North American’s will become dependent on foreign sources of energy to meet consumers' needs. And as we’ve noted the most powerful economy in the world is also the largest consumer of energy. These foreign sources of oil may therefore deprecate us from that traditional economic role. 

People, Ideas & Objects have chosen to pursue our user community, research and Intellectual Property as the three areas of focus for our competitive advantages. Note that none of these involve the development of the software code. We’ll own and provide the software code that is derivative of the Preliminary Specification and our Intellectual Property. We have contracted all of our software developments to Oracle Corporation. Their services division are well versed in their products delivery and are ready and capable. We believe we would need to dedicate at least a half decade in order to assemble a team of the size capable to deal with this project and then an unknown amount of time necessary to turn them into a functioning capable team competent to put out the quality of software necessary. We’ve been working on the development of the user community since the first quarter of 2014. A task we’ve assigned as our priority since then and one that will differentiate our product offering in terms of quality. Time is not the commodity available to the producers at this stage. Focusing on the IP aspects of this project will be a better use of our time, resources and skills. It is also where we see the value in the software business. It is consistent with our belief that specialization and the division of labor will need to be applied to all aspects of the economy and by doing so we can do a better, more productive job.

If directors believe these ERP developments can be done within their organization then why haven’t they happened? Our scope of application development in the Preliminary Specification would be considered equal to what each and every one of the producers would need to undertake if they chose to continue to go it alone in the unshared cost model. The main difference is in terms of scale. To acquire just the depth of understanding and detail necessary of the Oracle ERP Cloud offerings would require the same costs being replicated across the industry in each and every one of the producer firms. Assuming producers had a workable, profitable business model, or have a model developed in a timely manner. I could be reading things differently regarding the shareholders and bankers expectations. 2015 was when they began to express their discontent with the industry at large. The industries lack of performance, accountability and transparency were identified as issues by them at that time. I, like others, would never have assumed that six years of inaction was a tolerable amount of time. 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (Markets), Part X

 In this our second post regarding markets we are not pursuing the resolution of any issues such as we discussed in the Resource Marketplace module of our prior post. An issue that needs to be addressed and resolved in order to attain a dynamic, innovative, accountable and profitable oil and gas industry. The Financial and Petroleum Lease Marketplace will also implement the market's organizational structures into the Preliminary Specification and provide the organized interface necessary to access and interact within these markets of the oil and gas industry as they exist and evolve. Modules in which the full transactional power of the Preliminary Specifications ERP system supports the activities within these markets. We’ll also briefly discuss the Marketplace Interface that we’re building as I believe the virus provides the opportunity to adjust one's opinion to the use of this feature. I have suffered the slings and arrows, the ridicule for it in the past and there is not much that can stand in disagreement to what I haven’t already heard. In my opinion it is revolutionary and needs to be seen in the context of the changes that occurred in 2020. 

The Petroleum Lease Marketplace module is as one could imagine. An opportunity to post, bid, purchase, sell mineral rights and producing properties in the marketplace that exists and is replicated virtually within the Petroleum Lease Marketplace module. Everything from the opportunity to participate in a joint venture to establishing the surface rights payments is fully supported by the ERP system of the Preliminary Specification. Our product sits on top of Oracle ERP Cloud which includes their tier 1, Oracle Fusion Applications that Gartner rates as the highest quality offering. These oil and gas markets include the data of the Federal, State, Provincial, Freehold and Offshore leases. An opportunity for industry to consolidate on a dynamic platform which uses proven tier 1 technologies with the constant support of the service providers maintaining transaction administration and accounting in a standard and objective manner. (Note: People, Ideas & Objects have maintained the policy, and it is written into the user community and service provider licenses. That we will maintain arm’s length distance from all royalty administrations. We are operating in the best interests of the oil and gas industry. To ensure that they are provided with the most profitable means of oil and gas operations. There will be no compromise on this anywhere within this sub-industry.) This will be enhanced with the constant iterative design and development being undertaken by People, Ideas & Objects user community and developers on a permanent basis. Whereas if a jurisdiction reviewed and changed their royalty rates at some point, in terms of either the rate or method calculated, producers would not need to concern themselves with the administrative or accounting aspects of those changes. The user community, developers and service providers would have them covered and implement the necessary changes in the software and services in a timely and accurate manner. Producers would only need to deal with the issues regarding the revised costs of the royalty. 

