Our Ground Floor Vision

 People, Ideas & Objects have painted a vision of how and what the Preliminary Specification, our user community and their service providers would structure the dynamic, innovative, accountable and profitable oil and gas producers to be. Recently in Organizational Constructs we noted how the Preliminary Specification uses five major structures to define and support the industry. These include the Joint Operating Committee, markets, Intellectual Property, specialization and the division of labor and the Information Technologies that are available today, such as the Internet. Expanding on these constructs to include the reorganization of the Intellectual Property of the earth science and engineering capacities and capabilities that are undocumented in the industry today. Offering a comprehensive organizational form which provides an ERP system to support exploration, production, administration and accounting. Setting out the gold rush opportunity for the industries engineers and geologists to document, publish and earn the copyright and therefore establish a foundation for their new applied sciences firm based on that Intellectual Property. In the process breaking down the foundation of the existing producers capacities and capabilities and setting up new ways in which the engineers and geologists will operate in the industry we’re rebuilding. Supported directly through the Preliminary Specifications Work Order system that captures their time and billing needs to manage the commercial aspects of their products and services. 

But there is so much more to what we’re doing, and what everyone involved in oil and gas could be doing. The primary industry of oil and gas directly affects many other businesses and industries that are critically important to the success of a profitable, energy independent North America. That is to ask the question, what business, or how are you employed today? Does it affect our objective of ensuring that all production in North America is produced profitably and always? And profitably from the point of view of recognizing all of the costs of exploration and production in a timely and accurate manner? That competes in the North American capital markets on a competitive basis? Then you will be interested in better understanding the overall vision of rebuilding the oil and gas industry based on your involvement in the markets that are forming, and need to form, to make these objectives real for the remainder of the time that we’re dependent on oil and gas. Those wishing to save the planet will have their own plans as they move on to their clean energy startups. Ground floor opportunities for everyone in energy! Just as The Constitution assures us that all men and women are created equal. This ground floor opportunity offers the same equal treatment today. However, unlike the Biden regime it does not suggest that equality of outcome is even possible anywhere or at any time in this or any galaxy that we’re aware of. 

The role of capital in a startup operation is massively diminished in the 21st century. Particularly when the acquisition of Intellectual Property is the foundation of a firm. Add to this the soon to be standard working from home method of operation cuts the overhead of what you're doing. The other aspect of all of this is you don’t have to technically do anything in the short term. That is your new venture can exist almost exclusively in your mind and SSD. The time spent in planning, thinking, or what I’ve listed as the competitive advantages of the service providers would also be applicable here. They include quality, specialization and the division of labour, automation via software, innovation, leadership, application of Artificial Intelligence, which all use the uniquely human attributes of issue identification and resolution, creativity, collaboration, research, ideas, design, negotiating, compromising, financing, reasoning and judgement to just start the list. These form the long term competitive advantage of these businesses built upon the foundation of the Intellectual Property being developed. 

I’ve mentioned this opportunity to some people and in some cases found an interesting response that I would caution people from taking. That is they think the opportunity is too advanced for them at this time. Or too advanced for them. Maybe they’re just being kind to me and not telling me what they really think! People shouldn’t be thinking this way. Everybody has a role and a place to fit in, somewhere. Don’t preclude yourselves from this opportunity without some serious thought and consideration first. Set aside your concerns of where you are today, and think more of where you'd like to be in a decade and three decades from now. The only thing that haunts you in old age are your regrets. (And it’s not that I’m completely there yet.) Don’t let the opportunities you didn’t fully explore become one of your regrets. 

To rebuild the foundation of the oil and gas industry on profitability is the only way that the primary, secondary and tertiary industries can develop and prosper. What has happened here in the past is, and should be seen as unacceptable, is nothing short of a dictatorship run by bureaucrats for their own self serving purposes. Which is the inherent motivation of all people to do well for themselves. And that is what this opportunity provides, the opportunity to build a substantial business operation. Yet, as a result of their failure, we see now the need for a profitable oil and gas industry is necessary to make everything else real. And if everyone is not focused and pointing in the same direction at that goal and objective of profitable energy independence, we’re wasting our time, our resources and other people’s money. It’s time someone did something and that demands action from every corner of these industries and people involved. And that is us.

A few quick tips to make the process easier and safer for you. Don’t be afraid to publish your IP as soon as you can generate it. I use Google’s blogger platform for a number of reasons. At the beginning denial-of-service attacks were common and could cause time and effort to be consumed on petty server related maintenance. I’ve done none of that for any reason for the past sixteen years. It’s free and has the ability for you to earn advertising though you won’t have a strong audience in the engineering or geological related discussion of oil and gas. This is not a large market. Don’t concern yourself with bureaucrats finding out what you're doing. They're not looking and are busy with other things. If they do find you the worst they can do is blacklist your site on their file wall which is shared across the industry. Just don’t post your picture right away. In other words don’t quit your day job. Writing is the process of generating the IP and the process never ends. You’ll always be building on the base of what you've done. 

The need to spend money doesn’t exist. That is unless it’s absolutely necessary. If the pennies can’t scream any louder, don’t spend anything. Remember we can stop the log from rolling down hill at great cost. And begin rolling it back up with great effort and cost. Only to have what we had that’s caused this damage. There are better ways to do things today. Let's use those methods instead. You can start today. 

I’m now going to head off the range, even further, for a few minutes to get a point across that might be a bit of a stretch for some people. However I’m willing to risk it in terms of relating where we might be in the greater scheme of things. Whatever you may think of the argument make sure you come back. The first paragraph is a quote from Winston Churchill, and they are followed by quotes of Professor Larry Arnn in his book “Churchill’s Trial, Winston Churchill and the Salvation of Free Government.”

Mankind has never been in this position before. Without having improved appreciably in virtue or enjoying wiser guidance, it has got into its hands for the first time the tools by which it can unfailingly accomplish its own extermination. That is the point in human destinies to which all the glories and toils of men have at last led them. They would do well to pause and ponder upon their new responsibilities. Death stands at attention, obedient, expectant, ready to serve, ready to shear away the peoples en masse; ready, if called on, to pulverize, without hope of repair, what is left of civilization. He awaits only the word of command. He awaits it from a frail, bewildered being, long his victim, now—for one occasion only—his Master.

Churchill raised the hope that science itself will lead to the amelioration of these dangers but was quick to discard this hope: “The hideousness of the Explosive era will continue; and to it will surely be added the gruesome complications of Poison and of Pestilence scientifically applied.” Mankind is progressing toward destruction. Only an improvement in certain virtues of man—especially the virtue of wisdom or of “wiser guidance”— stands in the way of his elimination.

Nuclear weapons were the subject of his last major speech in the House of Commons, which he gave on March 1, 1955, shortly after the announcement of the hydrogen bomb by the United States. The hydrogen bomb was much more powerful than the atomic weapons used against Japan, and Churchill thought the change in power important, a difference in degree that amounted to a difference in kind. It revolutionized “the entire foundation of human affairs” and placed mankind “in a situation both measureless and laden with doom.” He continued: “Major war of the future will differ, therefore, from anything we have known in the past in this one significant respect, that each side, at the outset, will suffer what it dreads the most, the loss of everything that it has ever known of.”

Here then is the new situation: men can now build societies in which large populations can enjoy security, comfort, freedom, and plenty. The tools that enable them to build such societies, unknown in the ancient world, can also be used to destroy those societies. This changes the relationship between construction and destruction, between building and tearing down, between saving for the future and living for the present. It is in principle a demoralizing fact if by morals we mean the virtues that lead to peace, harmony, and plenty in a modern society.

