Change, Part II - Not So Changed

 As much as the velocity and trajectory of change are accelerating, some elements of the Preliminary Specification will remain constant. We would only consider changing something if it represented an improvement. This applies particularly to the reduction of overhead costs for both producers and Joint Operating Committees. People, Ideas & Objects, along with our user community, have dramatically cut overhead costs to mere pennies on the dollar, leading us to question why officers and directors so strongly resist our initiative.

We are not focused on minor adjustments to individual costs or contracts. Instead, People, Ideas & Objects is pursuing fundamental, structural changes that will yield significant benefits and outcomes. There are synergistic advantages, where improvements in one area enhance others. For instance, specialization and the division of labor are built upon the shared infrastructure of our upcoming Cloud Administration & Accounting for Oil & Gas software and service. Here's our approach to overhead:

Turn All Costs Variable

The reorganization and configuration supporting Cloud Administration & Accounting for Oil & Gas aim to make overhead costs variable, tied directly to profitable production. This enables producers to shut in unprofitable production, resulting in a null operation—no profit, but also no loss. This maximizes corporate performance, conserves reserves, and offers numerous other specific benefits.

Directly charging Joint Operating Committees for these overhead costs allows producers to include overhead in the current month's costs, which are then passed on to the consumer. As these are part of profitable production, the cash incurred to fund these costs is recovered within 30-90 days. Producers will no longer face decades-long waits to recover this cash, a consequence of their current policy of capitalizing most overhead costs.

As a result of these changes, overhead costs will cease to be a significant burden for producers. If a property is unprofitable, it will be shut in, and no overhead will be incurred. If a property is profitable, it will incur overhead and draw financial resources from the producers recurring monthly cash float established by using the People, Ideas & Objects Preliminary Specifications methodology.

Sharing of Accounting & Administrative Infrastructure

Applying Professor Paul Romers New Growth theory to oil & gas accounting and administrative infrastructure frees each producer from the need to build identical, non-competitive accounting and administrative capabilities. By consolidating industry resources and developing a single solution, producers can reduce their accounting and administrative resources and infrastructure, relying instead on our service providers through our Cloud facility. 

Our Cloud Administration & Accounting for Oil & Gas eliminates the redundant duplication of building the same infrastructure within every producer. We have reached a point where the IT resources are no longer available for each producer to undertake these tasks, where the financial burden has become too significant, and the task too complex for individual producers to manage. These are not part of a producer's distinct competitive advantage. Today, Cloud Computing is the only viable solution. As a related example, no one would suggest building their own infrastructure and capabilities for their own Artificial Intelligence’s Large Language Model’s (LLM) use. People, Ideas & Objects believe this same principle applies to oil & gas ERP.

Would any producer subscribe to an Exxon or Chevron-derived oil & gas ERP system? Our independence provides all producers with a standard, objective, actual, and factual accounting of their operations. This is essential. If a producer faces a property reporting a loss, they need to confidently know that all properties were subject to the same independent accounting criteria as theirs. Otherwise, production discipline will devolve into an accounting exercise aimed at boosting earnings, much as it is today.

Specialization and the Division of Labor

Producers have argued that our scope and scale are too complex and difficult. Yet, in making this argument, they fail to see that our scope is only marginally greater than their own. Our task is as substantial as their responsibilities and obligations. It is our scale that we need to address, and we are finding with these AI facilities that bigger is more efficient. The limiting factor is now the number of available natural gas turbines to power the cloud.

The configuration of accounting and administrative resources, as reorganized in the Preliminary Specification, presents a unique opportunity—one unavailable to any producer today or tomorrow, regardless of their size. Specialization and the division of labor are currently out of reach for most producers. They have been maximized to the point of diminishing returns; the greater the division of labor, the less efficiency is gained, as the volume of work within the organization does not justify the change. Low percentages of resource utilization diminish any benefits from task specialization.

However, by approaching the industry as a whole, we gain the transactional volume necessary to justify specialization and the division of labor, thereby realizing those benefits. Taking these advantages to our next category of automation and Artificial Intelligence, we see some of the synergies between these major categories in how People, Ideas & Objects reduces overhead and builds further incremental value.

Automation and Artificial Intelligence

We have discussed the benefits of automation in the highly specialized process management within Cloud Administration & Accounting for Oil & Gas software and service. It is reasonable to assume that the benefits from specialization and the division of labor will be substantial, and subsequent automation and Artificial Intelligence will be limitless in the short term—an empty canvas on which to build value for the industry and achieve the objective of People, Ideas & Objects, our user community, and service providers: to provide the most profitable means of oil & gas operations.

With discussions on how People, Ideas & Objects has adopted the high levels of automation and Artificial Intelligence embedded in Oracle Fusion ERP and their Database 26ai as a third, foundational justification for producers to support the development and implementation of the Preliminary Specification (as discussed in yesterday's blog post), there are many areas in the oil and gas industry where overhead costs are endlessly consumed. Production reporting processes are noted as the greatest consumer of all. Recall how our Material Balance Report (Podcast 32) and the subsequent automation of related processes are designed to address these issues.

A Conclusion

People, Ideas & Objects would strongly refute the idea that we are applying Oracle technologies for technology's sake to the business issues of oil & gas. That is not, nor has it ever been, our approach. We have consistently used advanced technologies to resolve business problems. We are not the ones who will tell you Windows 11 will make everything right. Oracle is using AI as a technology to solve business challenges, just as we are. The difference is stark, and it is the reason we are now adding their AI initiative as a fundamental justification for the survival of oil & gas producers.

Producers may report that all their operations are profitable yet still report corporate losses. If overhead costs remain as they are today, chronic and systemic corporate losses will continue. The magnitude of these changes introduced by the Preliminary Specification will reduce overhead costs to single-digit pennies on the dollar.

Let's assume, for discussion purposes, that the shared infrastructure of Cloud Administration & Accounting for Oil & Gas reduces overhead by 50%, which I would consider the minimum. Recall Adam Smith’s research at a pin factory, which yielded a 24,000% increase in production from specialization, the division of labor, and mechanical automation. What could intellectual automation yield in accounting and administration? Making all costs of the producer and Joint Operating Committee variable introduces an operational flexibility that People, Ideas & Objects believes should be welcomed.

It's easy to think these changes will make a producer profitable. I would beg to differ. They will help; however, the industry operates at a low level of competitive efficiency—a level that is unprofitable and far from competitive or profitable. It has a culture of "muddle through," which is anti-initiative and ingrained over at least 40 years. Hence, People, Ideas & Objects' much-needed rebuilding through the Preliminary Specification.
Drilling and producing is the only business model producers currently have. Accelerating their level of competitiveness to profitability will be an engineering and geological pursuit. Accounting and administration will serve in support, providing the much-needed understanding of what works and what doesn't from a financial and business perspective. The challenges of ensuring profitable, abundant, affordable, and secure energy are competitively produced are their responsibility.

We believe it's time for everyone in the industry to decide what their role will be in this rebuild.

