The Corporate Living Dead of Oil & Gas

We have watched oil & gas producers reduce themselves to little more than corporate zombies, then subsisting on the lifeblood of the service sector for a few extra years of survival. They have abandoned any semblance of business logic, ignored the destruction they’ve caused, and dismissed the consequences to others. The officers and directors of these producers have committed an act that is both vile and despicable, not only against the industry itself but also against society at large.

What makes this even more troubling is the silent verdict delivered by their own shareholders and investors. Over a decade ago, the capital markets simply walked away—refusing to fund producers any further. That is the one signal that any corporation should treat as terminal, a clear indication to act decisively or perish. Yet producers did nothing. Over that same period, I have pressed forward with our proposed solution the Preliminary Specification, published in August 2012, only to be met with obstinate denials and outright lies. Time, however, has proven our position correct and solution accurate. Today, it is their credibility that stands in question, not ours.

The industry’s chronic inability to manage even the most basic commercial arrangements underscores the risk. Take, for example, the 2023 LNG “free on board” fiasco. Producers designated Henry Hub as their point of sale, effectively ceding arbitrage profits to counterparties such as Venture Global, who pocketed margins as high as 500% by capturing export values. That such contracts not only exist but remain enforceable for years to come speaks volumes about the operational ignorance, business incompetence, and utter lack of accountability among producers.

This failure is doubly tragic because LNG exports represented a once-in-a-lifetime opportunity to rehabilitate natural gas pricing. Instead, since the advent of shale, gas prices have been systematically destroyed at levels unprecedented in modern business. Historically, natural gas traded at its 6:1 heating value equivalent to oil. That ratio has since collapsed—sliding to 50:1 in February 2024, and averaging 124:1 throughout July 2025 in Alberta. Producers remain in denial, dismissing our solution at People, Ideas & Objects as “collusion.” Their objections reveal either staggering naiveté or a complete absence of business understanding.

If one were to calculate the differential between the actual prices producers received for natural gas and the 6:1 oil-equivalent benchmark, the magnitude of this dereliction becomes clear. The result: an estimated $4.7 trillion in lost natural gas revenues over the past 25 years. That figure alone should stun the industry. Yet outside of People, Ideas & Objects, the number provoked no discussion whatsoever—producers casually dismissing it as “opportunity costs.”

The absurdity of this denial was compounded in early 2025, when the EIA reported that 2024s average annual natural gas prices were the lowest on record in inflation-adjusted terms. And by August 2025, we finally learned what producers had been doing since late 2023.

Litigation as Strategy: A Symptom of Failure

Months after this pricing anomaly was first identified, producers had the choice to engage with People, Ideas & Objects to pursue a structured, constructive, and productive solution—or attempt a legal workaround. Predictably, they chose litigation. Shell, most notably, sought to claw back lost export revenues from those domestic purchasers. This reaction underscores not strategy, but desperation: a misplaced reliance on courts to remedy what are fundamentally managerial and structural failures.

The results are staggering. By the most conservative measure, producers have already forfeited $4.7 trillion in natural gas revenues over this century alone—dismissed by officers and directors as mere “opportunity costs.” This framing is a distortion. No rational operator willingly abandons trillions in value. The reality is systemic incompetence. Counterparties such as Venture Global, recognizing producer sloth, have extracted profits effortlessly. It begs the question: why wouldn’t others ship the gas to Japan or Norway themselves and realize the windfall? The notion that litigation can restore that lost value or credibility is not only implausible—it is untenable. 

The surreal element is Shell itself. When Shell, of all companies, believes it is entitled to sue for revenues it willingly concedes? For more than a decade, Shell and its peers defied their shareholders, delivered performance that scarcely registers on the commercial scale, and ridiculed in debate with People, Ideas & Objects—dismissing our solution as an argument over “opportunity costs.” Meanwhile, counterparties like Venture Global took the “opportunity” to earn billions in margins producers themselves abandoned. Only now, with litigation, does Shell acknowledge the true ”cost” of their negligence.