The analogy I want to draw here is; as our tools and organizational methods become more effective, the extent of our reach becomes more consequential. The fact is there are many calculations as to the number of man hours of equivalent labor contained in each barrel of oil. For the purposes of this calculation I’ll use 10,000 man hours or 1,250 man days of labor equivalent per barrel. With approximately 130 million boe / day consumed, just today’s consumption is the equivalent man days effort of a population of 162.5 billion people, or 722.2 million man years that we gain each day through the consumption of that energy. Dare I ask what are our moral and ethical virtues have allowed these bureaucrats to destroy what is so obviously now a mortal dependence? And, if oil and gas is as valuable as represented here, why have we taken it from future generations unnecessarily and unfairly by not at least producing it profitably? Profitable from the perspective of an accurate accounting of the costs of exploration and production. We owe them at least the assurance we didn’t waste any, and that we pass a viable industry on to them so they can manage theirs. There is a history recorded on this blog that began in December 2005 that details the deficiencies of these bureaucrats' administration and what their motivation was. Have they now earned the right to continue in that role, to divert oil and gas revenues for the continuation of their own personal benefit, and “pursue” their objective of “saving the planet” with clean energy after exposing us to such dire consequences? 

I see the same behaviors and attitudes that have been ever present with these bureaucrats. In a Reuters article entitled “Canada boosts U.S. natgas exports, drills more as global prices surge” we hear the whining and sniffling of producer CEO’s telling us what we’ve known for some time. 

However, a shortage of skilled crews to operate drilling rigs in Canada could limit how much gas output climbs, and some producers remain cautious that increased supply may rein in prices.

"How do we do more even if we wanted to do more? We're at a limit on the people that we have," said Darren Gee, Chief Executive of Peyto Exploration and Development Corp.

Taking a responsible approach to oil and gas. A responsible approach could be defined however they would want to. This chronic excuse, blaming and viable scapegoating has to stop at some point and there’s only one way that I can think that’s going to happen. Start rebuilding the industry on the basis of this overall vision that People, Ideas & Objects have presented here and build the Preliminary Specification. That way these officers and directors self absorbed navel gazing can be replaced by people who are focused on the one critical aspect of what’s required of everyone. Profitability in the primary industry of oil and gas to ensure that value is being built everywhere and always, for everyone. 

Please note there is a different procedure for our user communities involvement than what is defined here. I’ll address those differences in Monday’s post and support why those differences exist. 

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Why Develop Production Rights?

 The issue of funding the development of People, Ideas & Objects Preliminary Specification and our user community has been a difficulty I've been unable to resolve at this point. The budget demand is significant, as the scope and scale of the project is substantial. We are further constrained by the behavior of the oil and gas producers towards their suppliers, and most particularly their ERP software suppliers since the early 1990s. Using them to ensure that their ERP systems remain of a certain quality and that no tier 1 providers are involved. That no software developments have or are made that enhance the development of the organization outside the bureaucracy itself. These objectives were achieved simply by ensuring that their ERP suppliers were kept on starvation budgets to ensure the bureaucrats activities remained as unknown and unknowable as could be comprehended. In our White Paper “Profitable, North American Energy Independence - Through the Commercialization of Shale” we detailed on page 18 the approach producers provided to the last two tier 1 ERP providers Oracle and IBM in 2000 and 2005. They were seeking to rewrite oil and gas ERP systems to bring them up to date. Both of these providers received no financial, but also no participation from producers in these efforts. As a result they left the industry in terms of providing their tier 1 ERP systems. 

It has been expressed directly by the producers' investors for the past number of years that they need to see tier 1 ERP systems being used by the industry. This and the general call for accountability are so easily erased through the shift to clean energy investments. Investment in tier 1 ERP systems is one of the most prosperous areas in Information Technology. Although technically Oracle is leading in the market they are not a pure play with other software, services and hardware being produced. Their market cap is $268.6 billion, SAP is at $167.49 billion and Workday’s is at $69.64 billion. Workday is a startup that was founded by the individual who started PeopleSoft which was sold to Oracle. There are a number of providers such as People, Ideas & Objects that fill a secondary industry of providing specialty services. The failure orchestrated by these bureaucrats with the tier 1 providers that we are detailing here is generally well known and understood throughout our industry. ERP investors in the secondary industry providers of oil and gas producers have bowed out since around 1997 when the antics of these producers were on clear display. Although I have not been looking for any equity investment, there certainly haven’t been any that have come knocking and there has generally been no interest in this market. Elsewhere outside of oil and gas it’s booming though. 

I want to emphasize once again the role that oil and gas should play as a primary industry. It generates the oil and gas revenues which are perpetual and are as a result of the efforts of themselves and all the secondary and tertiary industries that support oil and gas. In many cases these secondary providers are dedicated exclusively to oil and gas. They have no independent revenues outside of what is generated from the oil and gas producers. Oil and gas is a capital intensive industry with a small footprint in terms of the number of people it employs directly. Indirectly they employ far greater numbers of people in these secondary and tertiary industries which are unable to generate revenues outside of their activities with the producers. I feel it is therefore incumbent upon the producers to have eliminated the boom / bust cycle from the industry. This cycle creates a far greater impact in terms of its whiplash effect in the secondary industries and creates great difficulties in securing the appropriate means of operating stable operations there. It is however easy for producers to accuse these providers of being greedy and lazy during times of high demand only to slash their field activity levels to as much as 25% and halve the pricing of the supplier. Cutting the suppliers sole revenue streams to 12.5% of what they were just months before when they were accused of being greedy. 

This pompous, unconstrained, inappropriate and damaging process does not damage the take of the bureaucrats at the producer firms. They’re fine and they thank you for asking. This is certainly not how business is operated. Extracting power out of this process is the toxic value that has fed the bureaucracy with the all conquering belief that what they said was what was to be. Creating the dictatorial methods of operation that were used when dealing with employees, vendors and the service industry. Why listen to investors, why do anything when “muddling along” and “doing nothing” have been so productive and effective, for the bureaucracy that is. 

There is an inherent conflict between People, Ideas & Objects and the bureaucracy that is a classic tension that has existed throughout the 20th century. The bureaucracy is a representative example of the socialist form of centralization and we are the contrast of decentralization as represented in this new tool called the Internet. We are natural adversaries and were never intended to work in harmony and for that I am certain that I have never deviated from my role in the relationship, and am only happy to be the one that provided and will continue with our flak directed their way. The contrast between these two alternatives' effectiveness is beginning to become clearer for all concerned as the centralized model's failures become more evident through its inevitable descent. Disintermediation is not a choice or option available to industries. It is a force that is powered by organizations that are more productive and profitable. Choices to turn to in 2021 are limited in my opinion to the Preliminary Specification, its user community and their service provider organizations. It’s success is something that I’ve worked to design the necessary ingredients into the methods and means throughout our organizations and the specification itself. It will need to be the sense of urgency and desire of the many people who are affiliated with these organizations and these developments to take it to its ultimate, successful level of achievement. Driven by the vision of the Preliminary Specification. 

People, Ideas & Objects fundamentally understand that the bureaucracy can’t, won’t and will never participate in the development of the Preliminary Specification, our user community and the service provider organizations that are conceived to displace their centralized systems. In addition to all of the above difficulties the number of producers, and particularly the majority of the production volumes, are contained within a small number of producers. Therefore suppliers are unable to gain any traction or diversity in their clientele. The service industry also has geographical areas of operations that further constrain their exposure to the number of producers they’re able to access. Granting even more power to those bureaucrats in their dealings. Vendors have also been subjected to the treatment of having their proprietary developments and Intellectual Property freely cast to the four winds and actively handed to a vendor's competitors / potential competitors to spur further price competition in the markets they’ve grown to depend upon. This is generally well known, understood and accepted as the price to pay in the industry. People, Ideas & Objects treatment of Intellectual Property is a trojan horse to this method of operations and something that can’t, won’t and will never be accepted by the bureaucracy. It is also the reason that none of the Intellectual Property of the industry has been captured anywhere and at any time. This strategy made the engineering and geological IP available to all producers without obligation or concern. Not how an industry can operate in the 21st century. And in fact illegal. Within the Preliminary Specification we have made Intellectual Property one of the organizational structures that define and support the oil and gas industry. 