People, Ideas & Objects Tactical and Strategic Changes, Part III

 The stink coming out of oil and gas indicates that the situation is ripe. It’s my belief that People, Ideas & Objects have put forward a viable and credible solution to the issues that are more than evident to everyone now. I have and will continue to be patient however, the time necessary for me to act definitely is upon us. The industry can’t afford any further time wasted. Our case has also been made as to what the contrast would be between an industry operated under the Preliminary Specification, our user community and service providers vs the current bureaucracy. We see today in the inactions of the bureaucrats nothing has changed. Their pursuit of consolidations, increased drilling activity, unauthorized clean energy transitions and the always hilarious “capital discipline” lasting for about a week is just more of the same. For the life of me I'll never understand why they consider that we're the bad guys for focusing on their profitability. As bad as it is, nothing will ever change. Therefore we’re changing it for them. From Forbes

The risk is that the surge in private shale activity overtakes the “restrained growth” narrative that has defined public operators since last year. Larger-than-expected production growth could depress WTI prices and hurt producers and oil services companies. 

Much of what the Preliminary Specification does is define and support the oil and gas producer firm, industry and service industry around the use of the Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the oil and gas industry. Joint Operating Committees begin at conception, to represent the partnerships that are systemic throughout the industry for the variety of reasons they’re created. All of the actions involving engineering and earth science of the producer firm actively recognize the Joint Operating Committee. It is the administrative and accounting that has deviated from this business to focus on the accounting, tax, regulatory and compliance issues of the corporation. It is here that the communication between these two silos, the business of the Joint Operating Committee vs the administrative and accounting within the producer firms, ceased to effectively communicate. I believe the aggravating factor in this separation was the introduction of computers in the 1960s. When they arrived it was asked what would / should / could be done with them. The answer was accounting, tax, regulation and compliance for the corporation. And the producers' two silo's separated further each year from there. The adoption of the cultural means of the industry, the Joint Operating Committee, within the Preliminary Specification provides us with an extensive and productive opportunity to redefine the future work that is done throughout the industry and to do so profitably, and in the real sense of profits.

Since the late 1700s the source of all value creation has been a result of the further specialization and division of labor. The efficiencies are endless and therefore the Preliminary Specification has implemented high levels of specialization and division of labor, particularly in our user community and their service provider organizations. We have also developed an enhanced industry wide ERP software development capability and capacity in People, Ideas & Objects. These capabilities and capacities will be able to further iterate on the subsequent expansion of specialization and division of labor to cure the gaps that are discovered in the course of the day to day of the user community and their service providers work, and fill them with new roles and processes. Filling gaps is the method in which specialization is enhanced, this is simply done when the gaps that are identified are subsequently filled with new processes and resources. However without a purpose built software development capability, driven by an active user community and an enabling user community vision in which to enhance the software, no changes can or will take place. The software must be changed first in order for any organizational change to be lasting through to the next change or iteration. When people seek to change the organization without the changes to the software first, they’ll fail and regress back to the methods defined in the current software process. This is one of the many reasons that oil and gas has failed to change and progress. Producer bureaucrats have failed to sponsor any activity in the ERP marketplace for at least the past three decades. Therefore the status quo bureaucracy remains unchallenged in their methods of management and incapable of dealing with the issues and opportunities that stand before it. The speed and performance of their organizations are incapable of dealing with their environment and are represented in the financial statements which accurately predict the producers imminent demise. If producers were using successful ERP systems would their businesses be so unsuccessful? People, Ideas & Objects suggest that it’s not enough to own the oil and gas asset anymore. Access to the software that makes the oil and gas asset profitable will be the critical value generating element of the oil and gas industry. 

Another aspect of our Preliminary Specification is that the overhead burden of each individual producer will be substantially reduced as a result of the changes we’re instituting. These changes are a result of the burden of the producers' fixed-cost, unshared and unshareable, administrative and accounting capacities and capabilities are reallocated to the variable-cost, shared administrative and accounting capacities and capabilities of the service provider organizations. Providing an industry based administrative and accounting capability that is variable in its cost, variable based on production. The other attribute we’re using to reduce the costs of administrative and accounting, yet increase the performance and quality of our offering, is to use specialization and the division of labor to do more with less. These two elements of the Preliminary Specification work to enhance the cost performance of the producers. We believe that overhead costs are substantial, and are another one of the reasons for the producers chronic unprofitability. We also apply the inverse logic of this principle in the area of software development. When each producer approaches the need to develop their own software the demand on the markets IT resources outstrips supply, escalating the costs of the resource. More importantly it is the unshared nature of this redundant spending on these costs within each siloed organization in areas which are not distinct oil and gas competitive advantages. The demands of highly specialized software developments are no longer a capability that can be attained in-house, we believe, by a commercially viable oil and gas producer. Therefore the Preliminary Specifications consolidation of the industries resources on one focused ERP software development in an objective, standard and compliant manner offers better functionality and capability at considerably less cost and higher quality to each producer.

There is a fundamental principle within the Preliminary Specification that governs how the producer will operate in the future. Essentially oil and gas will be operated as a profitable business. Novel concept I know. Bilking investors had a good run but Bernie Madoff is no longer with us. The legacy of his thinking remains in the industry and there will be no future investments made by any investors capable of funding the capital demands of the North American producers. Simply for the reason that there isn’t enough capital on the planet. The blog series in which we identified four new categories of incremental trillion dollar costs of paying for the unrecognized capital costs of past production, rebuilding, refurbishment and reclamation also need to be considered. The producers will need to prove they can be profitable in the real sense for at least a decade, and compete on the capital markets with all other industries before they can reclaim any renewed reputation with investors. Therefore People, Ideas & Objects believe the only source of cash large enough to satisfy the needs of the dynamic, innovative, accountable and profitable oil and gas producer and industry are the consumers who will have to begin paying for the full cost of capital, operations, royalties and overhead costs of oil and gas exploration and production with an element of real profitability. The bureaucrats have rightly interpreted this not only as the demise of their franchise but also as really hard work.

All overhead costs should be passed on to the consumer in the current period. Not stored in property, plant and equipment for a generation as it is today. If oil and gas is a capital intensive industry, does that not imply that the majority of the costs that will be passed on to the consumers will also be capital in nature? Currently all of the costs including overhead and interest of the producer are capitalized and stored in property, plant and equipment for as long as possible by the bureaucrats. This enables the CEO’s to compare who has the biggest balance sheet among their peers. “Building balance sheets” and “putting cash in the ground” have become the talking points throughout the industry. These reflect the disconnect between those that are operating the industry and reality. It is lunacy and they should look critically at why these ever became the objectives they each parroted to one another in perfect harmony for many decades.  