The Issue Now

Shell’s litigation—and any subsequent actions—implicitly acknowledges that producers were fully aware of the issue, its scope, its scale, and the enormous losses incurred. It also concedes an understanding of the differential between domestic and export prices as a direct consequence of the structural deterioration in natural gas pricing from the historical 6:1 ratio. Otherwise, those prices would be harmonized.

People, Ideas & Objects has spoken to these matters extensively, while also putting officers and directors on notice regarding their fiduciary obligations and the implications of inaction for their Directors & Officers (D&O) Liability Insurance. If producers were aware of the issues and chose not to act, then their coverage could be jeopardized. Filing a weak, almost perfunctory lawsuit that fails the smell test does not constitute a remedy for their share of a $4.7 trillion problem.

“Muddling through” may be an option, but not for D&O insurers. Producers had been warned. People, Ideas & Objects formally advised officers and directors of the leakage in LNG revenues beginning October 11, 2023, in a series titled “This One’s Nuclear,” which detailed the free-on-board issue and the erosion of natural gas price structures. On January 24, 2024, in “Willful Misconduct or Negligence?” We specifically addressed the looming D&O liability exposure. Yet natural gas prices went on to record their lowest annual average ever, and the industry’s only visible response was to launch superfluous lawsuits.

Throughout 2024, People, Ideas & Objects published a 54-part series under the label Notice, documenting and discussing these issues. The final entry, “These Are Not the Leaders We’re Looking For, Part XXIV,” appeared on May 1, 2024. Taken together, these notices establish a clear evidentiary record—one that insurers could use to disavow liability in any shareholder vs. officers and directors action tied to the $4.7 trillion in losses.

The only regret we have is that the strategy People, Ideas & Objects developed to give officers and directors a “get-out-of-jail-free card” has gone unused. Our approach, “Issue Mitigated, Nothing Litigated,” would allow producers to materially reduce their exposure by supporting the development and implementation of the Preliminary Specification. With our budget fully funded, we could execute this strategy and meaningfully reduce their risk.

I am not a lawyer and this should not be taken as legal advice. These are facts based on the interactions between producers and People, Ideas & Objects since the LNG issue was identified. Anyone seeking legal guidance or validation should consult qualified counsel.

New Issues to Contemplate 

First…

What we need are dynamic, innovative, accountable, and profitable producers. Instead, what we have are organizations defined by lethargy and denial. When natural gas prices began their structural decline in 2009, which officers and directors recognized the gravity of the problem? The silence spoke volumes—no one stirred. By 2015, it was evident that capital structures were unsustainable, yet again, no one acted. The reality is that solutions were available, and industry leadership was aware of them. Their willful inaction is indefensible.

Second…

The alternative is clear. Clinging to outdated practices will only amplify losses as industry velocity accelerates. The combination of speed and complexity in today’s market all but guarantees the creation of countless “Venture Globals” at producers’ expense. Structural reform is no longer a choice—it is a necessity. Litigation may acknowledge that problems exist, but it is no substitute for strategy. Shell’s case was only the beginning; BP is next, with more to follow. These losses were predictable from the outset. The rational response is not the courtroom but the adoption of the Preliminary Specification. Equally troubling is the industry’s persistent reliance on tackling complex issues with one narrow, serial “solution” at a time. Such a piecemeal approach is a guaranteed path to failure in this marketplace.

A New Paper

People, Ideas & Objects is preparing a paper that evaluates the legislative and policy initiatives advanced under President Trump’s Administration which directly affect American oil & gas producers. These measures are being assessed through the framework of the Preliminary Specification, demonstrating how this shifting policy environment will reshape industry practices. The conclusion is clear: the oil & gas sector emerging from these changes will bear little resemblance to the industry of today.
Our review includes:

• The Big Beautiful Bill

• The GENIUS Act

• The proposed Clarity Act

• “Strengthening American Leadership in Digital Financial Technology”

• “Winning the Race: America’s AI Action Plan”

• Several tariff and trade agreements

• Alaska’s energy development initiatives

• Energy sector deregulation

Our deadline for publication is September 18, 2025. 