It has always been generally understood by me that the source of any revenues for People, Ideas & Objects et al will have to come from the primary revenues of oil and gas production. How and where is the issue. Producers as I’ve mentioned can’t, won’t and will not ever do so. They are conflicted, it is contrary to our adversarial positions and would only diminish the means of their power and money. People, Ideas & Objects have proven this specific point through the legacy of our efforts. We put the icing on this cake when we directed the question to the boards of directors of the producers. And their choice on August 31, 2021 was to pursue clean energy. This is a major impediment to the needs of a user community that depends on a source of financial resources that will be available to complete their work. The community itself is in great career jeopardy by committing to the project by self identifying themselves to the bureaucracy while the bureaucracy still exists and dominates the landscape. Without the protection and security of an alternative that provides for their opportunity to secure that successful alternative, there’s not going to be their wholesale and necessary commitment. If they should fail in not being able to resolve the industry problems it would be detrimental to the rest of their career, wherever that may be. They’ll therefore be highly motivated and driven by success. At this point no one other than myself is aware of who is involved in this project and that will remain that way until such time as we begin with the financial resources secured. They are even unaware of each other, in case the bureaucracy should / have decided to see for themselves who’s involved. 

And then there’s that budget. Which has always been inordinately large and out of scale of reality and probably a distortion of that reality and sanity. Yes, it is. Welcome to my nightmare. As we enter the period where the industry's collapse is beginning to be seen as more and more terminal, we'll begin to see more and more of the consequences of the damage and destruction that has been caused by the financial mismanagement of the industry. Four decades of such antics will quietly erode the value from everywhere. Possibly, just possibly People, Ideas & Objects have always been aware of the problem, have provided a sound solution in the form of the Preliminary Specification et al and scoped out its needs accurately in its, out of this universe, scale of budget! And then there is that multi-trillion dollar value proposition of ours… We’re now progressing to a point where the clarity of the deficiencies of the service industries capacity and capabilities will become more apparent. Where the response of the producers will be constrained by their drive to save the planet and their lack of activity to address the real consumer demand issues of oil and gas. When even Vladimir Putin wakes in the middle of summer in a cold sweat thinking that his country's supply of natural gas is in jeopardy… We’ll review the history in two decades from here and know that that’s the point where this decline started. 

This brought about the need for a solution to the funds necessary to solve the problem. Earlier in our lifetime we considered developing an ICO, an initial coin offering, however the crypto market and the virus had other plans. Inherent in that plan however were what we called Permission Rights. The ability to sell the coin with the exclusive access rights to the software of the Preliminary Specification and the service providers for a defined volume of production. The coin rights would need to be aggregated by oil and gas producers in order to access the system and services to meet their production profile. And therefore the coin owners would generate a monthly fee for these rights of access. These rights would be managed by the smart contracts of the underlying blockchain technology of the coin. This value and leverage was determined as a result of the logic of the 21st century. Where the only thing of value is Intellectual Property. Software and services are derivative of Intellectual Property as they are with the IP of People, Ideas & Objects. Therefore, from now on it will always be not enough to own the oil and gas asset, you’ll also need access to the software and services that make the oil and gas asset profitable. This method has been what we are now calling our Production Rights. 

As a startup we are outside of the regulatory processes and unable to meet those demands for several years, at a minimum. We aspire not to do so and remain a private company focused on the solution. I’ve detailed an exit strategy for myself where the user community is granted the Intellectual Property that makes up these communities upon their successful completion. As our budget defines, I get paid as the money comes in the door. I am unable as one individual to make much of a difference in an organization that demands five thousand man years of effort to complete. Our user community needs to be the ones with the motivation and drive to succeed. They’ll be the ones who live or die, career, and business wise on the basis of their success. I see the Production Rights separate and distinct from these transactions, licenses and grants. They are unique in the environment, but wholly dependent on the success of the user community fulfilling their role.

We are passing the responsibility, accountability and the authority of this project's success to our user community. We granted them in the user community vision the power they need to make the changes to ensure the software is developed in the vision of the Preliminary Specification. I am not abdicating my responsibility and authority in this development. I am committed to ensuring the integrity of the user community is undiminished by outside forces. That is what I’m able to do on a reasonable basis to ensure the success is achieved. Professor Larry Arnn is also the president of Hillsdale College. The following quotation captures succinctly the situation we have, the important role the user community occupies and how they must approach it. 

Hard cases are hard to tell, but you can consistently make better judgments if you remember what your aim is. And what your aim is, is that people should get a chance at an effective life. And one of the elements is that you can’t do it for them. Churchill loved to say in his speeches, “remember after we’ve done all that we can do, life will still be pretty hard anyway. It’s a human life. We should be careful not to take that from people. Their achievements need to be their achievements. The richness of their life will all come from that and nothing else. So there you have to be looking to establish a society where we’ll all get a chance to face the difficulties which ultimately will never go away.”

Who is best to undertake these difficult tasks which we face? I’ve made my nomination. Our Production Rights are the fuel we need to make this happen. 

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Gambler's Paradise

 With this title reference meant to apply to the characteristic of producers' share prices. I’ve suggested before that North American oil and gas producers might be seen as a haven for bottom feeders and my assertion today would be the same. Some bad news came across late last week that may not have been noticed in this fast paced blitz we live in. The Biden regime has some plans for the Federal Reserve that also doesn’t include a continuation of the capitalist system as we know or understand it. At least in terms of the oil and gas industry. Two allegedly un-Woke Federal Reserve Governors were accused by Senator Elizabeth Warren of insider trading. Under the legions of her woke mob the Governors resigned. In the “Build Back Better” line up are three Federal Reserve Governor candidates who are proponents of the belief they need to put wholesale pressure on banks to cease banking with carbon polluters. That carbon is a polluter is part of the science that began more than 5 days ago. The third candidate is a replacement for Fed Chairman Jerome Powell whose term is up in February 2022. The issue of course is you can’t refute 81 million ballots. This is additional bad news for a capital intensive industry that has destroyed its reputation with investors and bankers. With the needs to rebuild and refurbish the existing infrastructure of oil and gas, combined with its future capital demands. Capital will be hard to find in such an environment. Capital that is willing to earn next to nothing or even negative returns may be impossible to source. In any gamblers paradise, the saying is you can’t win if you don’t play, and the house never loses. 

It will be a hard run for producers these next few years anyway, with the decline in field capabilities and capacities. The resources having been scattered to the four winds. I can see the highly experienced driller on the rig who was convinced to come back having to work with recent high school graduates to teach them, on the job, the art and science of multilateral fracing. Victor Davis Hanson stated on one of his podcasts last weekend.

We’re regressing, progress is not linear, it's cyclical.

With producers' capital structure being potentially constrained in the development of oil and gas. The Preliminary Specification determined the industry's source of capital would need to be addressed. Our solution captures the common sense business logic that a capital intensive industry would have a large component of capital included in the cost of the product they pass on to their consumers. And we do so through our decentralized production models price maker strategy. Where each property is evaluated each month through full financial statements that include the direct overhead charges from the service providers affiliated with People, Ideas & Objects, eliminating the inadequate overhead allowances currently in use. There is also the need for a monthly accrual of depletion that will provide a competitive return on investment consistent with the properties remaining capital balance and the capital markets expectations. When, in the Preliminary Specifications price maker strategy, all production is profitable, the capital that was deployed to the property is being returned at a rate that is consistent with these capital market expectations. Why else would you be in business? If it wasn’t profitable then the property would be shut-in and moved to the producers inventory of innovative work-in-progress. Where it would be worked over and returned to profitable production as soon as possible. While shut-in none of the service providers are receiving any data from the property, are not conducting any activity on the properties behalf and therefore none of their overhead related billings will be rendered for the property. Turning all of the producers' costs variable. Causing the property to incur a null operation, no profit or loss. 