Administration and accounting are not competitive advantages of the producer firms. Thankfully that is one of the statements that we’ve received no pushback on. That doesn’t mean that these areas have to be a hodge podge, slapped together system that only makes do. There’s no reason why the industry shouldn’t have achieved state of the art ERP systems within their firms. That producers haven’t had state of the art ERP systems has led to many questioning not only the integrity of the accounting but also the systems that are being used by industry. Why? And why is it that the issue of overproduction, or as we define it as unprofitable production, can be documented to have existed in the North American marketplace back as far as July 26, 1986? The solution we propose to the overproduction issue, in addition to aligning all of these organizational constructs, but not the bureaucracy, has been available since December 2013. We documented the directors and officers liability throughout 2020 and these still stand today. Investors today are unhappy and becoming litigious. There is significant personal risk involved to the officers and directors, and People, Ideas & Objects, our user community and their service providers are offering a value proposition that makes the Preliminary Specification the best investment a producer can make. In terms of markets, it is alleged that there is double the amount of oil needed up until 2050. This capacity overhang forces the North American high cost producer to assume the swing producer role. To produce only profitable production. Saudi Arabia has production costs of $3 and probably $0.00 capital costs therefore can produce profitably at literally any price. They could use the money and the markets in 2050 are too far away and unpredictable for them to sit back and wait for. Let's call that the reality of the situation. 

In terms of marketplace modules, there is the Financial Marketplace module. As with the Resource Marketplace module we see many changes in this oil and gas marketplace. Which I would think producers would welcome at this point as financing is next to impossible. Moving to the Joint Operating Committee as the key Organizational construct of the dynamic, innovative, accountable and profitable producer is achieved in the Preliminary Specification. You’ll recall in Part VII of this series we noted that the movement of the knowledge to where the decision rights were held, which is the Joint Operating Committee, enhances accountability. It's here that the Financial Marketplace enhances that accountability with the board of directors' interaction with their current and prospective shareholders and bankers. A review of the Financial Marketplace modules specification would be the best source of information to capture an overall understanding of the module. If we also recall the discussion we had in Part VIII of this series regarding the standard and objective nature of the accounting that is conducted throughout the Preliminary Specification and the service providers. Consider if that would satisfy some of the issues that investors and bankers have raised regarding their investments and loans in the industry? Where everything being produced is profitable and the producers are seeking to maximize their profits by shutting in unprofitable production. Would People, Ideas & Objects, our user community and service providers be helping producers satisfy their shareholders and bankers to the point where they’d begin investing in the industry again? We hope that this enhanced accountability is not one of the reasons that the Preliminary Specification was not accepted in the industry? Sanctimonious questions I know, but that is what this environment and the relationship between People, Ideas & Objects and the bureaucrats has become.

Hokey graphics aside, the demos for the Marketplace Interface were prepared by the underlying technologies that are available to us. These were also prepared almost a decade ago. Much has developed in the technological environment since. There are many points that I would argue that are different today than were at the beginning of 2020. They include.

• The work from anywhere and its enhanced productivity of employees.
• The co-mingling of professional and personal lives, the deduction of redundant travel times and archaic rituals has had a marked increase in the performance of white collar workers engaged over a 12 to 14 hour day. 
• Zoom induced hell. (The demand to always be on camera.) 
• Turning cameras off for peace of mind is now a necessity to this ball and chain. All to satisfy one’s immediate supervisor's demand for command and control through continuous mandatory attendance.
• The lack of ERP tool support availability.
• Search, contracting, buying, selling, financing, billing, paying, marketing etc. What is currently being done in the ERP area of oil and gas vs what could be done could not be more stark. Oil and gas is in the dark ages.
• Proliferation of bots. 
• Both good and bad. Note, Oracle’s Cloud ERP now has “good” bots that fight the “bad” bots that may be attempting to get in. 
• Always there capability. 
• The establishment of permanent, virtual real estate for your bots and organization. 