Cash is the hypercritical resource that never stays in one place for long in oil and gas. This is also the reason the investors were annually fleeced for another round of dilution of their prior years investments. The reason for the chronic demand for cash throughout the industry is easily understood if anyone were to apply basic cash management principles. Oil and gas bureaucrats operate a spending machine, money only goes out. The cash that comes in from the sales of oil and gas has to pay for everything each month. Nothing is ever returned. Producers are seeking to build balance sheets and put cash in the ground. Therefore none of these costs are being recognized in the commodity prices that are passed on to the consumers. Therefore these overhead monies are not replaced each month in the form of a “cash float” as it is known in business. For example overhead is capitalized to the tune of 85% on average across the industry. (Still waiting for evidence to the contrary.) Therefore none of these overhead costs, which include rent, salaries, Post-It-Notes, telephones, etc are ever recovered in the current period from the price of the commodity to cover next month's charges. These overhead costs represent the ever expanding, bigger, better, bloated balance sheet of the CEO. That’s their job! Therefore each and every producer has to start anew each month with the fresh challenge of finding cash to pay the light bill etc. Secondly when producers seek to capitalize everything to property, plant and equipment in order to emulate the value of the firms reserves, they’re not passing these capital costs on to the consumers. Therefore they are storing the cash literally in the ground. But then that is what they’ve been telling us. Cash goes into the spending machine. Needs to be reloaded with fresh cash from an outside source each and every month. I’m beginning to see why the bureaucrats have fought so hard to keep me quiet all this time. They either don’t understand what I’m saying, they don’t want to air their dirty laundry or they don’t want to get caught. I guess then I have one question. Why is it that we never see any details regarding the breakdown of overhead incurred in producers. Is there something in there they don’t want us to see?

While the investor watches the behavior of the oil and gas bureaucrat, causing them to nervously shuffle their papers about and begin sweating from simple questions such as what is it they're hiding? They may want to drop another quick question or two on them and ask. Why is it that they don’t use a first tiered ERP systems provider such as Oracle? Why have they stuck with the same systems that began in the 1980s and why is the Preliminary Specification, which is an Oracle based solution, the only solution being offered in the market? Where and what are the existing competitors proposing? Where are their solutions to the industry issues? A question for the vendors might be, since their product was being used in the market how is it, and why is it that the industry failed while using your product? Would the industry have failed if it had appropriate systems in place? And why is it that the industry does not have any tier one ERP systems provider implemented? Why would the bureaucrats, who I’ve alleged are operating a Bernie Madoff style of operation, want to have systems that have failed to make the industry successful? Why are they so satisfied with low quality systems and poor accounting practices? (Again this is not a comment on the high quality of the people who work within oil and gas.) Credibility is what the bureaucracy lost. People, Ideas & Objects provided a means in which they could re-establish their credibility in terms of real profitability. They’ve slammed that door shut on themselves. It’s now time to deal with that and that is what People, Ideas & Objects, our user community and service providers have done. 

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

People, Ideas & Objects Tactical and Strategic Changes, Part II

 In this the second part of a series defining the revised tactics and strategies for People, Ideas & Objects to ensure that the oil and gas industry will transition to the dynamic, innovative, accountable and profitable producer and industry we all need it to be. Patience has been applied, we’ve attempted to work with the bureaucrats, we might have said some things that offended them but so what, and even held out that we could be their best friend in light of the fact that they’re now in such legal jeopardy by not upholding their fiduciary duties. Using our car analogy to reflect the difficulties in oil and gas. The analogy being the car that was trailing oil for the past few miles, began steaming and then lost power. Parked at the side of the road, the owner tried to resurrect the forward momentum by using the battery to turn it over, which lasted about an hour. For purposes of this analogy that was approximately equivalent to the year 2015 in the oil and gas industry. It’s been seven days since the vehicle's breakdown and the owner's family are finding it more and more difficult to find the food and water they need to survive. They have the viable scapegoats of it being too hot and too far to travel to the next town and of course there is no reception. An aggravating factor is they’ve all had the flu this past week. Cars continue to pass on the highway but no one stops and even tow trucks looking for people to save, just pass them by. This family is hopeless and helpless and no one will stop or anything! This no doubt was OPEC’s fault. Other than muddle through there doesn’t seem all that much to do?

I could continue as the analogy to our good friends the bureaucrats never breaks down. “Muddling through” is a lifestyle choice that demands commitment. Just stay with the vehicle until someone rescues them. Conversely what do the producers expect to happen now? What’s their plan and will it work? 

The good news for the producers is that their share values have been rallying handsomely over the past six months. The reason why is an interesting question that we’ll no doubt learn in a short period of time. The week of March 8, 2021 established itself as the high point for our sample of producer firms. Covid has had a detrimental impact on the industry and for that there is no doubt. With the vaccines distribution, relief from the lockdowns and the resumption of “normal'' coming back into focus. This however doesn’t create any benefit for the producers. And just as the impact of the virus is waning across the globe, relief from the flu provided the same effect for our family over the past week they’ve been stranded at the side of the road. It didn’t solve their problem. 

Two of the kids in the back seat of the car decided they might be able to help their parents solve their problem and get them back on the road. One grabbed the playing cards while the other got hold of the checkbook. The first one, thinking that consolidation of assets was a good strategy, started distributing the cards in exchange for “assets” of the car. Representing each card as a share he started by buying the front seats and quickly moved on from there. The daughter began scribbling in the checkbook which caused a “feeding frenzy” between the kids as to who could consolidate the most assets the quickest. It soon turned out that the parents had acquired all the shares and junk bonds the kids distributed and ended up owning each part of the car that was sold. This provided the occupants of the vehicle with ample activity for the better part of each morning they were stranded. Eventually, in frustration the baby threw the cards and checks out the window on a windy day. Which began the kids' consideration of their next move in terms of financial engineering. 

What to do next in oil and gas? It doesn’t seem to be a question that is being asked across the industry today. Drilling is picking up and that is consistent with the actions of the great science experiment that involves acquiring land, drilling and producing, rinse and repeat. Bureaucrats will argue that this is the business and belittle the argument that accounting performance has nothing to do with the reality of the value they produce once they access those valuable oil and gas reserves. It is here that the cultural standoff begins between those that are running the oil and gas producers and the “accountants,” as we’re called. “Accountants should do their job, pay the bills and get on the bus with everyone else.” We are told. That those involved in the science experiment have not conducted any activity in the past four decades on the basis of a competitive operation, where financial performance was a necessary and primary criteria, is not relevant to them. When accountants bring in depletion costs and impairments they’re “non-cash attributes.” Allowing bureaucrats to convince themselves they’re not real costs, “they’re history.” That these costs were incurred as a result of the money handed to them from their investors is not understood or appreciated, and to account for that spending is something they have not done and will never do as far as they’re concerned. That was never part of the plan and they foresee no reason to change any of this. Eventually, as far as they’re concerned, investors will return and the industry will resume its way’s once more. Comprehension that the reserves that are revealed are useless and valueless if they’re consistently produced unprofitably is something that will not, and can not be heard or understood by bureaucrats. 

Let’s have a look at that plan and see how things are in terms of supporting it financially. During times of crisis it is considered prudent to survive in the extreme short term and to do so by not considering the cost of capital in the thinking of what is “financial performance.” The issue with oil and gas is that this is how the industry has been operated for the past four decades. Capitalizing every possible cost that is incurred by the producer and only recognizing the share of capital costs of production in relation to an allocation to the entire reserves base. Leaving as People, Ideas & Objects suggests an inordinate amount of property, plant and equipment on the balance sheet. This amount is in stark contrast to all other aspects of the financial statements and appears as a distorted figure that is not representative of the firm. We believe that it should be regarded as the unrecognized capital costs of past production. Therefore the industry has been operating in somewhat of a crisis mode by never recognizing the appropriate level of capital cost in the commodity prices it passes on to consumers. Instead storing these capital costs on the balance sheet on the basis of “building balance sheets” and “putting cash in the ground” as key corporate objectives. Producers now stand with distorted balance sheets that have become representative of the major issue in oil and gas. That being over reported assets beget equal amounts of over reported profits. Which attracts a disproportionate amount of investors creating over investment in the industry and subsequently suffering as a result of overcapacity and overproduction. In commodities that are price makers, such as oil and gas this overproduction has led to unprofitable prices being realized for 28 of the past 35 years. 