A producer who doesn’t have the wherewithal magic ingredients that make for a successful oil and gas producer would still have profitable production and a profitable operation. However not at 100% of their production profile. Let’s assume they’ve had to shut-in 50% of their production due to unprofitable operations. This company under the Preliminary Specification remains profitable and each producing property is achieving market returns. However the producers performance would be substandard when compared to other producers who are able to profitably produce at 100% of their production profile. Investors will know they’re carrying dead weight when their returns on investment are lower due to the low production profile compared to their invested capital base, and therefore their action would be necessary. Alternatively, if the producer were to attempt to hide their low production profile percentage and produce some of their properties at a loss, offsetting their profitable properties profits and inevitably incurring a loss in the producer firm, they would be telling the market their performance was even worse. The Preliminary Specification provides this necessary method of production discipline that North American oil and gas producers will ensure unprofitable production is kept off the market in order to achieve maximum corporate profitability. This is the discipline they’ve lost and the reason chronic overproduction has been able to destroy their business. 

In what atmosphere does a profitable oil and gas producer turn to clean energy for their future? They wouldn’t, and the shuffling noise we hear at times in oil and gas is that of bureaucrats feet, or as I’ve described their herd mentality being similar to a Keystone Kops routine. There have never been any profitable clean energy companies. Processing CO2 out of the atmosphere for soda pop companies doesn’t stand up for me. Why wouldn’t Coca Cola invest in these facilities? The fact is the most profitable environment in oil and gas today is the conventional oil and gas that was abandoned some time just after the last century. They’ve been producing for decades, have retired all of their capital costs in a capital intensive industry and do not need the excessive rehabilitation of shale. 

Compare and contrast the environment created with the Preliminary Specification to today’s environment and we see the difficulties that we’re in. Producers build balance sheets and sell their souls to the banks to keep the hamsters fed. Meanwhile their revenues atrophy in comparison to the capital deployed to the point where, although each and every producer remains handsomely “profitable,” they don't generate enough cash to keep the lights on. This homogenized, homologated means of oil and gas operations doesn’t allow for anyone to know who’s building value and who isn’t. It does however, clearly indicate who the best talkers are. 

One of the understandings of bureaucrats regarding capital costs has been correctly applied by them and we’ll continue with that activity. Excluding the recognition of capital costs during the short term where there’s a distressed market or financial difficulties is correct. In the Preliminary Specifications instance, properties wouldn’t be charged with any depletion for those months they were shut-in. The difficulty that bureaucrats have had with the implementation of this understanding is the assumption of theirs that oil and gas has been in financial distress for four decades and minimal capital was recognized during that time. This was the case under their administration and became the primary reason for the culture of “building balance sheets” and “putting cash in the ground” that took over any business logic. I always found it comical that they would, on the one hand, belittle the charge for depletion, stating “that’s just an accounting charge for stuff that happened in the past.” Which is true but caused a serious loss in the producer firm. While at the same time issuing more shares to investors to fund next year's capital budget. Never seeing them as the same thing and choosing to be accountable to those past shareholders. When they had new shareholders in the next room who were transfixed by the EBITDA (Earnings Before Interest, Taxes, Depletion and Amortization) numbers reported in the producers press releases. In the vernacular of the Vegas gambler / producer CEO it would go something like, “this table is hot.”

We’re heading into the third quarter reporting season and I don’t expect much change in the producers' performance. That’d be the real performance being reported. The losses on hedges are going to be tremendous and that has set up a particularly difficult year end reporting situation for producers. The issue of Non-GAAP earnings or EBITDA with hedging losses excluded have been what’s quoted throughout the business community in oil and gas. Fueling the culture of “building balance sheets” and “putting cash in the ground.” Among many more myths and fallacies. The SEC has put a stop to that in the fourth quarter of 2021. I’ve been wondering how many producers will bite the bullet and start reporting that way in the third quarter? Would that be a benefit to get out ahead of the bad news in the fourth quarter? Or is it best to get lost in the crowd at year end where no one knows, or will remember your name. In a world where integrity is a concern I would suggest the third quarter is the time to start. However, there would be no consequences to producers by getting lost in the crowd at year end, is there. 

In Wednesday's WSJ (Paywall) and Reuters there was an article that reviewed the decisions being made at Exxon’s board of directors. It was fascinating. They had made some significant investments in the past in a natural gas field offshore Vietnam and an LNG facility development in Mozambique. Both represent multi-billion dollar investments to date with much larger commitments to complete. The argument at the board level was whether to continue with them in light of the political and climate related difficulties. Vietnam’s offshore investment was in the disputed South China Sea and Mozambique has unrest and terrorist actions being undertaken at another company's LNG facility which is also under development. The overriding concern at Exxon’s board was the concern and the commitment for the environment by the new Engine No. 1 directors who were elected in last year's annual meeting. That being said, the question was, was Exxon going to continue to commit multi billion dollars of investment to dirty oil? The final comment of the article was the contrast between the board and CEO Darren Woods who obviously fell on the oil and gas side of the fence. The two questions that I had about these articles and Exxon were. Why was there so much indecision and lack of foresight being discussed at Exxon’s board? And not that discussion and conflict are bad, but who’s airing this dirty laundry in public and why?

Why waste time in back alleys playing three card monte when you can discern the meaning of financial statements from producers or read about Exxon’s board meetings and gamble on the potential performance outcome. To find ourselves in the situation we’re in and to now be presented with these antics in this example is surreal. The lack of leadership in the largest producer of the oil and gas business itself is disconcerting. That they should withhold investments in oil and gas to consider that it may best be deployed in unrelated industries is not what the shareholders signed up for. What is intended by the publication of these articles is unknown but I’ve been around long enough to know that they’ll be self serving for the officers and directors mentioned.

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

I Thought This Was Just an Investor Problem? Part V

 What I find painfully obvious are the issues in oil and gas have evolved into a more dangerous and difficult period. To state there’s an overall level of unpreparedness is necessary to describe this. People, Ideas & Objects pursued these issues as persistently as we have due to the fact that businesses in the state that we felt the oil and gas industry was in and headed to, pass through three distinct phases of degradation. Each phase becomes more severe as we move through them. Financial destruction leads to difficulties that are eventually felt throughout the industry. From the investors and bankers initially, to the employees of the firms and eventually on down the line to those who are providing services in the supporting industries, whether that be companies or individuals. Oil and gas is a primary industry that can best be described as saying it’s at the top of the heap. There are not many primary industries and the privilege of obtaining primary revenues has been abused by our good friends the bureaucrats as a license to better their personal financial interests at all others’ cost. 

The extent of the financial damages are represented to be catastrophic by People, Ideas & Objects. We’ll be able to determine how far they’ve fallen when attempts are made to resurrect normalcy. The initial follow-on consequences of the financial deterioration of any industry are the subsequent loss of what an industry was once capable of doing at volume. This is only reasonable and intuitive. Producers today are not picking themselves up and leaping tall buildings. The rebuilding of capacities and capabilities that have atrophied and were deliberately destroyed through the bureaucrats “market rebalance” theory of suspending field activity for two to seven years while demand catches up to market supply. The service industry will be a necessary component of the return. The final or third phase of these financial difficulties are the impact they have on consumers. Supply constraints become the issue leading to “demand pull” inflationary pressures for consumers. Choices to either pay the difference, seek alternatives or to go without being the three consumer options. This is the issue we’re suddenly at in terms of consuming oil and gas and the one People, Ideas & Objects were working to avoid. We’ve noted these points throughout our writings and as far back as the initial Preliminary Research report (May 2004) in which we determined the Joint Operating Committee was the preferred option for the dynamic, innovative, accountable and profitable oil and gas producer and industry. These were ignored and only raised the ire of the bureaucrats as it was a serious challenge to their well established franchise of self aggrandizement. 

It is the most powerful economy that uses the most energy. Each barrel of oil provides 23,200 man hours of labor. Unquestionably the consumer's best deal of the millennium. I have stated these points repeatedly, only to have been ignored. When I said profitability in oil and gas was an issue I was laughed at and told that cash flow was the point of the exercise. When I asserted that oil and gas commodities were price makers instead of the price takers they were assumed to be by the industry, I was ignored. The warnings and concerns that I’ve expressed here are documented throughout the time of my writings. They are consistent and focused on the one issue that has now become what I believe to be a life and death issue that will be unresolved in the short term. Bureaucrats will laugh and ignore it, but there were at least 11 people who died as a result of the Texas snow storm last year. The economic consequences of that event were felt far and wide. We’re no longer talking about one snowstorm in one state. Nor are we talking about just snowstorms. 