Looking at the establishment of IT in other industries where technology has been embraced we can ask some interesting questions. Why is there such volume on the stock exchanges today? What are all those algorithms doing? It’s been more than two decades that they’ve existed. How is it that NASA, Ford and GM can all be collectively outperformed by Elon Musk? And how is it that oil and gas is generally, and rightly regarded as having many of the best science and engineering Information Technology available to it. Yet its business is about to be thrown on the trash heap of history? 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (Markets), Part IX

 Although many may not have seen the overall vision of the Preliminary Specification before, this series is bringing a few more of the pieces into the picture for people. We could probably spend a few more posts just on the Joint Operating Committee as the move of the compliance and governance frameworks to its seven frameworks has a dramatic effect on everything that is done in the industry today. Is there a need for that level of change? It may be consolidated mega-corp would satisfy everyone with everything and always. That there’s excitement in the industry may be more attributable to the covid release from lockdown and economic freedom. What is not being realized is that the issues in oil and gas have been prevalent for many decades. The financial destruction was complete prior to the lockdowns. Our approach is to establish the necessary organizational structures that will support a dynamic, innovative, accountable and profitable oil and gas producer, industry and supporting service industries. What we’ve discussed in this series are the organizational structures recognized, defined and supported within the Preliminary Specification which include the expansion of specialization and division of labor, Intellectual Property, the Joint Operating Committee and today we’ll discuss the adoption of markets as a framework that defines and supports both the producer and secondary service industries. 

We have three modules in the Preliminary Specification that are “market” modules. The Petroleum Lease Marketplace, Resource Marketplace and Financial Marketplace modules. Each establishes marketplaces where producers can engage in the markets which they need to function. To suggest these are B2B’s or exchanges as have been the traditional “solution” would undermine their functionality and purpose. These marketplace modules emulate the markets that producers participate in and are designed to deal with the day to day activities of each of the producers, service industry and others. Supporting them with the contractual, transaction processing and other capabilities of our ERP system. Reading these modules definitions to capture their purpose and approach is necessary as it is impossible for me to do so in a simple post or two. Speaking generically we can discuss the larger issue of our approach vs consolidated mega-corp’s in terms of the reliance on markets vs firms. How we are using disintermediation, with its reliance on larger decentralized capabilities enabled by the Internet, establishes far greater opportunities, speed and performance in the organizations that adopt them. 

The economic principles of markets and price discovery are two of the mechanisms by which North America has advanced its overall quality of life. Adoption of these within the oil and gas industry are therefore a necessity and the Preliminary Specification has done so as part of the structures that define and support these industries. Our decentralized production models price maker strategy relies on the principle of oil and gas commodities being priced based on the price maker principle. The need for producers to produce only profitable production, after full consideration of all of their costs on a timely and accurate basis, is how they’ll operate under our ERP system and service provider offerings. Using all of the information contained within the commodity markets price, (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is the same mechanisms that are involved in every transaction involved in a free market. 

From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21”

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17

We first need to discuss two components of how I see one of the marketplaces in oil and gas. The reliance on the field service industry providers to extend the producers capabilities and capacities into their regions of interest. To own and operate their field infrastructure would otherwise be an impossible impediment and constraint towards progress. The second component is the history of abuse and disrespect that producers have displayed and presented to the service industry over the past forty years. And particularly since 2015 when the producers recognized their financial difficulties were amplifying. The assumption that oil and gas is a boom / bust industry has been accepted over the long term by these producer bureaucrats. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance that has left us with a legacy of maybe five good years out of the past thirty five. Bureaucrats don’t understand this point as they’ve experienced thirty five years of excellent compensation. Producers assumed the service industry would need to adjust to the boom / bust trend in lock step with the producers. There is an implied assumption that the service industry, like the oil and gas industry itself, enjoys revenues as a primary industry and therefore continues business as usual during the bust cycles. The diversity of the service industry offerings, and their coverage across the various regions of their operations throughout North America spreads them relatively thinly. As secondary industry participants they are not as resilient as the producers believe them to be. The collapse of their revenue streams into the low teens in terms of percentages has been devastating.