Financial Marketplace Podcast # 21

Once again, the virtual presenters in our podcast series have managed to distill the larger strategic themes embedded within the finer points of our content. This episode focuses on the Financial Marketplace Module, which—like its predecessors—will no doubt provoke renewed debate over the Marketplace Interface. At People, Ideas & Objects, we’ve become entirely numb and fully desensitized to the criticism and laughter this interface has generated. That said, the two presenters offered notably thoughtful commentary on the subject.

We currently have a major paper in development that addresses the Marketplace Interface directly, scheduled for release after our next publication. Once it’s out, we’ll see who shares in our laughter. 🤓

The Financial Marketplace Module is the third and final instalment in our marketplace module podcast series. From my perspective, there are three key takeaways:

• Increased throughput and speed in Financial Marketplace Module agreements and transactions, benefiting both producers and Joint Operating Committees (JOCs).

• Recognition that speed without control is an operational liability.

• Expanded integration between producers and JOCs, moving beyond an internal focus to embrace a broader spectrum of opportunities and risks.

For those seeking a concise introduction to the modules, the components of the Preliminary Specification, and People, Ideas & Objects as a whole, these podcasts offer an efficient, high-level way to gauge both interest and understanding.

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Podcast # 20, Petroleum Lease Marketplace

I am very pleased with the content of this podcast. It captures the subtle complexity inherent in the interactions within the Petroleum Lease Marketplace module—complexity that underpins the data and process integrity across all other modules of the Preliminary Specification.

As the second in our series covering the three marketplace modules, this episode moves beyond the central theme of data integrity to explore the broader strategic implications of the module and the downstream consequences of its design. I was impressed by the clarity and depth with which these topics were addressed, as well as the ease and fluency of the virtual presenters in navigating such a sophisticated discussion.

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Resource Marketplace, Podcast # 19

We are transitioning our podcast series from this year’s White Papers to a focused exploration of the fourteen modules within the Preliminary Specification. The first episode in this new series, released today, covers the Resource Marketplace module. Upcoming episodes will feature the Petroleum Lease Marketplace module on Tuesday, followed by the Finance Marketplace module on Friday.

One of the remarkable aspects of substantive writing is how it can evolve in meaning over time. When a document is set aside for six months or more, revisiting it often reveals insights and themes the author was unaware of during its creation. This has been my experience with the six papers published this year, and it is motivating me to expand certain sections of the Preliminary Specification to incorporate these new perspectives.

Separately, I’ve observed an unusually high volume of asset sales in the oil and gas sector. What stands out most is that the identities of the buyers are rarely disclosed.

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Breaking the Cycle, Podcast # 18

People, Ideas & Objects continues the conversation with today’s episode, building on yesterday’s release of “Breaking the Cycle.” The first few minutes are a warm-up, but once the discussion hits its stride, it delivers high-value insights for anyone serious about oil & gas reform.

This episode marks the completion of our six-paper podcast series for 2025. Next, we shift gears to cover the remaining twelve modules of the Preliminary Specification—laying out the operational blueprint for the industry’s future.

   
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Breaking the Cycle

People, Ideas & Objects announces the release of our paper:

Breaking the Cycle: Ending the Boom & Bust of Oil & Gas to Forge a Prosperous New Era in Energy

This paper dissects the structural flaws that perpetuate volatility in oil & gas and presents a proven remedy to end the destructive boom/bust cycle. Drawing on 

Gary, Michael Shayne and Dosi, Giovanni and Lovallo, Dan, (September 20, 2007). Boom and Bust Behavior: On the Persistence of Strategic Decision Biases. THE OXFORD HANDBOOK OF ORGANIZATIONAL DECISION MAKING, GP Hodgkinson, WH Starbuck, eds., pp. 33-55, Oxford University Press, 2008, Available at SSRN: 

Our analysis shows that the same decision biases and entrenched motivations identified in the research are at the core of industry mismanagement today.

The Preliminary Specification is designed to correct these failures. It ignores macroeconomic noise, focuses on the commodity price signal, and uses market discipline to ensure producers only operate at profitable production levels—always and everywhere.

The operational model is simple:

• Accounting and administrative functions are moved to specialized service providers executing one standardized process for all producers.
  
  
• Overhead becomes variable—incurred only when production is profitable, priced into the cost of production, recovered immediately in revenues, and returned to producers in the current period.
  