We therefore need to ask ourselves why did this happen? I’ve always directed my anger and frustration at those who are solely responsible and accountable to ensure this didn't happen. The officers and directors of the producers themselves, or as we call them bureaucrats. They saw their role was to fill their pockets with what can only be described as innovative and excessive executive compensation. As I’ve documented throughout these writings they’ve betrayed their shareholders by lying to them about their activities and performance over the past forty years. Something I’ve detailed in terms of what and how they did so throughout these writings. Yet they ignored it. I’m not raising these points to say I told you so, I’m raising them to show that these bureaucrats were well aware that what they were doing was causing serious problems and difficulties. Which would eventually lead to their current financial damage, industry wide destruction and follow on consequences to consumers. Creating an impact far in excess of most businesses. They didn’t care and today continue not to. They’ve discovered the nirvana that they always sought in their dealings. A place where accountability and performance could never be questioned. Where their lifestyle would be sustained by oil and gas revenues while they failed consistently in their clean energy “efforts” of an unknown nature. Undeterred they would continue to work as hard as they could to “save the planet.” Claiming, as they have stated so many times before, they’re responding to the demands of their shareholders. This time for their investors' concerns for the environment. By doubling down on the myth and lying they do everything for shareholders. Yet they’ve failed to respond to their investors' 2015 protest and strike to correct for their lack of profitability and accountability. In the past few years there has been an explicit demand from investors for producers to upgrade their ERP systems to tier 1 providers, such as Oracle Cloud ERP, the base of the Preliminary Specification. I’ve chronicled their self interest and behavior in this blog since December 2005 and now we’re supposed to believe that this altruistic environmental approach is their motivation?

That we would call this anything but a tragic failure is unacceptable. There has been no discussion regarding any plans or strategies for the future. There are no concerns or consideration about their past lack of accountability, profitability or their investors' lack of support, investors who left in protest of bureaucrats' actions up to six years ago! Silence is not acceptable, yet that is all we’ve ever received under their “muddle along” method of operation. The most convenient corporate strategy to cover for an irresponsible and uncaring executive. We have a leadership that believes their future lies elsewhere and has now summarily given up on oil and gas without the least bit of effort to affect any remedy. When a remedy has been available for at least eight years, the remedy they actively ignored, abused and laughed at. Consumers are now faced with the financial costs of these past inactions and an unknown future. Complicated by a continued non response, lack of concern, caring or action. Most importantly, a time in which consumers are exposed to serious risks associated with their standard of living and quality of life due to a lack of energy and / or its high cost. How did we get here? I can’t scream any louder or swing any harder at these bureaucrats.     

What is it that we can reasonably expect to happen as a result of their continued administration? Maybe a better way to ask this question is the following. How stupid do they think we are? Now that they’ve settled into their optimal strategy of clean energy will they move back to oil and gas? We’ve seen no evidence of that and I would question the validity of their claims and opportunism if they tried. What is the financial state of affairs in oil and gas? Are they financially endowed now that prices are higher? Or are they, as People, Ideas & Objects claim, heavily indebted, financially non performant with culturally incapable organizations that move at the speed of dried cement? Many people have moved on from oil & gas, but also the service industry. Will they be convinced to return with the potential of as much as one months pay? Will the oil and gas faculties in the universities fill up based on these latest commodity price changes? Only in four years to dump their graduates into a potentially empty, vast unemployment situation? Damaging the university's reputation further? Will investors in the service industry who saw their past investments cut up for scrap metal reinvest on the basis of a newly printed purchase order? The reputation of these bureaucrats precedes them. They’ve used these and other tricks a few times before and the consequences were realized by those who believed them. In other words that was us, and would be again if we expect any reasonable change from past behaviours. 

It’s important to point out. They’ve been laughing at my arguments on this blog since 2005. They chose to do nothing about their business until it degraded to this level. Their decision to deal with it was to declare it untenable and to pursue clean energy. Are we all now going to jump up because the inevitable supply constraints have caused prices to jump and start the party with these bureaucrats all over again? Being in an abusive relationship is something that puzzles people who see the victim repeatedly return to the bully. Case in point. 

I see my job as finding the way out of these difficulties, providing an alternative and to offer a choice. I think we’re headed into very difficult times as a result of the manifestation of these problems and something needs to be done. We have always been prepared to rebuild the industry brick by brick, and stick by stick. A phrase I first stated in this blog on October 17, 2008. What I see now is my analogy of the log rolling down the hill is well advanced. Things are happening at a tremendous speed and we are seeing bureaucrats sticking to their green energy plans as a means to avoid responsibility and accountability. No vision, no plan and no strategy for oil and gas. When people see a house on fire they’ll stand around and watch it burn. No one runs into burning buildings but well trained Firemen and no one steps out into rolling logs deliberately. People, Ideas & Objects spent over thirty years working to avoid this and have failed to build the fire houses and hire the Firemen. North American oil and gas is now a tragedy, in my opinion, no one would be surprised at that. I have a greater sense of urgency to begin the rebuilding of the industry, I trust that is shared.

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

I Thought This Was Just an Investor Problem? Part IV

 It was not that long ago when oil and gas producers went out of their way to abandon dirty oil and gas to commit to the development of clean energy. Doing so with oil and gas revenues in hand would not have been too great of a challenge for them, or anyone. However, People, Ideas & Objects et al and there are a few others, are working hard to make sure that they’re held accountable and responsible for this and other past decisions. Whereas they’ll be expected to continue to move on with their clean energy initiatives and develop their ideas with their own skills and knowledge but also their own sources of financing. We see today the development of new market expectations that this is done in the form of making clean energy reliable. The dependence on unreliable sources of energy while we enter the cold seasons in the Northern Hemisphere is an issue that is making governments in Europe and China revisit their misguided ways. I might be jumping the gun by suggesting to these governments that they’ve got some help on the way and to wish both these former oil and gas bureaucrats and governments good luck in their policies and challenges. Meanwhile People, Ideas & Objects have been able to resolve the oil and gas issues our good friends have nudged us into. Oil and gas will always carry the freight in terms of reliable energy for as long as this century keeps ticking along. To abandon it as they did is only the most recent example of irresponsibility and unaccountability. The most recent example of what they’ve been able to get away with for many decades now. Here’s a suggestion that might make their careers in clean energy easier in the long run. Listen to your investors. 

There are three issues that face the North American consumers as a result of the status of the oil and gas industry. Our competition outside of the continent knows we are wholly dependent on energy and this is a foundational reason we’re able to maintain our dominant economic position. These oil and gas producer bureaucrats' betrayal has provided our foreign competitors with the leverage they need to extract value from us. Therefore we’re unable to fully control our future in the manner that we would have if we had been able to achieve profitable energy independence, the objective of the Preliminary Specification. We do have an abundant amount of oil and gas reserves to meet our needs for the remainder of this century. They are however proven to be useless as they’re unable to be produced profitably. This may therefore be a short to mid term issue and something we can remedy, and our foreign competitors may understand that it’s in their best interest to be wise and considerate. The metaphor of a log sent rolling down the hill by the bureaucrats four decades ago is apt in our current environment. What could have been easily resolved then is impossible today. To stop the log rolling down is extremely difficult and dangerous at its current speed. To begin rolling it back up the hill would be strenuous and time consuming. And then what would we have, a reasonable facsimile of what we have today. There comes a time to start over and forget about the old and do things differently, such as what has been proposed in the Preliminary Specification. A proposal that will mitigate the three issues of time, effort and money consumed in otherwise recreating a broken wheel. 