Now in 2021 the consequences of this downturn have destroyed much of the service industries capacities and capabilities that were once available to producers. This decline in support since 2015 on top of the cumulative difficulties administered by oil and gas producers has created the situation where it will be difficult for many of them to survive. The largest service industry providers have left the continent as a result of the abusive treatment they’ve received. Therefore working out the boom / bust cycle through our price maker strategy will go a long way to rectifying this issue in the long run by providing a stable environment, or constant level of demand for which the service industry can prosper. However, investors in the service industry have had it for the remainder of this millennium. They invested in good faith and were abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal to pay the light bill and taxes on the shop. This was primarily due to the producer bureaucrats determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. The dilemma today is who’s going to provide the financial resources for the service industry to recapitalize itself and reestablish the capacities and capabilities that will be necessary for a self-sufficient and profitable oil and gas industry?

This is what’s known and understood in the market today, it’s not news. Consolidated mega-corp will expect the service industry to dance for their dollars just as they’ve always done. If People, Ideas & Objects are correct and no one’s going to play that game, what would be the result. I would point to the example of the history of the ERP providers in oil and gas over the past thirty years. I can report there is still no consideration whatsoever of a second chance these first tier ERP providers will be riding to the rescue of the producer firms. Why, they feel the industry is too complex, too costly and there are not enough producers to be able to negotiate their sales prices fairly. The last two ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper, due to the inability of producer bureaucrats to pay for their software development in advance. Producers have never paid for any ERP systems anyways, so why start? Producers have had eight years to invest in the Preliminary Specification to make their organizations profitable and to avoid this inevitable, predictable and disastrous outcome but didn’t do it. Not a penny has been spent on People, Ideas & Objects at any point. Therefore producers will be paying for all of the costs of the Preliminary Specifications development and user community in advance. The need for skin in the game is the apt approach when so many investors and vendors have been betrayed so comprehensively.

As the producers sit upon the primary industries revenues they so enjoy. (And mostly for enhanced, innovative, executive compensation. I do question what's in those capitalized overhead accounts we never see.) They will show a thumbs down to this idea as if People, Ideas & Objects is the only vendor they’ll be faced with who has this ludicrous idea. Bureaucratic actions have consequences which have been wholly detrimental to everyone else in the industry. Bureaucrats will no doubt argue, rightly, this does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of the markets they’ve caused. These facts on the ground are what bureaucrats refuse to consider or admit. Until they do the industry will be plagued with problems. And they’ll never admit this, what they will do instead is they’ll just leave which is the historical action other bureaucrats have taken in other industries. These issues need to be dealt with and I am unaware of any other solution. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means now available. The primary industry revenues of the oil and gas industry. Facilitated through the Preliminary Specifications decentralized production models price maker strategy. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the bureaucrats pockets. However, that does not create the dynamic, innovative, accountable, profitable and self-sufficient oil and gas industry that we need does it? 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (JOC), Part VIII

 Doubling and tripling down on their failed vision is the method chosen to resolve the oil & gas industry and producer issues by the current bureaucrats. Raising the viable scapegoat that it's the small producers who are overproducing in order to meet their bank payments which has caused the disaster in the industry today. When bureaucrats raise this argument we see the source of their own future demise. For them to admit the overproduction issue is attributable to their own actions would never cross their minds. Everything is always someone else's fault. And therefore with their remedy of consolidation, they’ve already put in place the “fact they’ve acted in good faith to put the industry on the right path.” Subsequently recognizing that they would need to admit to their historical errors, or the need for them to conduct further corrective actions can already be seen to be unnecessary. The only thing they iterate upon is excuses.

We’ve defined our alternative vision in the Preliminary Specification and would note that it’s in stark contrast to the consolidation vision that producers are implementing. Disintermediation is best defined as the removal of the bureaucracy and red tape that is rendered redundant through use of the Internet. Although the world is unaware of “how” and “what” the bureaucrats' vision will operate, or any details, we can only speculate as to why it’s being done when all other industries are, and not by choice, finding efficiency in the decentralized methods of organization. The old saying that the bigger they are the harder they fall may be the apt saying. Possibly, we should heed this as a warning and govern ourselves appropriately at this critical juncture. People, Ideas & Objects have repeatedly stated the fact that each boe provides 23,200 man hours of equivalent labor. Bureaucrats capitulation of shale resources should be seen as irresponsible when we understand that it’s the world's most powerful economy that is the largest consumer of energy. Why aren’t bureaucrats seeking to make shale profitable? It’s reasons such as these that the people who are elected to the boards of directors are given such responsibilities. Although it is not their job specifically, they also would not ignore such important criteria, after all profitable oil and gas production is what producers should be doing on behalf of their shareholders.