The overhang of assets on property, plant and equipment became a critical audit issue in 2020 for the producers across the industry. Will it be the same for 2021, or how about 2022. How does the industry deal with the legacy of this past that distorts their performance and is more representative of a culture that feigns it doesn’t know or understand the difference? Does it continue to accelerate the depletion and impairment of its capital costs to bring it in line with the market's understanding of what property, plant and equipment is? Or should they await the results of the SEC investigation into Exxon’s overreported asset allegation and potential shale producer review. If they do finally recognize these capital costs of past production the account of property, plant and equipment will come into line with the expectations of reality and can be relied upon as a reliable gage of the producers performance. It however will also eliminate retained earnings in every existing producer, if there are any retained earnings remaining today, and in most cases create a negative equity situation where the debt of the producer is higher than the value represented in total assets. Which begs the question what do the banks think of this situation? 

The majority of the producers would fall into the category of having debts larger than their assets once their unrecognized capital costs of past production are recognized appropriately. This alarms the banks and the regulators for two reasons. First the banks have clients whose leverage exceeds their lending criteria and demand that efforts be taken to remediate the accounts, write down the loans and seize their bank accounts in the most severe situations. More or less business as usual these past five years, only with a desperate sense of urgency on the banks behalf. The debts would then, and in some cases do so today, exceed the value of the reserves that are booked by the producer. Indicating to the bank their exposure exceeds what it is the producer would ever be able to generate and contribute towards the loan. I’m not a banker, but this may be a limit they’ll stop to think twice about crossing. When asked about these issues the bureaucrats will no doubt once again state that these are accounting issues and only represent “history.” Bureaucrats are correct about that however instead of calling it historical, I would suggest they think of it maybe in terms of legacy.

When questioned on the disproportionate valuation of property, plant and equipment the producer can make themselves a candidate for consolidation with another larger producer. This will restore the asset valuation as paper in the form of shares and Junk Bonds are passed about the oil and gas tycoons, much as the kids in the back seat did with the playing cards and checkbook. If they value the transaction for more than what the assets are listed at on the balance sheet, then those values will be what they’re recorded at in the consolidation process. Thankfully no one else in the world is interested in these assets otherwise the premium producers would have to pay would be so much higher. And to take the bureaucrats point of view this is all just accounting jibber jabber. The fact they’re spudding two wells next week in the Permian will be spectasmogorical. 

Performance is the purpose of accounting. The timing and accuracy of all costs incurred is what is sought by accountants. Performance based on falsehoods such as the over capitalization of costs will provide substantial value to an organization in its early years. They will be attractive to investors and appear to be doing well. The reality is that they’re poorly managed and the representations being made are lies and falsehoods, much as the situation we have today in oil and gas. A misrepresentation built upon earlier misrepresentations that are attempted to be concealed by further misrepresentations in the form of consolidations, as the current flavor of the day. Oil and gas overproduction in North America has been with us since at least July 1986. People, Ideas & Objects Preliminary Specification has been available since December 2013. The alternative answer to these is consolidation? Just as our family that’ve been stranded at the side of the road are unaware why they have no help. They’re heading into another day and see their shortages of food and water coming to an end. What will they have to do, abandon their strategy of “muddle along” and get out of the car? Or will someone finally save them? 

We should all thank OPEC. Recently they increased their productive output by 2 million barrels and have 5 - 6 million barrels of oil remaining to provide for our needs in the future. Relying on North American based producers for that deliverability in the long run is not going to be possible. Bureaucrats are unaware of the situation they’ve caused and are causing. They only concern themselves with their personal financial position. We can also thank OPEC for the stern warning in the article of The Calgary Herald of July 26, 1986. The one entitled “OPEC Minister Can See Economic Destruction” and “Return to Glory Days Unlikely.” They knew the results of what was being pursued in 1986 was not going to be productive and were concerned about it. It’s probably a good thing that North American producers were always so much “smarter and better than the OPEC Ministers” were in 1986 isn’t it? Is it that bureaucrats don’t listen, don’t do anything or both?

The issues are evident to most people that have an interest in oil and gas. The investors left in 2015 and I began gripping on this blog a decade before that. What is it that I know now, what is it that the investors are thinking and what do most people have to learn about the level of destruction that has been caused by these bureaucrats? I think one of the key takeaways has to be that shale will eliminate any opportunity for any boom or upside in oil and gas again. When prices begin rising the rapid increase from shale production is the immediate response. This has now become a market signal that soon additional production will be on the market and the price adjusts accordingly. Limiting any upside in the price of the commodities. This is known as an inherent part of the producers business model which is assumed not to be changing. Distractions in the form of bright shiny objects to occupy time, such as consolidation and the pursuit of clean energy will satisfy the media and environmentalists. No one will stand up and say anything to contrast the bureaucrats logic, only to be publicly persecuted, therefore nothing will change in terms of the bureaucrats actions. 

The level of devastation that I see within oil and gas is more than what has been experienced in any other industry that I am aware of. It has been made possible by the large cash flows from being a capital intensive industry. These cash flows have enabled the bureaucrats to continue their methods of “management” and have proven they’re only interested in their own personal financial compensation. Diversion of these cash flows towards clean energy is only the most recent viable scapegoat that draws attention away from their performance. These diversions are not consistent with the oil and gas investors original intent in establishing these producers. I believe they should be stopped and let the bureaucrats pursue their clean energy dreams as startups and feel the rush of having no revenues to rely upon. People, Ideas & Objects will continue to hold them personally accountable for these actions and ensure that it is known that this issue was prevalent since 1986 or earlier, that our solution was available in the marketplace in December 2013 and producers have done everything in their power to avoid addressing either the issue or the solution, but also the continued destruction of the industry under their watch. If it appears as if this is a design feature of their system of self aggrandizement, you’d be 100% correct. 

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

People, Ideas & Objects Tactical and Strategic Changes, Part I

 In a recent eight part series we documented how People, Ideas & Objects, our user community and service providers were structured to achieve success in oil and gas across North America. This may have been mistitled as I was not so much documenting how People, Ideas & Objects et al were planning on being successful, but how it was that we were structured to ensure success in terms of profitable oil and gas exploration and production. This new series is taking that thinking to the next level to discuss how we have amended our strategies and tactics to deliver that success to an industry that is in desperate need of real profitability. That’s currently managed by a handful of self interested and conflicted bureaucrats who have proven they’ll do nothing about anything, except their enhanced executive compensation. Why are we doing this, what’s changed and is today any different than any of the past decades these bureaucrats have been in control? Yes, things have changed dramatically, and this post will document the situation. This series will also document what People, Ideas & Objects are doing as a result of these changes, and we are now making recommendations to others to begin their own personal processes of change and begin the transition to the environment we are building.  