The difficult question of time in coming up with an alternative becomes costly as the alternatives viability needs to be proven. Ideas are plentiful but will they work? That’s the hard part and the time consuming aspect of the changes we need to make. Using the Joint Operating Committee was a good idea in 2003 and no one knew if it would work. If we were to adopt it how would industry and the producers need to operate and would that be worthwhile? Would it make economic sense and be profitable? Difficult questions such as these need to be answered and that took me ten years to figure out. That research is provided in this blog and the product of that research is the ERP software defined in the Preliminary Specification. That it’s as viable and valuable as it was when it was published in December 2013 shows that it’s the right solution. That it’s the only idea that has completed the comprehensive research necessary to become viable is the situation we’re in today. Alternative solutions are not available as nothing else survived which threatened the bureaucrats' existence as we disintermediated them. Maybe we have ten years in which we could evaluate other ideas but that’s not my decision. With the time based costs being incurred throughout, it's time to stop this damage and destruction. Remember it's a boom / bust cycle. These cycles have become shorter during their peak and longer at their valley. Their volatility is more extreme as a result of the reckless irresponsibility of the bureaucrats' management these past four decades. 

The effort needed to build the Preliminary Specification is substantial and sets in place a new cost paradigm. One that suggests that it’s no longer enough to own the oil and gas asset. You’ll also have to have access to the software that makes the oil and gas asset profitable. The nature of the complex environment we operate in where change is happening faster and our capacity to deal with it needs to be inherent within the organizations and industry structures. Information Technology is a way of life and is the means to the efficient and effective development of the dynamic, innovative, accountable and profitable oil and gas producers from this point forward. Profitability is the missing ingredient that has caused this disaster, crisis and destruction that we’ve all witnessed in the industry. We’ve all seen what it’s like without it, now we know why it is an important ingredient and why we must build profitability into everything that we’re doing. 

And that ERP software that makes oil and gas profitable everywhere and always in North America is the Preliminary Specification with our user community and their service provider organizations. I can tell you that I am personally satisfied with the budget that I’ve defined to build the Preliminary Specification. Satisfied both personally and professionally. The process that it has gone through in the past five to six years has been one in which the focus was to reduce the time required to deliver the software to market. We’re not committing to a timetable as we do not have the money to go through that costly process. We have estimated that the time commitment equals approximately five thousand man years of effort. However the principle is that the more we spend the less time we’ll take building the solution. I therefore approached where it was that we could cut substantial amounts of time out of the deliverables time frame. The most concrete example is our move to refocus People, Ideas & Objects as a user community, research and Intellectual Property firm as our three competitive advantages. Removing the software development aspect of our organization and contracting it to Oracle reduces our time to market substantially. We no longer have to spend the half to full decade necessary building the requisite capabilities necessary to have a high performance development team, purpose built to meet these needs. This change is costly to do, however the time of delivery is reduced substantially, our quality goes up, we in turn can focus on the key aspects of the oil and gas attributes through our user community and the delivery of their tacit knowledge through their service provider organizations. Developing real value for the oil and gas producers and consumers.

Our budget is also based on the value that we generate. There is substantial value in the Preliminary Specification and that makes it an investment from the point of view of industry. That principle is the means in which I’ve used to support the price of our product. I believe in profits earned as long as they are based on the value generated. This can be determined through a comprehensive review of the Preliminary Specification. We are building the solution with this budget which covers the cost of People, Ideas & Objects, our user community and developer’s. There will be additional annual costs for the capacity and capabilities necessary to support the costs of a permanent ERP software development capability and capacity. Our user communities service provider organizations are independent of us and are licensed users of our software. They are independent businesses responsible for the administration and accounting capabilities and capacities that we’ve discussed throughout. They are a replacement to the existing administrative and accounting resources of the producers. We are looking to them to handle the implementation of our ERP system both on an initial roll out and subsequent updates. Their business models are the result of the decisions they’ll make internally. None of their costs are involved in our budget. 

The value we generate is therefore as follows. The Preliminary Specifications business models ensure that “real” profitable production is provided throughout the North American market and at all times. In addition the reorganization of the industry and producer firms are structured around a capacity and capability to continually exploit specialization and the division of labor providing two additional key values. First, the throughput capacity of the industry will be enhanced continually by using fewer resources. These increases in output from specialization and the division of labor are the only principles of enhanced organization that have built any value over the past 245 years since Adam Smith developed them. It is also through these principles that we’re able to institute the shared and shareable approach to building the industry based, variable overhead cost, administrative and accounting, capabilities and capacities. This will eliminate the redundant duplication of identical, non competitive capacities and capabilities in overhead being incurred in each and every producer. Another attribute of how we build value is the establishment of Intellectual Property as a principle organizational structure within the Preliminary Specification. This will reduce the wasteful and costly method of disorganized duplication of making the same mistakes over and over within each producer and within each fiscal year. More can be read in the Preliminary Specification about these and they are just a few of the means in which value is attained for the dynamic, innovative, accountable and profitable oil and gas producers. There are others attributes for those in the service and tertiary industries that are critical supports to a successful, profitable industry. It is only in these ways that the consumer will know that they have an abundance of reliable, affordable energy. Where their value is gained through its consumption which generates for them 23,200 man hours of mechanical leverage per barrel. That their choices of what energy source to use is theirs and will consider all that they need in order to make the appropriate decisions based on those needs. This is how problems are solved. We’re seeing how governments, like oil and gas bureaucrats, are unable to even identify the correct issues within the appropriate decade. 

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

I Thought This Was Just an Investor Problem? Part III

 Consumers throughout the world are learning the distinct advantages of the business principles used in North American oil and gas. “Muddle along,” boom / bust cycles and “market rebalancing” are all done with the bureaucrats, our name for the producers officers and directors, wallets in mind. When markets are ignored as they’ve been in the pricing of oil and gas commodities, the cycle's extremes become more dramatic with each iteration of the cycle. One year we may see negative $40 oil and the next $40 natural gas. This of course is how you operate an oil and gas concern. Real profitability has never been earned at any point in the industry at any of the North American producer firms in the past four decades. Is profitability the symptom or the cause of these commodity price fluctuations? A profitable, healthy oil and gas and service industry are of great benefit to the oil and gas consumer. With our Preliminary Specification the only cost inflation that would be seen by consumers would be the incremental costs of retrieving the additional reserves. Shale being comprehensively more difficult and costly than what was done in the 1940’s, etc. And this trend will never stop. There would be an abundance and availability of viable resources available to the consumers at the lowest possible cost, including an element of profit. These profits enable dynamic, innovative, accountable and profitable oil and gas producers. A healthy and profitable oil & gas and service industry are the only way that these are going to come about. People, Ideas & Objects hypothesis of why there is a current lack of profitability is as follows. 

The history of this issue begins with the late 1970’s SEC instituting an accounting method for the recognition of assets in oil and gas. Known as Full Cost it became the regulation for all listed producers on U.S. exchanges. Enabling the producer to claim as the outer limit of what their asset costs on their balance sheet would not exceed the present value of their reserves at the day's current commodity prices. Note the key words here of cost on the balance sheet, not value, accounting is not about valuing the company it’s about assessing performance. Over the course of the 1980’s this rule was quickly misinterpreted by the oil and gas bureaucrats to mean cash flow was the important factor of evaluation, you could include all the costs incurred by the firm as assets and they proceeded to devise ways in which to do so. Soon overhead, interest and all manner of costs were capitalized without any consideration of the impact on performance or follow on consequences. The issue is a result of the bureaucrats misinterpretation of the rule, not the rule itself. It would be the most competitive and performant producer that would seek to reduce their account of property, plant and equipment to $0.00 as quickly as possible. The real consequence of what happened is well known and understood in the business community and has been repeatedly documented as a known issue in accounting as the following. 

