Connecting the Dots

Two crucial points, highlighted in separate papers this year, have gained significant traction and warrant explicit connection in light of recent major investments aimed at rebuilding the oil and gas industry. The Carlyle Group's $2 billion investment in Diversified Energy's non-operated properties, following Citadel's $1 billion earlier this year, signals a pivotal moment and underscores the importance of the following actions.

• First, investors who are non-operator members of Joint Operating Committees are encouraged to propose the implementation of the Preliminary Specification to their working interest partners. The value of these properties for all owners, including Carlyle and Citadel, will be substantially increased with the system fully operational across all partnership assets. Should this proposal be considered, People, Ideas & Objects is prepared to manage the subsequent marketing with discretion and confidentiality, pending receipt of the necessary contact information.

• Furthermore, our January 20, 2025 paper, titled “Reconstructing Oil & Gas: Enabling Engineers and Geologists to be This Century’s Pioneers and Lead the Industry’s Future," presents a vital challenge to the industry's technical professionals. For the sector to fully capitalize on the economic opportunities that lie ahead, it is essential that engineers and geologists actively engage and participate as producer firms, leading the charge in innovation and growth.

Investors 

The current climate in the oil and gas industry presents an unprecedented investment opportunity. A combination of factors has created a market of highly motivated sellers and affordably priced assets. Producers are motivated to divest properties for several reasons: the immediate need for cash after a prolonged period of scientifically-driven rather than financially-focused operations, the desire to mitigate personal liability risks associated with past fiduciary duties by distributing proceeds as dividends, and a clean break for new investors who wish to avoid entanglement with the previous leadership.

Simultaneously, new investors, such as hedge funds, are attracted to the sector's potential for significant returns. However, their continued participation is contingent on two key factors that have historically been absent in the oil and gas industry: profit reliability and liquidity. These investors are not fundamentally committed to the industry itself, but to the financial gains it can produce. Therefore, the ability to easily enter and exit positions is a critical requirement.

To attract this new wave of capital, emerging producer firms must design their business models to directly address these needs. We propose the consideration of innovative financial structures, such as creating asset-backed securities or securitizing working interests in properties. Furthermore, technologies like blockchain could be leveraged to enhance transparency and facilitate liquidity. Incorporating these elements is essential for new producers to succeed in this evolving landscape.

Engineers and Geologists: Seize the Opportunity to Lead

With renewed, multi-billion dollar investments from entities like Citadel and The Carlyle Group, the oil and gas industry is at a pivotal turning point. This new capital is not backing the old guard; it is seeking dynamic, innovative, accountable and profitable new leaders. This is a direct call to the engineers and geologists who possess the essential talent to develop, exploit, and manage these properties.

Investors like Citadel and Carlyle are focused on financial strategy, not day-to-day operations. Their participation in Joint Operating Committees is a temporary measure to secure assets at advantageous prices. They are looking for entrepreneurial leadership to step up and drive the future. They require new producer firms built on reserves preservation, performance, and profitability—firms that can provide a return on investment and potentially offer liquidity through mechanisms like securitization.

To facilitate this, People, Ideas & Objects is developing the Preliminary Specification, an ERP system designed to handle the accounting and administrative needs of an oil & gas producer firm. This tool will enable new companies to build on a foundation of transparency and efficiency.

The capital has already been committed. Now, the talent must rise to the occasion. The industry needs new producer firms, led by technical experts, to form immediately and build value for themselves and these new investors. If the entrepreneurial dynamic does not emerge to meet this opportunity, this wave of investment will recede. The mandate is clear: create agile, profitable business models and lead the industry forward. Let's not disappoint the investors again.

In Conclusion 

New producers in today's oil and gas industry face a critical choice. They can spend valuable time and resources slowly building investor confidence by demonstrating a newfound commitment to profit and accountability. Alternatively, they can immediately establish that credibility by adopting the "Preliminary Specification" and the inherent business models developed by People, Ideas & Objects, thereby signalling their commitment from day one.

People, Ideas & Objects has established itself as the authority on the profit-focused principles the industry must now embrace. We provide the standard, objective, and factual financial information that was sorely lacking when investors exited in 2015. The legacy of that era still burdens every new venture, and overcoming it is paramount.

While the current arbitrage strategy employed by investors provides a temporary window of opportunity, it will not last forever. This strategy gives the industry a few precious years to rebuild and establish profitable operations as a universal standard. The ultimate goal for any producer is independence, which can only be achieved through the sustainable funding generated by consistent profitability.

The road to becoming competitive in the broader capital markets is long. The industry as it stands is ill-equipped for that journey. The opportunity to change this dynamic is now, but the challenge is immense. For those ready to build on a new foundation, this is the best of times.