In granting the bureaucrats the honor of proceeding with the development of the Preliminary Specification People, Ideas & Objects were able to provide them with the credibility they needed to move forward with their operations. Many may feel I’m overstating my case here, that I’ve inflated my self worth. I don’t think so and it is not my intention. What I’ve done is patiently waited for them to act and it is through their inaction that the Preliminary Specification as a solution to today’s issues came into clearer focus. The contrast is evident, dramatic and obscene due to their inaction. Bureaucratic resistance to our solution only increased and there was never any consideration otherwise. Their issues have now fallen well outside the domain of anyone’s control. 

Thucydides’s ancient warning that “It is the habit of mankind to entrust to careless hope what they long for, and to use sovereign reason to thrust aside what they do not desire”

Victor Davis Hanson

I am looking at the landscape of the oil and gas industry from the point of view of the destruction that has been caused by the inaction of these self serving bureaucrats. Profitability in an industry is the only worthwhile pursuit in business and anyone associated with oil and gas over the past number of decades will understand that principle intuitively from this point forward. We should thank the bureaucrats for their real life lesson on such an important topic. Without profitability within the producer firms everyone suffers. The shareholders pursuit of earnings is the reason the North American economy is the strongest ever and has the resilience and effectiveness that it does. It may appear selfish and narrowly focused on those with capital however it works out very well for all concerned. And when it is corrupted as it has been in oil and gas it is an ongoing tragedy of unending misery. It is not me who is overstating my case; it’s the bureaucrats that have abused their position to the greatest extent seen in North America. If I speak of granting the honor and credibility to the bureaucrats that they need, I am only representing all of those that have been affected by bureaucratic inaction and their corruption. Every opportunity has been granted to bureaucrats since I published the Preliminary Specification in December 2013. And they have abused them all. This last opportunity was an overt calling to proceed with the Preliminary Specification under the “issue mitigated, nothing litigated” expression. This began on June 2, 2020 and has been a constant theme on this blog. Seeking to provide the bureaucrats with a means in which to avoid their personal risk of being sued for their inaction regarding the July 1986 documentation of overproduction, or unprofitable production, by North American producers that OPEC had sought to resolve. This issue has so destroyed the industry and has been present each and every day since at least July 1986. And the fact that the Preliminary Specification was published in December 2013 as the solution to that issue. Our good friends, the bureaucrats who are the members of the Boards of Directors and Officers of the producer firms, have sworn to uphold their fiduciary duties and are therefore culpable and guilty. 

I still have not spoken of the change that I see causing the revised strategic and tactical changes People, Ideas & Objects are implementing. And it’s not to keep you in suspense but there are many things happening and we will get to the triggering event in this post. However, there will be more posts in this series that reflect the other changes that have been made. First I want to start by stating the conclusion of these changes and then get on to the triggering event. 

The first change People, Ideas & Objects are conducting is that we are cancelling our program of “issue mitigated, nothing litigated.” Bureaucrats are no longer welcome here to proceed with the development of the Preliminary Specification. They have done nothing, and the fact is they will do nothing so there is no loss here on their behalf. Their pursuit of consolidation, drilling, their unauthorized diversion into clean energy and “capital discipline” are evidence of their plans for the future. This was their choice to maintain the status quo. Therefore it will from now on be known as “nothing mitigated, issue litigated.” There are consequences to inaction, all of us who are associated with oil and gas are experiencing that. It’s now time for those who are actively engaged in inaction to feel it too. Our December 4, 2020 blog post asked “Who’s Going to be the Bigger Fool” in the future? Will we be sitting here in five, or ten years with the same set of circumstances and the same viable scapegoats being parotted by these bureaucrats? There is no question in my mind that the question stung and the answer was and is a resounding “not me.” The game is up for the bureaucrats and no one is being taken for a fool anymore. It’s also at this time that I’m reminded of a Winston Churchill quote. 

You can always count on Americans to do the right thing - after they've tried everything else.

Who will proceed with funding the Preliminary Specification? To quote a famous politician “At this point, what difference does it make.” What People, Ideas & Objects, our user community and their service provider organizations need is access to the oil and gas revenues of the industry. Producers need to have some skin in the game. Otherwise we will fail as a result of a lack of their willing and necessary participation in the user community. They can not hand a critical aspect of their business off to someone else and expect it to be done appropriately. We also have no capacity whatsoever to provide any investor of ours with any means of a reasonable return or expectation of a return due to the destruction that has been caused in the oil and gas ERP market space as a result of past malicious actions by bureaucrats. 

In 2015 we saw the beginning of an investors strike that has continued and become a protracted issue for oil and gas. Producers had grown to depend on the annual stock offering as a means to literally pay the light bill throughout the entire calendar year. Dilution of last year's investors, and all their other investors, fell into the memory hole known affectionately as “history” by these bureaucrats, saying “don’t worry about it.” There is nothing more critical than investors abandoning management by walking out on them. The reason People, Ideas & Objects have had to be patient is due to the virus providing a viable scapegoat for the past year. But prior to that, a few years ago private equity and Warren Buffet saw an industry that was in pretty rough shape, in desperate need of some capital and rehabilitation. Warren Buffet made his “ultimate contrarian bet” as he called it into Occidental Petroleum and then promptly saw what obviously scared him to the point of quickly selling out of all his Occidental holdings. Private equity hung in there a little longer and have now exited the industry as well. Banks have extended themselves in the industry to the highest level they can tolerate. Producers working capital continues to evaporate. It is for the lack of a better saying, the end of the road for our good friends the bureaucrats. Maybe the Biden administration will help? From Forbes.

The demand for shale producers to become self-sufficient with less reliance on outside capital is intensifying.

The withdrawal of private equity, long a crucial investor in the shale sector, will take a significant toll on many shale companies, particularly smaller producers that lack strong balance sheets.

Why is it that People, Ideas & Objects, our user community and their service provider organizations are standing there, at the ready, hat in hand, offering our services in hopes that the bureaucrats who caused all this damage, do the right thing and fund the Preliminary Specification to save the bureaucrats personal empires for them? I can’t find a reason why we’re the last ones here in support of these despicable people. By supporting the bureaucrats and offering them the Preliminary Specification we are working at cross purposes to those who are the shareholders of the producers. It is the investors that we have supported and identified as the critical resource that the industry needs to guide it through these difficult times. Their actions, and their ultimate action of leaving the industry is fully supportive of what we needed to happen for our Preliminary Specification to become a reality. Profitability is the only criteria that is going to resurrect the industry and provide the financial resources for all those that have been so betrayed by the despicable self dealing bureaucrats. Why is it now that People, Ideas & Objects, our user community and service providers are actively betraying those that we’ve needed, wanted and indirectly participated with us in removing the bureaucracy. Our olive branch to the bureaucrats would have given them a life line that may have instilled another generation of their franchise with the caveat that they would have been able to “muddle through” more easily, and enjoyed the bounty of a truly profitable industry at the expense of those shareholders. 

