And We’re Back
I enjoyed the focused time away writing the five papers published over the past few months. These works have solidified research as People, Ideas & Objects’ third competitive advantage, complementing our user community and Intellectual Property strengths. While we’ll shift from a monthly paper publication schedule, we will continue publishing periodically moving forward.
I’m pleased with the papers’ content, which share a cohesive theme: the transformative role of People, Ideas & Objects, our user community, and their service providers in rebuilding North American oil and gas producers. Each paper targets a specific industry segment, detailing how the Preliminary Specification will drive change and support the industry’s reconstruction.
The first two papers, released on President Trump’s inauguration day, January 20, 2025, set the stage for this vision, highlighting the opportunities and mechanisms for revitalizing the oil and gas sector.
Reconstructing Oil & Gas
Our first paper outlined how engineers and geologists can leverage the Preliminary Specification to establish their own oil and gas producer firms, revitalizing the industry into dynamic, innovative, accountable, and profitable producers competing in North American Capital markets.Overcoming Barriers for Small Producers
Small and startup oil and gas producers face significant challenges: limited access to capital, high overhead costs, and difficulties scaling into larger operations, which historically relied more on access to financial resources than engineering or geological expertise. The Preliminary Specification addresses these hurdles, enabling small producers, the future pioneers to thrive.
A New Era of Innovation and Profitability
Small and startup producers are poised to lead the industry’s transformation, echoing the vision, drive and success of its pioneers. Investors, like Citadel’s hedge fund, are committing billions to non-operated oil and gas assets, relying on these newly formed agile, innovative producers to manage them. As change accelerates, investors seek profitable producers to restore faith, trust and confidence in the industry.
Catalyst for Change
Our second paper explored transformative business opportunities in oil and gas administrative and accounting functions. People, Ideas & Objects envisions reallocating these resources from producers into independent, user community-owned firms. These firms will initially shape the business perspective of the Preliminary Specification’s software development, later transitioning to manage specific industry-wide processes. Service providers, leveraging the explicit knowledge embedded in the software and their tacit expertise, will deliver these services to producers.
Leveraging Non-Rival Costs
Drawing on Professor Paul Romer’s theory of non-rival costs, our user community and service providers operate through the Cloud Administration & Accounting for Oil & Gas platform. This shared infrastructure, accessible to all North American producers, eliminates the need for each producer to independently build and maintain administrative and accounting systems. By pooling these costs, the industry achieves significant overhead reductions.
Enabling Flexible Operations
This shared infrastructure offers producers the flexibility to shut in unprofitable production. When a property is shut in, no data is generated, no service provider work is performed, and no service provider invoices are issued. The Cloud Administration & Accounting for Oil & Gas system renders the Joint Operating Committee’s financial performance a null operation—neither profit nor loss. This allows producers to focus on innovative solutions to restore profitability to the property.
Innovative Organizational Excellence
Published February 10, 2025, People, Ideas & Objects introduces new approaches to configuring organizations for exceptional performance. As some organizations achieve unprecedented results, we explore what drives their success and how it can be replicated.
Redefining Performance in Oil and Gas
North American oil and gas producers face intensifying performance demands from competitive capital markets—standards they’ve struggled to meet. The Preliminary Specification offers a framework to establish dynamic, high-performance standards and adaptable infrastructure. If leading organizations are setting new benchmarks, how long until these become the norm? Can oil and gas afford to meet only today’s expectations, risking obsolescence once again as capital markets raise the bar?
The Quest for Innovation
Our January 20, 2025 white paper, Reconstructing Oil & Gas, challenged engineers and geologists to pioneer innovations akin to the America’s Cup sailing boats, which achieve 30-knot speeds in 6.5-knot winds. What proprietary innovations will unlock dramatic performance gains in shale formations? With vast known shale resources, engineering and geological breakthroughs could yield significant upside. Is shale’s full potential untapped?
A Call for Collaborative Innovation
Innovation in oil and gas requires a fundamental shift. Producers, the service industry, academia, and other stakeholders must unite to address critical questions: What performance do we expect from oil and gas? How will we achieve it? The industry’s current approach to innovation is inadequate. The first step is to reorganize, aligning efforts to harness the collective expertise needed to meet future demands.
Building a High-Performance Future
By adopting the Preliminary Specification and fostering a culture of innovation, oil and gas can meet and exceed capital market expectations. It should be asked if shale has been fully exploited from an engineering and geological perspective. Organizing for excellence and setting ambitious goals will position the industry to thrive in a rapidly evolving landscape.