  
• If production is unprofitable, properties are shut in and no overhead is incurred.

Compare this to the current model:

Overhead is capitalized and depleted over the life of the reserves—returning invested capital in years and decades or until new funding reloads management’s spending machine.

This is not efficient. This is a deliberate choice by officers and directors to preserve a model that rewards them regardless of results. Over capitalization creates equal amounts of over reported profitability. For over a decade, investors have been unable to motivate them into action in their own interests.

The Preliminary Specification replaces this broken system with one that restores market discipline, ensures profitable production in all circumstances, and stops the destruction of capital. The choice for investors is stark: continue financing a cycle that destroys value, or back the Preliminary Specification which ends it.

Hyper-specialization, Artificial Intelligence & Intellectual Property - Podcast #17

 I have some reservations about publishing this podcast, as it fails to fully convey the core argument of the accompanying paper. The central thesis is this: to significantly improve both the productivity and quality of work within the oil and gas industry, we must fundamentally reorganize ourselves around the principles of specialization and division of labor.

This transformation is currently constrained by two primary structural limitations. First, individual producers lack sufficient operational throughput to deconstruct their workflows further without encountering diminishing returns. Achieving material productivity gains would therefore require the aggregation of work across multiple producers, enabling the deployment of hyper-specialized capabilities.

Second, expanding operational processes to their optimal levels introduces overwhelming complexity in terms of coordination and control. Managing the flow of data and information at that scale rapidly exceeds the capacity of conventional organizational structures and human oversight.

The productivity potential of hyper-specialization is not in dispute. Its benefits include exponential improvements in output, precision, and organizational velocity. However, realizing this potential requires a system that can manage such complexity without collapsing under it. Human managers alone are inadequate to fulfill the role of coordinating high-volume, high-speed workflows among hyper-specialized agents.

The Preliminary Specification addresses this challenge through a triadic framework:

1. Intellectual Property – IP must define and assign the rights to specific work domains. This enables clear delineation of responsibilities and prevents the chaos that would arise from unregulated competition for work.
   
   
2. Contractual Structures – These must bind individuals and firms to their areas of specialization, ensuring accountability and coordination.
   
   
3. Artificial Intelligence – AI systems are required to act as the “traffic cops,” managing throughput, enforcing workflows, and maintaining system-wide coordination among authorized participants.

Without these elements working in concert—IP rights, enforceable contracts, and intelligent automation—we will remain constrained by the limitations of our current organizational structures and be unable to achieve the performance step-change the industry requires. The paper being discussed today is:

Hyper-Specialization in Today’s AI & IP Enabled Workforce: 

Strategic Implications and Operational Consequences 

for the Oil & Gas Sector

Other than these points the podcast is a little rough around the edges but the content is well portrayed. 

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Podcast # 16, Innovative Organizational Excellence

 On February 10, 2025, People, Ideas & Objects released the paper titled:

Innovative Organizational Excellence: How Elon Musk and Visionary Leaders Build High Performance Enterprises—Strategies for Emulating Their Success Within Our User Community.

In today’s podcast, there are a few rambling moments at the start—nothing to worry about. Despite this, I’m reluctant to re-record it because, once it gets on track, it delivers valuable insights on what our user community and service providers need to focus on to evolve into the forward-thinking organizations that the oil & gas industry urgently requires.

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Arbitrage Strategy Part VI, Our Value Proposition

In a recent blog post, we discussed OPEC’s revised capital expenditure estimates for global oil and gas, projecting $6.3 trillion needed for North America over the next 25 years. People, Ideas & Objects propose doubling this to $12.6 trillion, factoring in the severe damage to the service industry, reduced producer capacity, and persistent unprofitability. Here, we outline the value proposition of our Preliminary Specification, delivered through People, Ideas & Objects, our user community, and service providers, for North American producers. Our solution generates an additional $5.7 trillion in profits beyond the $12.6 trillion in capital costs, totalling $18.3 trillion in value.

Financing Capital Expenditures

Historically, producers relied heavily on external capital. Our Preliminary Specification introduces a price-maker strategy, providing each Joint Operating Committee with timely, accurate financial reporting compliant with SEC standards (and other frameworks). Capital costs are included in production costs where profitable properties continue operations, rapidly returning capital to producers for reinvestment. We advocate for a 30-month capital turnover to compete in North American capital markets, moving away from outdated goals like “building balance sheets” or “putting cash in the ground.”