What needs to be done is a purge of these people from their lofty positions and away from the producers check books. It’s time to choose sides in America, are you with the shareholders, which after all are John Q. and Jane P. Public, or are you with the bureaucrats? Corporate America who recently came out in favor of political initiatives that have nothing to do with their products or services profitability. Who’s corporate objectives have morphed into the Democratic Parties key issues of race and climate. To suggest they’ve lost the script is undeniable. It’s time for change.

The long and short of all of this is the declaration of total, irredeemable failure of the North American producers at the hands of the bureaucratic mismanagement. People in the industry who want to stay with the status quo are able to do so, and participate in the development of the Preliminary Specification as their long term career transition away from these failed organizations. Please follow the application process defined here and understand that the user community has always been considered to be part-time positions. The source of user community members long term value and day to day compensation is designed to be fulfilled through the service provider organizations you’ll need to develop. Don’t let the bureaucrats' disease of inaction infect you. 

We’re setting out the framework of two different types of producers in the oil and gas industry. The first type will be bureaucrat free and as a result successful and profitable oil and gas producer by using People, Ideas & Objects, our user community and their service provider organizations. The second will be an extension of what exists today in the slow process of chronic destruction. I see the bureaucrats as the chaos and we’re the opportunity. When bureaucrats find themselves alone, and not just alone but wrong on so many fronts, I’m not going to be their last good friend that’ll help them out. 

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

Speaking of Personal Best Interests

If the bureaucrats were smart. I know, I expect too much. They would want to extend their run at the helm of the producers. Then they could keep their personal circus going for a while longer. Not a bad idea, but how? Funding the development of the Preliminary Specification. That of course meets my personal best interest but I can assure them that they will also be able to keep their show going for a while longer. Here’s how. They can say they are doing something to remedy the situation in the marketplace! Action! Just what is required to pass through the next quarter and year end reporting process and solve the problem.

We’ve discussed before the difficulties that we are going to have if they try to pass through this reporting season, starting with this very difficult third quarter, without addressing the state of affairs in the industry. The situation is dire. The worst the industry has ever faced before. And there are no discussions, plans or ideas being debated anywhere on how to resolve the problem. Day by day our community grows larger and it is inevitable that at some point we are “discovered” by the marketplace and then what. The bureaucrats deny that they were aware of the Preliminary Specification? They need to remember the times that they hired other firms to steal the Intellectual Property that makes up the Preliminary Specification. That those attempts leave residual claims in the marketplace that provide evidence of the attempts by the bureaucrats.

I, unlike Mrs. Clinton, am not about to go deleting emails at this point. These are too valuable. The point is there is a record that exists regarding the Preliminary Specification in the marketplace. Although not mainstream, it is known. Attempts to state that they were unaware of the ability to implement a price maker strategy isn’t going to sell for too much longer. And unlike Mrs. Clinton, these bureaucrats may not be able to lie like a sidewalk, particularly about a previous lie. Speaking of honesty, what personal best interests were assured to the investors when they took their money? Just asking.

The tone of my argument has taken on a rather nasty perspective. And that is when I started writing this blog ten years ago. Lately I find I’ve found my voice. If you’re a bureaucrat and find this unkind I suggest you don’t pick up the phone in the next six months. The Internet has enabled people to voice their concerns with those that hold power in society. Nothing wrong with holding the power in society, as far as anyone is concerned, you just need to be accountable. There is some accounting that needs to be done in the oil and gas industry. Just as John Boehner thinks he can hang on for the next month or so, our friends the bureaucrats will see the hostility that exists in the marketplace. They’ll want to return to this blog for some civil treatment.

I can’t decide which would be the more appropriate at this point in time. Would it be a salty or sweet snack? I'm glad I have a front row seat. This is going to be one heck of a good show. I don’t think that we have seen anything of the scope and scale that we are about to see. The 2008 financial crisis was no fun because it scared everyone half to death that the paper they were thinking was useful might become redundant. Spooky. This one is going to gouge the bureaucrats from their most comfortable positions in the industry. That is what I would suggest, unless that is they’re smart, and proactive.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Bureaucrats Have Made Money

To understand what’s in store for oil prices we have the situation in natural gas to show us the way. For almost six years the bureaucrats flooded the marketplace with unprofitable natural gas production. Losing progressively more money each fiscal year as they went along. The response was to cut capital expenditures to balance the markets supply and demand. Each of those six years cuts to the annual budget were made. Natural gas is now at $2.50 and costs many times that to produce. In areas like the Marcellus shale they are lucky to get a $1.30 for their production. You have to remember that the bureaucrats are paid out of the money that comes in from general revenues. So they can’t cut off the hand that feeds. And who cares what natural gas prices are, there is nothing that the bureaucrats can do about them. So they state. Has anyone noticed the level of discussion in the industry about its current situation is a little frightening?

We discussed the decline in natural gas prices that will happen as a result of the continental storage filling to capacity in the next few weeks. We have some more news that should hit the natural gas prices here immediately. It would seem that all of the international LNG contracts are priced based on a factor of oil prices. With oil prices down, it doesn’t make economic sense to ship LNG from North America. The cost to purchase the gas, liquify it, ship it and return it to a gas is beyond the price in the destination countries. This is what I mean when I state that the bureaucrats are not taking care of business and as a result we risk losing the capacities and capabilities of the industry from a societal point of view. The investors who were committed to building the LNG facilities were told they would be making money. But just as in all things oil and gas, only bureaucrats make money.

This drop in demand from the LNG facilities, and inability to make any money will push natural gas prices lower yet. Making the industry more difficult to turn around. If it has been six years in natural gas, that means we have five more years in the oil side of the business before we see this kind of destruction. And with these bureaucrats, their sense of urgency, you know we’ll get there. In the future getting the investors to follow the industry is going to be next to impossible when all they did was lose their shirt. All I see is devastation. An infrastructure that doesn’t provide any value for anyone. A history of losing money for years on end in terms of the shale technologies impact. All of that natural gas has gone to waste in the form of a large subsidy to the consumers at the expense of the investment community. No plans, no ideas or worries from the people who manage the industry. Just carry on losing.

When the bureaucrats ran me out of the industry for my ideas. They knew what the implications where if we implemented them. The elimination of the bureaucracy. They laughed and enjoyed themselves in their turning the screws and making my life miserable. Sure is funny now isn’t it. They’ll have to live with the fact that they had made the decision not to go with my ideas more than eleven years ago. If they would have, the industry would have had the price maker strategy implemented and oil and gas prices would be profitable for all of the oil and gas production. However, now they do have their cabins and boats to keep them company. So there is that.

No doubt all the silence is attributable to the plans that are being made for the mass layoffs that will be announced around Christmas. The investors are not going to want to invest in a business that never pays. People are never going to want to come back into an industry that when it finds itself in difficulty it lays people off like it was 1920. They’ll move on to bigger and better things. Something more reliable. And so the seeds of the destruction of the industry are being sewn by these selfish, corrupt bureaucrats who had the chance to do the right thing. It only conflicted with their personal best interests.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Where's the Outrage

We have focused on the situation in oil and gas and most particularly its difficulties. As I pointed out the responsibility for this downturn in the industry is fully attributable to the bureaucrats that run the industry. Shale formations have brought about a new dynamic of abundance of the resources. There has been no response to this change in the underlying business. With these bureaucrats being unresponsive to market signals. When prices do go up, what's to say they just don’t sit on the production they have and just pocket the booty? The attributes of one’s character can help to determine what their future actions will be. Therefore, since this is the past character of the bureaucrats, you can take it to the bank that they will use any increase in the price of the commodities to line their own pockets. Leaving the industry to perish and decay as we’ve discussed earlier.