The dynamic demands in oil and gas make each Joint Operating Committee unique to one another. The conflict that can arise between an operator and the Joint Operating Committee may lead to compromises in operations and not always provide for the most profitable means of operations for each of the producers concerned in the Joint Operating Committee. Consideration therefore needs to determine when profitability was achieved at a property, or what is the appropriate level of profitability to determine if production should continue under the price maker strategy. The Preliminary Specifications determination will be at the Joint Operating Committee level and not at each producer's determination of profitability at that specific property. Leading some producers to remain producing and yet mildly unprofitable. This unfortunate situation will arise in the many scenarios where these conflicts exist. The most common would be in natural gas production where Joint Operating Committee members that were not members in the gathering and processing Joint Operating Committees, and therefore had to either pay custom processing and / or sell their by-products for prices that were fixed lower than the markets. Or the allocation of production back from the gas plant would be determined by contractual agreement as opposed to the chemical composition. In the Preliminary Specification the ability to conduct either the legal or the chemical production allocation is available with our Material Balance Report. Hedging is done at the corporate level and has nothing to do with the performance of any of the Joint Operating Committees or the impact on their determination to produce or not. 

Due to the demands for earth science and engineering resources in the near future. We’ve discussed how specialization and the division of labor are being used in the Preliminary Specification to deal with these associated resource demand issues. Conceptually we have implemented the pooling concept where the ability to have the Joint Operating Committee assigned with the available technical resources of each of the producer firms would be how the property was managed from an earth science and engineering perspective. The pooling concept being the replacement of the operator role. Establishing the second source of revenue for the producer and its supporting administrative infrastructure in the Preliminary Specification. We have also implemented the necessary governance model to support these resources with the appropriate organizational structure to ensure effective operations across the producer and each of their Joint Operating Committees. 

We have moved the focus of the administrative and accounting away from the “corporate” structure to the Joint Operating Committee. Where it will align with the work being done within the technical areas of the oil and gas producer firm. The Preliminary Specifications accounting assesses the profitability of the Joint Operating Committee on the whole property basis to determine if it is profitable. Each property is being furnished with full financial statements each and every month in the Preliminary Specification. This therefore needs to be done in order to determine the actual profitability or loss that’s incurred. The service providers will be charging each Joint Operating Committee the service fee for the service they rendered, if at all that month. Therefore each property will have detailed, actual, factual overhead charged to the Joint Operating Committee to ensure these costs can be recovered in the form of cash in the current month. 

The second difference that needs to be accounted for is a monthly allocation of the depletion of any remaining amount of undepleted property, plant and equipment of that producer's capital costs that has not been recovered. (Note each of the producers' capital costs may be different, and some substantially if they purchased an interest in the property, and amounts previously depleted were at different rates, therefore these are producer based calculations.) By identifying these costs each month, then determining the profitability the prices of the commodities will need to be adequate to cover these costs in order to continue to produce. Without the zeal to build balance sheets and hide overhead costs, depletion and overhead costs can be appropriately determined in the commodities price and therefore capture these costs in the prices being passed to the consumers. The cash consumed each month to operate the producer will then be returning to them each month. Hence this cash return provides the intrinsic motivation to accurately deplete their property, plant and equipment account. If after considering these costs the property is unprofitable it would be shut-in and put in the producers inventory of innovative works in progress. With all of the costs of the Joint Operating Committee being variable, there will be a null operation reported for shut-in production that reflects no loss or profit. When producers are focused on profitability the consequences on cash flow and performance will be substantially positive. When producers focus on cash flow, profitability and performance are disasters. 