Industry Challenges

The industry’s capital demands far exceed available investor or government funds. The only viable solution is earning these funds through profitability. However, a pervasive “muddle through” culture, coupled with decades of prioritizing spending over performance, has reduced industry efficiency to roughly 25% of a profitable operation’s potential. Ignoring investor demands for a decade further highlights a disconnect from the need to establish performance and profitability.

By implementing our Preliminary Specification, North American producers can address these challenges, achieve sustainable profitability, and meet the industry’s immense capital needs.

Addressing Chronic Unprofitability

We’ve long argued that only profitable operations can resolve the industry’s systemic difficulties. Spending investor money without returns is never sustainable. Profitable operations require recognizing all exploration and production costs accurately and ensuring commodity prices cover marginal costs. Currently, consumers cover operating costs, while investors subsidize capital costs—a flawed business model.

Price-Maker Strategy

Our decentralized production model utilizes a price-maker strategy to ensure profitability. This is achieved by generating detailed financial statements for each individual property, allowing for the immediate shut-in of any unprofitable assets. This preserves valuable reserves for future production at higher prices and maximizes overall corporate profits.

Recent industry actions suggest a growing, albeit delayed, appreciation for this approach. For example, ARC Resources recently elected to shut-in approximately 60,000 boe/d of dry gas production, citing unsustainably low prices. As CFO Terry Bibby stated, “We just refuse to waste the resource when we don’t have to wait that long to make a better rate of return.” This decision, prompted by an AECO price of just $0.76/GJ in July, validates the core principle we have advocated for since 2012.

However, such actions are irrational and reactive rather than strategic. The fundamental issue is that without the analytical framework to determine profitability at the property level, producers cannot proactively manage their assets. If the industry adopted this granular approach universally, natural gas prices would stabilize above the marginal cost of production, preventing the catastrophic value destruction seen this century, which has resulted in an estimated $4.7 trillion of lost revenue.

While ARC’s decision is a step in the right direction, it is an extreme measure born of necessity. The scale of the problem, evidenced by a record-high oil-to-gas price ratio of 124:1 in Alberta this July, demands a systemic change. The industry must move beyond intermittent and reactive commitments to a disciplined, data-driven strategy that unlocks the true value of its assets. Only People, Ideas & Objects Preliminary Specification can provide this. 

Two Different Perspectives

The oil and gas industry is at a crossroads, defined by two distinct operational philosophies. The first is the prevailing engineering-centric view, which treats profitability as a technical problem to be solved through innovation at the wellhead. The second is a business-centric model, which posits that profitability is a function of disciplined financial management applied across the entire asset base.

The current engineering-driven approach focuses on adopting new technologies to incrementally increase production. While effective on a micro-level—improving output from a handful of wells—this strategy fails to address the systemic issue of unprofitable production across the continent's ~853,000 wells. Corporate culture often reinforces this narrow view, dismissing comprehensive financial solutions as secondary to technical innovation.

People, Ideas & Objects propose a paradigm shift toward a business-management solution. This involves implementing a system that provides actual, variable overhead and depletion costs for every property on a monthly basis. This granular financial data allows for a clear-eyed analysis of what is truly profitable.

The strategic implication is profound. By identifying and shutting in unprofitable properties, the industry can systematically remove marginal production from the market. This would naturally align commodity prices with the true marginal cost of replacement barrels, benefiting all production and restoring a sustainable business model.

The industry can no longer afford to fund what have effectively become science experiments. With investors withdrawing, capital must be generated internally. The recent admission by Exxon that consolidation has not yielded the expected financial benefits is yet another signal that the industry's traditional strategies are failing. The choice is clear: continue with a limited, well-by-well approach or adopt a comprehensive business framework that ensures the profitability of the entire enterprise. The Preliminary Specification does both. 