The question I guess we have to ask ourselves then is there anything that these bureaucrats are going to be able to say and do that will convince the investors, any investor, to invest in the oil and gas industry in the next, 5, 10, 15 years? Investors have been on strike, more or less, since 2008. Alternative means to fund the industry have been used since the financial crisis to finance the shale boom. It could be argued that the junk bond market is no longer available. The attitude of the oil and gas investor is consistent with mine, I would think. A general disheartening of the bureaucrats in power. A lack of faith in their capabilities, trust and integrity.

Since the financial crisis governments have taken great steps to intervene in the monetary markets with their over the top stimulus measures. Instituting a zero bound interest rate policy has removed any integrity or discipline in the financial markets anywhere in the world. These oil and gas bureaucrats have had the luxury of being compared to the performance of other industries that are about as capable, trustworthy and of low integrity. Performance has not been the concern of anyone in any industry. It has been about survival, dividends and stock buybacks.

Global market volatility is rising as the world prepares to move away from the zero bound interest rates. That means the oil and gas industry will be expected to perform in order to obtain any investment from anywhere. Compete when interest rates on bonds are paying good returns. Compete when other industries can provide real returns on investment. It was easy for the bureaucrats to get away with the low performance and slack attitude during this zero bound interest rate period. Now it will be expected of them to compete.

I don’t think they care. If interest rates do go up it will affect the value of their stock and that might impair some of their compensation. But not materially. What can be counted on is when oil and gas prices do go down from an abundance of production, they will inevitably go up. That time could come quickly and they, the bureaucrats, would be able to enjoy the lifestyle they grew to enjoy as recent as one year ago. The trick will be not to fall into the same difficulty again by spending on drilling which would lead to overproduction and commodity price declines. If we don’t respond to market signals now, we certainly won’t begin to respond to market signals then, they will say.

All of these ingredients are in place. We are subjecting ourselves to an uncaring and unaccountable group of self interested people who feel they are entitled. Why would they change this situation? Put yourself in their shoes, it's not a bad situation to find yourself in, and who has the wherewithal to do anything about it?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

History Repeats Itself

“The history of every civilization teaches us that those who do not find new means to respond to new challenges will perish or decay.” President Lyndon Johnson 

I’ve read Roberta A. Caro’s four books on Lyndon B. Johnson. These books represent a lifetime of research and detail in the man who became the President of the United States. You will know everything about Lyndon B. Johnson when you have read all four books. There is a fifth that is being written at this time, Caro is uncertain, at 79 years of age, if it will be finished. Knowing Lyndon Johnson through these books I’m not pleased that I find myself quoting him here. However it is such an appropriate quote to the time and situation that we find ourselves in.

Oil and gas has more to do with the quality of our lives than any other “thing” that I can think of. We put in jeopardy that way, that quality of life, when we ignore the challenges that the industry currently finds itself in. It is our history that we are doomed to repeat. The difficulty is that we are travelling at a much higher altitude with much higher velocity than at anytime in our history. I would suggest that the decay will be short lived. Perishing would come quickly.

Maybe I’m being too melodramatic. Industries have transitioned in ways that have appeared seamless to the average consumer. Which is true, no one remembers or even really cares when the record store manager lost his job. The technology was there to provide you with the music that you wanted and you were finally able to use it the way you always knew you should. Our problem with the oil and gas industry is the technology we need to use is right there in front of us. It just doesn’t fit on an iPhone and work within just one app. We need the software development capability and user community to ensure that the software meets our needs and the services to support the software. A big budgetary obstacle that stands in our way.

We used to be able to rely on what the economists called “spontaneous order.” The economy would act dynamically as people and companies would automatically fill in the gaps left between various companies offerings. These gaps, in the past, could be filled by entrepreneurs who were able to see and configure solutions out of their own financial resources and provide these products and services to their community. Now it's a global economy and software demands that it be the first item to be delivered into the marketplace. This is why Apple, a software company, is so successful. Now not only do we have to understand the global scope, the software nuances, but also undertake the battle of the vested interests who are entrenched in the old ways.

I hope I’m wrong about all of this. I think the speed of events, if left unaddressed, will accelerate exponentially. The momentum will move against us and we’ll never get the upper hand again. We stand on the shoulders of many brilliant people and pay no respect to the things that they have brought us. The fact of the matter is that there are 5,000 man hours of labor in every barrel of oil. If we allow the industry to proceed in the manner that it is, it will certainly decay. Who will volunteer to give up the first barrel of oil. The economy that consumes the most oil is also the most powerful economy. That has traditionally been the United States. Therefore it would seem reasonable that they were the first to give up that first barrel. I don’t think so either.

Clearly the market forces are not working. Oil and gas producers have not responded to natural gas prices in over five years. And oil is following down that same path. What we have are self interested bureaucracies. Just as the former Soviet Union was unable to respond to any market, we currently are not much better. If we are not responding to market signals when there is an abundance of oil, should we now assume there would be a response by these bureaucrats to any market signal denoting a shortage? I don’t think so. After all it would only provide them with more cash which they can then divert to the various forms of compensation that they have so richly provided themselves. These are the facts of an uncaring and unaccountable oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Some Miscellaneous Items

A Subdued Stampede

The Stampede in Calgary is as much of a corporate event as it is a tourist attraction. We welcome the tourists each year to what we call the “greatest outdoor show on earth.” And as a visitor, I can only assume they have a good time. The town transforms itself into one party city. I for one have looked upon Stampede as a time to let loose and enjoy the weather and the festivities. This tradition has been upheld throughout the city since the beginning of time. Well over the past 100 years, our big flood of a few years ago, gave it the appropriately named “come hell or high water” as the theme. That flood was the countries biggest natural disaster, happening one week before the big event, and it didn't slow this town down. Apparently this year we will witness what does slow the Stampede down.

Cancellation of corporate events is the name of the game in town. It would seem the oil and gas industry wants to send a message to the new government that they are not happy with their plans for a revised tax and royalty regime. Since when did the bureaucrats concern themselves about the business of the oil and gas business? Optics? It doesn't look good to be partying so hard when the people need to be told that their choice in government doesn’t sit with them. So instead of partying, everyone will be present at their desks for the entire Stampede. No corporate breakfasts or festivities. That'll send the message.

Its one thing to sit down and make representation about how the industry is having difficulties financially. To engage the government to advise them and educate them about the industry. The New Democrats are now running a $40 billion government with many of the cabinet ministers never being responsible for much more than their local communities budget. A little help and encouragement might have been the appropriate direction. Particularly their leader Rachel Notley is of fine pedigree and seems capable and approachable. These bureaucrats however have fallen into their classic pattern of attack and bully to make it as difficult for everyone, and the bureaucrats importance is the key and only issue.