This performance accounting is enabled through the reorganization of the administrative and accounting resources into the service providers affiliated with People, Ideas & Objects. In this marketing series focused on the directors we have not discussed the standardized and objective nature of the accounting that will be conducted as a result of this configuration. With service providers focusing on one process and applying it through the use of their application of the Preliminary Specification and their services to the entire industry as their client base. This demands that every scenario be defined and captured within our software in order to be able to account for it in the method that producers need. A lack of participation by a producer will lose this opportunity and subsequent capability to deal with their possibly unique situations. Any subsequent changes would need to be funded directly by that specific producer and not as a result of the annual assessment for software changes. The developed software processes will be invoked and supported by the service providers in standardized fashion. There will be no consideration to deal with any special situations that were not worked out beforehand during development. The standard application of the processes will be handled in this manner and any changes or modifications will need to be discussed with the user community member who is the principle in the service provider organization. They will be able to coordinate the subsequent development. The importance of producer participation in these software developments can not be stressed enough. Standardization is achieved across the industry in this manner and as these processes are dependent upon each other any changes will need to be made through the appropriate analysis, development, testing and deployment. 

It is important to note at this point that the competitive advantages of the user community and service providers includes automation. Any deviation from the system processes that haven’t been fully analyzed and implemented appropriately, primarily as a result of a lack of participation by producers. Can not be accommodated. Automation will be invoked at high levels to ensure that the most effective and efficient operations are provided to those producers participating in these developments. Relieving the administrative and accounting resources to pursue higher level value added opportunities. Reduction of costs in this sense is a worthwhile pursuit, not from the point of view of the reduction of the costs itself. Reduction of costs implies high levels of automation are in play. Automation does not just reduce cost directly it does so indirectly through the reduction of error. Reduction of errors reduces time. What admittedly is becoming a more critical resource as we proceed through this 21st century economy.

The need to have standardization is also necessary from the point of view of having industry rely on the outcome of these methods. Objectivity is achieved as the ability to deal with unique situations or “manage” some producer's data is counter productive due to the global dependence on the data. Consider the process of balancing the production data across the month, across a gas plant with 1 bcf / day processing. Consideration of the elements and needs of the industry and having them captured in the software is a necessity for this reason. The benefit of this strict interpretation is that when it’s reported that a property is not profitable according to the standard and objective accounting. The producers in each of the Joint Operating Committees will know it is in their best interest to shut-in the property for the short term. They’ll know the property was assessed on the same basis as all the other oil and gas properties throughout the continent and be satisfied with the understanding of the nature of that standard and objective accounting. They will know and be satisfied with the determination of profitability or loss, its impact on their organizations performance, and govern themselves accordingly. And therefore increase their organizations performance by only producing profitable properties. 

It is critical to note here that the basis of the Preliminary Specifications development is user community based developments as they are the only means in which to develop quality software. Our user community is our customer, the only people that the People, Ideas & Objects developers understand to exist in the world. They are the only people that have an influence over the software developed by us. And, our user community is there as an industry based resource to deal with the issues and opportunities that people are having in oil and gas. For bureaucrats to be discarding the development of the Preliminary Specification because it doesn’t suit the 1% criteria of what is perceived as necessary for the industry to operate effectively is disingenuous. It will be a producer's lack of involvement that will precede the inability for that organization to effectively use the software derived from the Preliminary Specification. We suggest that to catch up after initial developments are complete will not be possible as the system will be subsequently developing and iterating on concepts that are foreign and potentially a renewed industry standard. To let some of the producers carry the freight so that other producers can catch a free ride after it's been built will be dealt with. There will be no free lunches, and if a producer decides to wait there will be consequences in terms of performance, their ability to catch up the performance of the rest of the industry and these costs are guaranteed to be much higher through a non-participation penalty. Recall it's not enough to own the oil and gas assets anymore. It’s also necessary to have access to the software in the form of the Preliminary Specification which makes the oil and gas assets profitable. We are configuring an industry of successful producer and service industry organizations based on the issues that have caused the systemic failures that will also dictate future difficulties. Will boards of directors be telling their shareholders they’ve opted out of an investment being made in their organizations profitability and performance? If directors don’t like the changes then their future will have been written through non participation. If they share our vision, have some questions and concerns, sitting back and remaining moot is the last thing the boards of directors need to be doing. It’s a different world in the 21st century. Bureaucrats chose to sit back and dictate their far reaching vision. That has now failed spectacularly, doubling and tripling down will too, which to me is quite obvious.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (JOC), Part VII