This description of fact was well understood by bureaucrats in oil and gas, yet they chose to do nothing for over four decades. Over capitalization of the firm's asset value leads to an equal amount of overreported profitability. If none of the costs of the firm are incurred in the current quarter, but deferred for several decades later through depletion, profitability in the current quarter will be substantially higher. However, that profitability is not representative of the performance of the firm. When companies over-report their profitability then investors overinvest into the sector in anticipation of earning higher profits. Overinvestment leads to overproduction of whatever products a firm produces, and the pricing of the commodities in the producer's case will collapse. These commodity prices collapse as a result of oil and gas as commodities following the principles of price makers, not price takers which is the assumption of the bureaucrats operating in the industry. When prices are so low as to invoke losses under the Full Cost method then bureaucrats invoke the “market rebalancing” principle of capital discipline which reduces capital investment, causing the industries productive capacity and service industry capabilities to deliberately atrophy over a two to seven year period to where the market supply and demand “rebalance.” I stated the following analysis of pricing in the oil and gas industry in our White Paper “Profitable North American Energy Independence - Through the Commercialization of Shale” on July 4, 2019. 

What People, Ideas & Objects provide in our Preliminary Specification, if we could assume the accuracy of this graphs numbers, is the point at which the property would be shut-in would be at the breakeven point and below. The reason for this being the production discipline gained through knowing that producing any property unprofitably only dilutes the producers corporate profits. Producing below the breakeven point is the point where unprofitability begins. Producing below the breakeven point for one producer, in an industry who’s commodities are price makers, will have the effect where the price of the commodities will be dropped below the breakeven price for all producers. When all producers continue to produce below the breakeven price for four decades you have an exhaustion of the value from the industry on an annual and wholesale basis. Times were only “good” when investors were willing.

I may not have explained myself clearly to the CFO’s in the producer firms. The difference between the graphs well breakeven and shut-in prices are what’s called the contribution margin. In these cases the contribution margin is determined by taking the total cost of the well and dividing it by the producible reserves that are allocated to it. If the well cost of $5 million dollars exposed 200,000 barrels the contribution margin would be $25 of capital costs were incurred for each barrel of oil found. Therefore the only profitable operation will be beyond the well breakeven price and that is why it has to be the point in which the well would be shut-in when prices drop below it. It had become unprofitable on a performance basis and was unable to return all of its costs. The assumption that the full 200,000 barrels would be retrieved in a period of time that satisfied the capital markets is incorrect. For these purposes let's assume the wells lifetime was 20 years. A return of capital over the course of 20 years is inconsistent with the story that has been told by producers in the past decades, inconsistent within any recent commodity pricing environment and wholly inadequate by capital market standards to have the return of just the capital investment in that time frame. Shale demands heavy rework costs in order to maintain production and to capture those reserves. The $5 million is just the starting number, there will be more costs incurred as soon as two years from the commencement of production. A more accurate, actual, factual accounting of the wells performance is part of the Preliminary Specification. Today, producers quote “recycle costs,” which are the results of engineering “what if” scenarios based on current service industry quotes. These lead to their allegations that they can be profitable at $50, and when the price drops below that, $40 until the price drops below that and they become profitable at $35. This miracle is either “recycle costs” based on abused service industry provider quotes. Or some otherwise unknown development in historical cost accounting. 

“Pay no mind to those accountants over there; they don’t understand the engineering and geological brilliance of the work that we do. They’re paper pushers and we build stuff.” Allocating costs over the reserve life may have been a reasonable assumption in the 1950’s however in the capital markets of today where money demands actual returns far in excess of these in a much short period of time, these are not the points that will sell the investors to return. Note: I did not raise the integrity, trust, faith and goodwill that the bureaucrats destroyed with their investors and bankers as an issue that would preclude them from participating. The financial facts can be remedied and other issues as to the fact that people have been lied to and cheated can’t be. That’s why I didn’t discuss the fundamental lack of integrity, trust, faith and goodwill that bureaucrats acquired during my discussion in this post. But then somehow I just did! Of course officers and directors of the producer firms all know these business principles discussed here. Whether that is price maker, breakeven or performance. They chose to do nothing but ignore these and to concern themselves with their new business principles of “putting cash in the ground,” “building balance sheets,” “rebalance markets,” “capital discipline” and “we’re profitable.” I study / read Winston Churchill and have another one of his quotes, this one from his first book on WWII entitled The Gathering Storm, “Nothing was wasted that could contribute to the process of waste.” This should be put on the desk of each and every bureaucrat. For clear identification purposes that is. 

I can’t imagine anyone arguing that these bureaucrats should be kept in power for a couple of more cycles of this rollercoaster. The issue should be clear in 2021 as it was for Qatar's oil minister in that Calgary Herald, July 26, 1986 article entitled “OPEC Minister Can See Economic Destruction.” (Paywall.) And the Preliminary Specifications publication in December 2013. Removing officers and directors is a difficult question. How should it be done and by whom? I’d sure do it, but if I could it would have been done long ago. Proxy wars during annual general meetings are for losers. Besides, the majority of those meetings will be held in May 2022 and that is after the winter months and two months into spring. I think we can bring consumers into our happy little party of highly motivated investors, bankers, service industry, oil and gas employees and those in the tertiary industries that benefit from oil and gas. To have the industry operated on the basis of a more reasonable approach. One that expands the thinking beyond what it is today. The solution is in hand in the form of the Preliminary Specification. How we implement this so that we all don’t freeze in the dark or pay everything we have to these bureaucrats this winter is unknown at this time and beyond my capabilities. I’m not suggesting that I can solve it this winter, it will take a while for us to do our work, and an unknown amount of time until we can begin the process and have a better understanding. My comment only suggests that we shouldn’t let those responsible benefit from the destruction we know they chose to cause.

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

I Thought This Was Just an Investor Problem? Part II

 The number of companies that have made the decision to permanently work from home appears to be increasing, at least in the Calgary market. As a proponent of this method of organization I support the trend and find that the best of this change has not yet been experienced. During lockdown and fear mongering by dictators people haven’t been able to get out as they would normally. And once living as free individuals again they’ll begin to find that working from home has many attributes and advantages above those already experienced. The many key features of the method realized today include the ability to control your day’s effort from both a professional and personal standpoint. Higher productivity from the employers point of view. Reduction in the travel time to and from work, but also to meetings and a possibly temporary reduction in business travel. These are just a few of the highlights with the constraint of a 9 to 5 office being somewhat of an archaic idea that is seemingly limited in its purpose. Companies can experience reduced costs and an expanded number of working hours per day. Covering off all the time zones of the North American continent as the time in which they’re operational. Accepting that some people are morning people and I am not.

This is an opportunity that is embraced in the Preliminary Specification and was considered prior to the virus induced trend. Our solution provides a means in which producers are profitable everywhere and always. It also resolved the reason that producers consume cash in the horrific manner they have in the past four decades. Looking at the overhead costs incurred by the industry we see in the financial statements of our sample of producers have incurred 3.59% of revenue as of the second quarter. These are immaterial amounts and no one would be concerned about those. However they’re also not the amount of overhead that is incurred by the producer firms. People, Ideas & Objects suggest that on average 85% of the overhead in the industry is capitalized to property, plant and equipment. We’ve requested on many occasions that producers could educate us on what these amounts are, and what they consist of, however none of them have taken us up on our free audit offer. Of course we don’t want to belittle a cost of only 3.59%. I can only go on my personal experience in the industry which is what defines the 85%. What’s included in those accounts are what we believe to be material amounts of executive compensation above and beyond what may be known. But that is just a suspicion based on that same personal experience gained in decades of employment in the industry. Remember boom times are good times. Perks, once established… 

Overhead costs are recurring monthly expenses that are recaptured in the prices of the products and services a company sells. However, when a producer sells oil or gas, their defined purpose is to “build balance sheets” and “put cash in the ground.” This overhead treatment of capitalizing large portions of overhead ensures they’re meeting their defined purpose. However leaves them short of material amounts of cash that were incurred in paying the overhead costs of the firm each month. When investors were compensating for the entire year's capital budget, these overhead costs were included there and as a result were covered in their majority. And now they have to be sourced by “new” sources of money each month as they’re not included in the price of the commodity other than the sliver of depletion recognized each year. The disappearing cash issue is there is no cash float in the oil and gas producer where the majority (85%) of the overhead costs are replenished through the sale of oil or gas. Cash and working capital have diminished into a critical issue in the industry as a result of these “3.59%” overhead costs. This material and constant drain on cash has been rectified in the Preliminary Specification in a variety of ways. 