A Comment About Production Discipline 

People, Ideas & Objects price-maker strategy establishes the only fair and reasonable method of production discipline in the oil and gas industry. Producers adopting this strategy will maximize profitability and enhance capital market appeal. Details of that value includes:

■ Maximized Profitability: Producers maximize profits when losses from unprofitable properties no longer dilute the gains from profitable ones. It’s common sense to limit one's losses. 
■ Strategic Reserve Management: Holding reserves until they can be produced profitably means avoiding the incremental costs associated with losses from unprofitable production.
■ Cost Reduction: Keeping oil & gas as reserves reduces production and storage costs tied to excess, unprofitable output.
■ Market Stability: Removing unprofitable production allows commodity markets to find the marginal cost, establishing fair prices for all production. Eliminating industries' boom / bust cycle.
■ Reserves Valuations: Market prices accurately reflect the value of producers petroleum reserves. Expanding the volumes of proven recoverable reserves and fulfilling officers and directors fiduciary duty to safeguard assets.
■ Innovation Opportunities: While unprofitable properties are shut in, producers can innovatively explore ways to increase production volumes, reduce costs, or expand reserves. To return the property to profitable production.
■ Replacement Value: The realized market price of oil & gas must reflect the current market’s costs of exploration and development. It is the cost of a replacement volume of energy produced today.
■ Production Discipline: Using profitability as the criterion for production decisions is the only fair and reasonable method of production discipline.
■ Innovation as a Foundation: Higher commodity prices finance greater innovative activity.
■ Effectively Eliminating the Boom / Bust Cycle: Dynamic changes to the producers production profile ensure they remain profitable and are aware when industry overbuilding has begun. 
■ Consumers will use the Products Price to Make Decisions: Consumer decisions based on price will stabilize the demand side of the market.

This market-driven approach mirrors a healthy economy, where prices guide production and consumption. Critics have falsely accused our price-maker strategy of promoting collusion. In reality, independent decisions based on accurate, property-level financial data—as enabled by our strategy—contrast sharply with the industry’s current practices, which could be seen as collusive.

Industry consolidation concentrates control among fewer players, limiting responsiveness to market signals. For instance, despite calls for increased production, consolidated producers resist expansion. In contrast, the Preliminary Specification fosters an environment where startups and small producers thrive, empowering dynamic, innovative, accountable, and profitable companies to rebuild the industry from the failures of consolidation.

People, Ideas & Objects Preliminary Specification is designed for all producers. Establishing the environment for start up and small producers to be established once again. We are seeking to enable dynamic, innovative, accountable and profitable producers to rebuild the industry from the failed remains of what these consolidated producers created. 

Arbitrage Strategy Update: The Revised Value Proposition 
$18.3 trillion is the amount needed to be raised over the next 25 years. About $800 billion per year for 25 years. In last Monday’s blogpost some of this money was designated as sunk costs, remediating damages the industry has experienced in oil & gas and the service industry. This raised a number of questions with regards to our arbitrage strategy being less opportune than what may have been stated before. I don’t believe that to be the case and for the following reasons, I would identify this as nothing but good news for Arbitrage Strategy investors. 

Our Arbitrage Strategy sees two groups diametrically opposed to one another. Existing oil & gas producers. And those who wish to invest in oil & gas, however are hesitant due to their experience showing a lack of trust and profitability have severed any hope of working together. Oil & gas producer officers and directors seem to be occupying the boardroom more in protest than any fiduciary duty. Believing they are the ones who have built substantial value and are unappreciated. Waiting for the time when the rest of the world catches up with their self perception. A surreal situation is made even more comical with each passing quarter as their financial performance deteriorates further and their artistic interpretation of that performance becomes more abstract and bold. 

The Arbitrage Strategy uses these producers for their inherent strength in the market today, their desperate need for cash. Selling large amounts of properties and reserves as repackaged “non-operated” properties. Investors can reenter the oil & gas industry directly without the influence of the producers management or governance. They’re novated into the Joint Operating Committees and have the past producer to operate them in the field for the short term. In the mid to long term it’s assumed the Preliminary Specification will be available where the administration, accounting, engineering and geological elements of an exploration and production based producer will be in place to manage it for them. 