 We’ve been discussing the organizational structures that are defined and supported in the Preliminary Specification, our user community and their service provider organizations. To this point we’ve identified how we’re advancing the use of specialization and the division of labor throughout our community to turn all of the producers' costs variable. Enabling the use of the decentralized production models price maker strategy to ensure that all of the producers production is produced profitably everywhere and always. And to deal with the constraints of the diminishing science and engineering resources identified long ago. Moving the performance trajectory of the industry through specialization and the division of labor to meet the market demands of profitable energy independence in the North American market. We then discussed Intellectual Property laws and how our modules of the Preliminary Specification enable the producer firms to exploit those to their benefit and establish the much higher levels of innovation necessary in a scientific and technologically based industry. 

Today we’ll be discussing the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Joint Operating Committee is the industry's legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. When we move compliance and governance of the producer firm away from the bureaucracy and into alignment with the seven frameworks of the Joint Operating Committee, we achieve an increase in organizational speed, innovativeness and accountability in producer organizations. Continuing on with the theme of this series of what, how and why we do that, let's begin.

Adoption of the culture of the oil and gas industry in the Joint Operating Committee is one of the fundamental changes that we’ve made in our ERP system. By doing so we’ve changed everything that is currently done in oil and gas and recognifigured it around what is unquestionably its cultural method of operation. We hypothesize that the current “corporate model,” as we describe it, developed as a result of the 1960s introduction of computers. When asked what would be done with the computers; accounting was one of the more natural responses. From there it was a simple evolution to the tax, regulator and compliance of the corporation and soon what was being done in the administrative and accounting part of the corporation had little to do with what was happening in the rest of the producer firm with the Joint Operating Committees operations. These divisions grew to the point where neither side was truly aware or appreciative of the other's concerns. With the forces of creative destruction in play and disintermediation introducing far more effective business models to each and every industry. People, Ideas & Objects et al believed the level of disruption in the oil and gas market would be horrific without any consideration of what we were doing or would introduce. Creating an opportunity to provide a solution to these issues and take this once in an industries lifetime opportunity to move back to the more natural flow of the business, focused around the seven frameworks of the Joint Operating Committee.

Research taught us that when you align compliance and governance with operational decision making, accountability is the result. This is intuitively understood. We believe this to be a source of conflict throughout the oil and gas industry today which creates an atmosphere and culture of unaccountable decision making. Operators assume the responsibility of managing the Joint Operating Committee based on the need to have the requisite capabilities available to conduct the necessary field operations. Operational decision making authority is held by the Joint Operating Committee and is delegated in the operating procedure to the operator based on the results of voting by the participants. A threshold percentage is established for any decision to be passed. Let's assume 60% is the required percentage for approval and the operator has a 33% interest. Decisions are then made on this basis, AFE’s are issued, funds are spent and the initiative fails. Who’s responsible and who needs to be accountable for the difficulties experienced? We believe this to be the root cause of the issue we identified in Part III of this series. Where we discussed the unaccountable nature of the bureaucrats just sauntering off from the shale fields to pursue clean energy without a whisper of effort to make them profitable. If they’ve never been held accountable for the day to day individual field decisions that were made, during any period of their tenure at the producer, why would they then be held accountable for any decisions when they’ve assumed the officer roles in the firm? It is the culture of the industry which developed over the past six decades that dictates this unaccountability. Assuaged by the viable scapegoats such as “it's a difficult business.” To resolve this the Preliminary Specification aligns and implements the Compliance & Governance module at the Joint Operating Committee level to establish a new culture of accountability for the decisions that are made. 

The next point is related to the accountability issue and to some of the previously discussed issues around the resource restrictions that are looming in the earth science and engineering resource supply. Professor Richard Langlois was another extensive source of primary research we used throughout the Preliminary Specification. His research is in the area of Industrial Economics and the Economics of Innovation. He raises what he calls the agency issue or rights assignment problem in his working paper “The Austrian Theory of the Firm: Retrospect and Prospect.”