First we eliminate the overhead allowances that are used to charge the Joint Operating Committees for the approximate costs of the overhead incurred. The issue that People, Ideas & Objects have with these is they’re not adequate for the purposes of dealing with the costs of overhead in the industry. Secondly the monthly and annual value of all the overhead allowance charges incurred within the industry total nothing. Zero may also not be an accurate representation of the overhead costs in the industry. Swapping charges in the Joint Operating Committee are not representative of the true cost and avoid the reality of recording actual overhead to the property during the month in order to determine the Joint Operating Committees actual performance and spontaneous, summary and universal declarations of profitability. Other than during periods of negative $40 oil prices. The Preliminary Specification, through our decentralized production models price maker strategy, reallocates the administrative and accounting resources of the producers into the service providers that are owned and operated by our user community members. These are the individual firms that are handling the individual process of accounting and administration on behalf of the industry. They’ll charge a fee for their services directly to the Joint Operating Committee. Therefore each property will now be evaluated on the basis of its actual, factual costs and if it remains profitable it will remain producing. Returning the cash of all of these overhead costs back to the producers in what is considered a cash float. If it is shut-in due to its inability to produce profitably then no information will flow to the service providers, no services will be provided and no billing will be rendered to the Joint Operating Committee. Therefore the property would incur a null operation, no profit, but also no loss. Our decentralized production model changes the makeup of the industries overhead costs from the fixed cost, producer based accounting and administrative capacity and capability. To become industry based, variable cost, accounting and administrative capacity and capability. Variable based on production where production is only produced if it's profitable. This is only one aspect of the many changes we make in the Preliminary Specification. We need to tack back to the point of the post now.

The topic at hand is working from home in combination with these complications from the producer's overhead issues. The ability of the Preliminary Specification to convert the Joint Operating Committees overhead to the actual, factual costs that are incurred by the individual service providers. And do so on a variable basis depending on profitable production that includes the actual overhead costs. The reallocation of the administrative and accounting resources of the producers into the service providers can be done in combination with the permanent shift to the work from home of these resources. That assumes the service providers choose to work from home with their staff. That would be their decisions as to how they operate their business; however, accessing the talent pool that they need may require them to have access to a geographically diverse resource base in order to provide their most competitive offering. 

The competitive advantages that are being brought forward through the development of the Preliminary Specification and formation of the service providers are substantial. Turning overhead costs from fixed to variable nature is necessary but another key point may be missed in the transition. And that point is the secondary reason profitability is an issue in oil and gas. That is the desire of each bureaucracy to build their necessary infrastructure of administrative and accounting capabilities and capacities, which are substantial in oil and gas, into each of the oil and gas producers. None of these costs are shared or shareable in their current configuration, or form part of the producers distinct competitive advantages. Each of the producers are incurring 100% of these costs individually. These costs are not in any way different than the hundreds of other producers in the industry. People, Ideas & Objects et al standardization and building of an industry wide administrative and accounting capability and capacity eliminate the redundancies of each producer attempting to replicate these same costly non-competitive attributes within each firm. If overhead was 3.59% it would be a waste of time. With the diminishing cash and working capital consumed by the capitalized overhead it becomes a necessity. The extent of these two changes of making overhead costs variable, and an industry based shared and shareable capacity and capability are dramatic. We have discussed the development of industry based capabilities on many aspects of the producer firm to include our ERP systems, which include Oracle Cloud ERP. Oracle now has a 90 day release period that demands executive attention. These system changes have to be accommodated in the organization and need executive focus on how they’ll do so. Attributes such as these, when using an industry based capability as contemplated here, can disperse the workload across the industry on a shared and shareable basis. Implementing the solution within the service provider organizations. 

Additional competitive advantages of the service providers include and are not limited to the following. Quality, specialization, the division of labor, automation, innovation, leadership, integration, issue identification and resolution, creativity, research, ideas, design, planning, thinking, negotiating, collaboration, compromise, financing, reasoning, judgement. There is a strong division of labor between People, Ideas & Objects delivery of the software and the service providers as well. The Preliminary Specification captures the explicit knowledge within the software and the service providers use their tacit knowledge in deployment of their service in combination with our software. When CFO’s in oil and gas have had difficulty over the course of the past four decades in determining where their cash has been going. Hence the demand for repeated stock issuances. You can only imagine the difficulties that I’ve had in trying to market this kind of logic. Discussing fixed vs variable, shared and shareable, cash float by recovering overhead costs, corporate vs the Joint Operating Committee did nothing to help them “build balance sheets” or “put cash in the ground.” Or maybe, it was the director's choice not only to ignore the opportunities to adopt our initiatives, but to also mismanage their cash these past decades? Keeping their ERP systems providers on the starvation diets makes for ready excuses. After all, what is it they’ve been telling us?

The point of this series is to show why this is not just an investor problem. That it has now manifested itself into the financial destruction of the producers. Which has taken the service industry and comprehensively destroyed it. Where the capacity and capabilities of both oil & gas and the service industries are unable to meet the needs of consumers. To hire back the people with the promise of healthy compensation is met with the reasonable question, for how long? Investors in the service industry are far more jaded than the oil and gas investor. Having watched their equipment being cut up into scrap metal for cash. Natural gas is currently selling for $40 in Europe (as of Tuesday October 5, 2021), homestead of windmills where the wind never blows. Which is not all that high considering Russia has now increased its price guidance to $295 to $330 (Approximately $8.80 to $7.73 /mcf)for the winter months. It was also 9 degrees in Helsinki and 21 degrees celsius in Rome on that day. This is the road that these producers directors chose to take their firms when they decided that all of their previous decisions, made in Keystone Kops fashion, didn’t reveal the riches they promised. I can categorize the discussions I’ve had with directors over the course of the past twenty years into two different types. Paraphrasing in both instances of course. The first would be “what’s that.” Meaning what are ERP systems. The second would be “I’m not talking to the management about this, they’re doing such a great job that this would not be worth their time discussing.” As a consumer of oil and gas, and if you’ve been reading this blog for any period of time, this is the unfortunate but absolute 100% and easily determined outcome of such bureaucratic… fix your own adjective here. Officers and directors of oil and gas producers are wholly responsible for this. People, Ideas & Objects have proven the cause of this began as far back as that Calgary Herald article from July 26, 1986 “OPEC Minister Can See Economic Destruction” which eerily sounded like the difficulties over the past thirty five years and predicted today’s outcome. People, Ideas & Objects solution to this was published in the form of the Preliminary Specification in December 2013. How many more second chances should they get?

No one outside of these officers and directors received any of the financial benefits from any of the prior periods activities. Nothing has or ever will change as we’ve documented that the shareholders representatives, or directors as they call themselves, will never consider alternatives. If you think they didn’t have enough time to consider their options then please scroll down to the time I began writing about these issues. What makes anyone believe now that prices are headed to a period of unconstrained panic driven premiums will we now see any of the proceeds from these producer bureaucrats. The last thing that we will ever see happen is the investors move back into the oil and gas and service industries while these officers and directors occupy their current positions. They left in 2015 and bureaucrats' proven and absolute behavior will stand as it has for the past number of decades. To have a dynamic, innovative, accountable and profitable oil and gas industry requires these people to be purged with extreme prejudice, the investors will then return with new officers and directors in new producers to begin the development of the Preliminary Specification et al. Besides, current management can move on to their chosen direction in clean energy. Let them feel the burn as a startup clean energy company without the revenues from oil and gas making them complacent and idly biding their time. Motivate them to do the hard work while the heat is on to get it done before they run out of their personal money. Only through that risk will clean energy issues be resolved. 

On the other hand we have no shortage of work to do. Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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.