The benefits of this are many and it first of all gets them back in the game. Animal spirits in the general economy are raging and energy is seen as a critical component to the 4th Industrial Revolution. These investors know the oil & gas business and how to make money in the business. Owning the reserves which they’ll theoretically purchase at the lowest prices ever, they’ll realize any price increases in all of those reserves. And when the prices rise reserves are reclassified from possible or probable to proven as they become commercially viable. Giving the Arbitrage Investors a substantial kick in their investment value. Immediate revenue should cover the operation and if quality is attained, maybe cash flow positive. 

A common misconception regarding the Arbitrage Strategy lies in the perceived risk of acquiring assets during a period of depressed oil and gas prices. However, it is critical to distinguish between market-based valuation and book-based accounting. Arbitrage investors are purchasing properties at prevailing market prices—prices that reflect current conditions and forward expectations. In contrast, producers must reconcile these transactions against their carrying values, which are often inflated by historical capital expenditures now deemed sunk costs.

These sunk costs—though real for the producers—do not translate into transactional value. They are not priced into the sale; they are embedded in the producer’s financial legacy, not the asset’s market worth. As a result, the Arbitrage Strategy effectively transfers the burden of sunk costs back to the producer, while enabling investors to capture the upside unencumbered.

This asymmetry in cost structure produces a unique arbitrage opportunity:

• Producers require higher commodity prices to justify their sunk cost burden and maintain solvency.

• Arbitrage investors, by contrast, carry none of those historical liabilities, yet benefit from the same market price realization.

To illustrate: if two producers each deliver one barrel of oil per day to the market—one having invested $100,000 to do so, the other $200,000—the market assigns equal value to both barrels. The market does not reward inefficiency; it clears at price, not at cost.

This is the essence of the Arbitrage Strategy: capturing market-based returns while remaining structurally insulated from legacy inefficiencies.

A Study in Contrasts

Has there ever been a greater contrast between what an industry has to offer? There is the failed, dilapidated and increasingly poorly functioning. Unable to even grasp the most basic of business concepts such as “free on board” or why their investors left? And there is the potential, entering a familiar industry without the baggage or legacy damage conducted by those who chose or pretend not to know better. An industry which is fundamental to our society’s competitive future. Realizing the value of what is possibly the greatest endowment of wealth, shale oil & gas reservoirs. 

It will be drudgery for the officers and directors of existing producers if they don’t begin to change their positions. Will they allow themselves to be dragged grudgingly from one court room to another for the crime of being obstinate. Or will they get with the program and aggressively market their properties, pay down debt and return the rest to shareholders. Or continue to sit there blinking mindlessly at their desks and looking out the window. What will they do?

A clean slate is available for the investors who use the “Arbitrage Strategy.” The same goes for those who work in oil & gas. Our user community and service providers for the accounting and administrative functions of the new industry. And new dynamic, innovative, accountable and profitable oil & gas producers for engineers and geologists. Investors have already shown a willingness to invest on the basis of the arbitrage strategy, Carlyle and Citadel alone have put in $3 billion. What’s old is gone and what we build will never be enough for what will be expected. People need to come and they need to bring ideas by the hundreds, more than they’ve ever thought of. 

Catalysts for Cultural Change - Podcast # 15

 The quality of our podcasts continues to surpass expectations. This week’s two episodes, covering papers we released on January 20, 2025, are particularly aligned in theme and purpose—each highlighting a core leadership role in rebuilding oil and gas through the lens of the Preliminary Specification.

Tuesday’s episode focused on the leadership required from engineers and geologists. Today’s episode shifts to address the expectations of new investors, engineers, and geologists regarding administration and accounting within this reimagined industry framework and needs of the Preliminary Specification. 

Catalysts for Cultural Change: 

The Leadership Role of 

People, Ideas & Objects 

User Community

If there was a flaw in today’s episode, it escaped me. We’re beginning to dial in the right cadence, tone, and format—and the quality of the supporting technology is becoming a real asset.

If these two podcasts don’t motivate you—given the state of the broader U.S. economy and industry—you’re probably close to your retirement date.

This latest paper also outlines our user community’s compensation plan, detailing short-, medium-, and long-term value-generating components: hourly compensation, bonus structures, licensing arrangements, and proprietorship opportunities.

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