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 6

People, Ideas & Objects therefore questioned whether the ability of each producer firm would be able to continue to establish their in-house earth science and engineering capabilities and capacities at the level necessary to meet all of their needs, just-in-time, on a go forward commercial basis. On this basis, the anticipated resource constraints dictated the necessity of unused and unusable technical resources, or surplus capacity, in each producer firm was a luxury that was no longer available commercially or a viable commercial alternative due to the demands of a further specialization and division of labor. And therefore concluded the control or agency problem would need to be resolved on the basis of the knowledge being transferred to where the decision rights were held. It is specifically in the Research & Capabilities, Knowledge & Learning and Resource Marketplace, but also throughout all of the modules of the Preliminary Specification that we’ve moved the knowledge to the location of the operational decision rights in the Joint Operating Committee. 

A secondary point I would raise is the definition of capabilities. Professor Langlois has provided the following definition from his paper “Modularity in Organization, Technology and Society”. 

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." p. 27

To which we’ve humbly suggested that “ideas” be added to that list. We also have Professor Carliss Baldwin noting that “knowledge begets capability and capability begets action.” What will become of the oil and gas earth science and engineering related capabilities and capacities now that bureaucrats have cast their future on clean energy. Renouncing shale and casting it to the back seat of the bus where no one will see or hear from it again. Shale being what can unquestionably be the most advanced science the industry has ever seen or developed. Shale technologies will at best develop no further, atrophy or be cast to the four winds. I’ll reiterate that People, Ideas & Objects have a plan to make shale commercial in the energy independent North American market. Shale is a critical and highly necessary element of our energy independence. Those that have graduated elementary school understand that clean energy is not and can not be relied upon. Energy independence will require effort and hard work on behalf of all concerned however it can be done. It will not be done with the means and methods of those who have never had their hearts or minds in the business for anything other than what it would do for them financially. Bureaucrats are responsible and should be held accountable for the destruction that we’re witnessing in the industry today. Will we see the producers board of directors begin to establish the necessary accountability frameworks that have been missing for the past four decades? By finally holding the producer firms' officers accountable for their actions and failures and setting a new culture of accountability throughout their firms by funding the Preliminary Specification? 

The bureaucrats' capitulation of their oil and gas operations in exchange for clean energy is what I believe to be the case we’re experiencing. We’ve seen a history and litany of lying, blaming and viable scapegoats that have provided all manner to suggest this is just more of the same. I think it’s different this time. With the inability to make shale profitable. Their incapacity, lack of motivation and unaccountable nature to even try. Their public shale denouncements to satisfy what they believe their investors need to hear. Bureaucrats have to stop reading the tea leaves as to what they believe investors want. Investors want profits, everywhere and always, and that is all. With their contrived positioning of clean energy and environmental concerns I would ask what is it in oil and gas that will be the new frontier if it is not clean energy? Offshore, the arctic or conventional, maybe heavy oil? It is this focus on clean energy that will do more damage to the industry and seal the fate of the existing producers. What message is being conveyed to the investors in oil and gas or its related service industries. Let’s assume they’re looking for capital for the producer to purchase land or a driller to build a new rig. As if they would ever be so foolish to do so. The investor’s first question would be why? Producers aren’t focused on oil and gas, its clean energy. 

The Biden administration provides cover for the inaction by oil and gas leading to a probable decline in American deliverability. So be it say the bureaucrats, it would be the higher commodity prices they would be able to enjoy as a result and to do so without lifting a finger. I sincerely doubt that any of the directors of any of the producer firms would act and behave in such irresponsible and inappropriate ways. These directors would be able to prove themselves were not party to this unaccountable nonsense, and besides, they know this Biden induced downtime would be the appropriate time to be developing alternatives such as the Preliminary Specification for the future of a dynamic, innovative, accountable and profitable oil and gas producer firm. I don’t believe they’re part of this overall drive towards environmentally focused clean energy. They have a fiduciary duty to their shareholders who invested in good faith to build the oil and gas business and develop a profitable operation from the revenues generated today. Not to divert those, or allow those revenues to flow into new, unrelated businesses that are unauthorized and unproven. What I also know is that the directors now have a larger source of overall revenues to initiate the development of the Preliminary Specification and associated user community. In a related manner, if investors don't see any effort by the bureaucrats' to make shale commercial, and don’t see producers investing in their organizations profitability, what message does that send? Let’s get on with the oil and gas business and cut out all this other nonsense.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.