Hyper Specialization in an AI- and IP-Enabled Workforce
In our March 17, 2025 paper, People, Ideas & Objects explore the synergy of hyper specialization, Artificial Intelligence (AI), and Intellectual Property (IP) within the Preliminary Specification, building on Professor Paul Romer’s theory of non-rival costs. By sharing administrative and accounting infrastructure, producers avoid the burden of building and maintaining it internally. Combined with hyper specialization and division of labor, these principles drive unprecedented productivity and performance in North America’s oil and gas industry, creating value far beyond the sum of their individual contributions.The Power of Hyper Specialization
Specialization has driven economic value since 1776, but have we reached the point of diminishing returns, where further specialization costs more than it yields? In the context of hyper specialization—extreme task segmentation—we believe we have. ERP systems, designed to identify and support processes and people, must evolve to accommodate this dynamic. Hyper-specialized markets may appear chaotic, with heightened activity mistaken for inefficiency. To prevent disruption and ensure order, clear mechanisms are needed to manage access, roles, and workflow.
Intellectual Property as Gatekeeper
IP is critical to maintaining control in a hyper-specialized environment. By licensing only authorized participants with defined roles and responsibilities, IP ensures that only those with rights can operate in specific domains. Without IP protections, unauthorized players could encroach, eroding the benefits of specialization and stalling progress. IP safeguards the value of hyper specialization, division of labor, non-rival costs, and AI integration, preserving and enhancing industry performance.
AI as the Orchestrator
AI serves as the intelligent overseer, coordinating the complex interplay of players, roles, processes, and Joint Operating Committees within the ERP system. With its comprehensive understanding of each participant’s status and responsibilities, AI acts as a traffic cop, judge, jury and executor, enforcing structure and functionality. It ensures seamless operations, managing the speed, complexity, and volume of interactions in a hyper-specialized market.
A Synergistic Future
The integration of hyper specialization, AI, and IP, supported by the Preliminary Specification, unlocks transformative value for the oil and gas industry. By leveraging shared infrastructure, tightly controlled IP, and AI-driven coordination, producers can achieve unparalleled efficiency and performance, redefining the industry’s accounting, administrative, operational and economic potential.
Oil and Gas Arbitrage: Citadel’s Strategic Play
On April 7, 2025, People, Ideas & Objects published a paper detailing Citadel’s March 22, 2025 strategy, where one of their hedge funds invested $1 billion in non-operated Haynesville shale gas properties. This move exemplifies oil and gas arbitrage, capitalizing on market inefficiencies.Strategy Overview: Non-Operated Properties
By acquiring non-operated properties, investors following Citadel’s approach benefit from operator management in the short term. This allows direct participation in oil and gas without inheriting the inefficiencies of legacy organizations that struggle with profitability. The paper implies that adopting People, Ideas & Objects’ Preliminary Specification offers the mid- to long-term management solution for these assets.
Rethinking Reserve Valuation
The traditional net present value (NPV) of cash flow for oil and gas reserves inflates asset values due to producers’ outdated “building balance sheets” and “putting cash in the ground” strategies. People, Ideas & Objects advocate valuing reserves based on the NPV of earnings, reflecting true profitability. Producers, unprofitable and cash-constrained, often rely on property swaps or exchanges rather than cash for acquisitions, overpaying based on inflated cash flow metrics and lack of cash makes this now a buyer’s market.
Citadel’s Long-Term Arbitrage
Citadel’s strategy involves purchasing reserves at today’s prices, which are undervalued compared to their future profitable value under the Preliminary Specification. The arbitrage opportunity lies in the price differential between current and future profitable prices, multiplied by the vast shale reserve volumes. All costs are fully accounted for in today’s reserves valuation. Maximizing the differential’s leverage.
Unlocking Value Through Price Increases
As oil and gas prices rise to “real” profitable levels—defined as the replacement cost of a barrel of oil equivalent in today’s market—reserves shift from possible/probable to proven categories, markedly boosting NPV. Replacement costs reflect the ever escalating, real costs of exploration, production, and operations, as defined by heavy oil and shale.
Escalating Costs and Future Funding
Oil and gas production costs rise faster than inflation, driven by increasing engineering, geological, and field efforts. With easily accessible reserves depleted, each incremental barrel demands more resources. Current production must fund these rising future costs to sustain output.
Preliminary Specification: A Comprehensive Solution
People, Ideas & Objects’ Preliminary Specification provides a robust accounting, administrative, and operational framework to manage these assets. It supports flexible participation models—active or passive—yet preserves voting rights in Joint Operating Committee agreements for novated participants.
Citadel’s strategy, underpinned by the Preliminary Specification, positions investors to capitalize on the inevitable rise in oil and gas prices, unlocking significant value from today’s under-realized reserves.