These bureaucrats don't concern themselves with the business unless they can exercise some real public relations value out of the issue. By ramping down the Stampede festivities they attempt to destroy an annual tradition so that they can look good in the eyes of, well I don't know who will buy in to the BS, or who will give them credit for being prudent about the business. If they were really concerned about the business they would be focused on our $45.7 trillion value proposition over the next 25 years and how they can make that real. Not in punishing everyone during Stampede week.

The Cloud Paradigm

Amongst our distinct competitive advantages, the cloud provides us with much value over the traditional decentralized IT infrastructure. Today, each producer is tasked with the needs of developing, maintaining and operating their organization with the IT resources afforded by their budgets. This may have been easier in the past when the organization was less dependent on IT, and when the IT infrastructure was less robust and mature. Now with so much dependent on these technologies the ability and capability to have the skills, talent and resources housed within the producer organization are exceeding the budgets that are provided to these departments. None of this activity is within the domain of a producer's competitive advantage of their earth science and engineering capabilities, or land and asset base.

Maybe the best example of this is in the area of security. Where cyber security has become the issue of the day and is occupying many hours and days within a producer firm. Each producer is having to spend this time and effort to ensure the firm's data and resources remain secure. Each producer is undertaking the same tasks and activities to ensure their systems are safe. With the cloud, or more specifically with People, Ideas & Objects, producers will be able to rely on the efforts of our software developers, our user community and the service providers to provide this security. By aggregating the resources of the industry we are able to focus our budget on items such as cyber security and devote more resources to the issue than what a producer can. This centralization theme works most effectively in our key competitive advantage of providing the oil and gas industry with a software development capability for the long term. A capability that will enable changes to be made in the business model when and if they are required.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

It's a Confidence Game

Last week we briefly discussed the levels of intervention by governments in the banking business. There are estimates that over $22 trillion in support has been used in various quantitative easing programs and other forms of fed policy interventions. You would think that after almost seven years the problems that caused the great recession in 2008 would have passed by now. Why is there a continued high level of government involvement in the financial industry? I think that the confidence of the average person in the financial marketplace was shaken to the point where there was question to the viability of that marketplace. Were my investments safe? I can recall many people liquidating their portfolios and not trusting the integrity of the system itself. Restoring the confidence of the people in the viability of the system is the effect that the fed governor and their European and Japanese counterparts are trying to achieve.

We also hop in the car for a cross country trip every once in a while. Expect to fly to wherever as soon as possible. And see the seasons change with little thought to how we’ll keep warm and dry during the winter. We are confident people. And it is this confidence that provides us with the ability to experience high levels of Gross Domestic Product on an individual basis. Our quality of life is very good. And unlike in the banking industry nothing could happen to shake that confidence and put in jeopardy our way of life. Maybe it's in our nature to realize the downfall of our ways and means before we begin to appreciate them. That to solve problems proactively is unnecessary and subject to the whims of the ridiculous. I could certainly agree with that.

If it takes at least seven years and $22 trillion to fix the confidence in the banking system. And it doesn't seem that we are that close to declaring victory there. How long would it take if people lost confidence in the ability to rely on the oil and gas industry if those capabilities were suddenly removed and put into question. Would people be able to just carry on? Reduce their demands and proceed as they were? In California in the 1970’s we saw the successful implementation of gas rationing throughout that state. In a novel implementation, those with even numbered license plates were allowed gas on alternate days to those with odd numbered license plates. And except for the lines that were very long at the gas pumps, and the fact that those pumps were emptied relatively quickly each day, the rationing was a screaming success!

We should give a thought to our friends the bureaucrats in this scenario as well. What will the likelihood of abundant marine fuel be at the cabin? We saw last Wednesday half of Cenovus’ leadership team announced their retirement. Now I ask you, who would have thought that that might happen? Wholesale losses of the leadership team! Bureaucrats don't abandon ship when the going gets tough! I think we should expect to see the rush to the doors begin in earnest now. Who really wants to stick around and clean this mess up? If you note in the Cenovus press release there really are no replacements. No one to replace the Executive VP and COO of the firm. A coveted prize of the energy bureaucrat.

And those bureaucrats that are not ready to retire will be seeking their fortunes in other industries. You really can't quantify the level of inertia that is needed to overcome the bureaucracy in these producers and make the necessary changes. It saps the energy out of even the most ambitious. And that is why we need to start with a blank slate. Something like the Preliminary Specification where people can begin building the future of the industry so that we can confidently move forward in society.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

I Know, It's Ridiculous!

We have now entered the phase in which the bureaucracy have become untouchable. Annual report and annual general meeting season are over. Accountability is no more. As I mentioned the other day, thoughts move to the cabin and the pension benefits that will be earned over the next nine months of relative stress free living. Has anyone noticed that the level of discussion in the industry regarding the situation that it's in is non-existent! And isn't it odd that the “strength” in oil and gas prices seems to have abated. What to do? I guess one could join the crowded highways and enjoy the summer months with the bureaucrats. Or, depending on your point of view. That is if you agree with the points that I have made here before. And you are an investor in oil and gas, or are a potential user community participant there is much that we can do while the brain trust parties the summer away.

It is ridiculous to expect that our budget will be funded. Just as it is ridiculous to think that the bureaucrats will change and fix the problems in the industry. And just as ridiculous to think that the ridiculous tens of trillions of dollars of our value proposition will come about without the Preliminary Specification. And so here we sit and wait for that one unhappy individual that realizes that as ridiculous as all this is. Someone has to pull the trigger and fund these developments before it's too late. Too late being the bureaucracy find the pension benefits too healthy and the cabin too comfortable to bother with accounting for their actions three months of the year and retire. Then there will be no one and nothing in which to operate the industry. But that is a ridiculous assertion.

All of this doesn't seem too ridiculous to me. There are a large number of people who read these words each and every day. Some may be doing it for entertainment, others may agree with the ridiculous nature of the problem. In most cases they may be living with the difficulties in the oil and gas producers and know that there is a better way and see how the Preliminary Specification can help to solve those issues. They also know that their careers are not going anywhere with the status quo and are stuck in an unchanging environment that is unhealthy for all concerned. It is these people that the Preliminary Specification appeals to. And it is these people that I see as the potential market for the user community participant.

The banking crisis that we experienced in 2008 was evident to everyone, everywhere for many years. Watching house prices rise to levels that no sane person would want to participate in. Having mortgages for those houses being issued to people without full time work, or liar loans as they were called, and then having those mortgages “securitized” and sold to “willing” investors was a bad business model. Then they took it the level of creating synthetic derivatives of mortgages. And thats when people really began to make money. Anyway we all know the history and the fact that the banks are still not able to stand on their own without massive, unprecedented fed stimulus. Which has become about as normal as the summertime commute to the cabin.

The business model of the oil and gas producer is no longer functioning to provide any value to anyone. Except the bureaucrats. They need to keep full production to ensure that they can cover their salary, benefits, pensions and perks. Outside of that who cares what happens to the industry. The problem is that there is no fed to flood the market with deliverability if the oil and gas industry fails in the manner that the banks did in 2008. There is no “adult” supervision. There is only the energy that we depend on for everything that we are. But then again, in a very big way, that too is ridiculous.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Career Risk for the User

Members of our user community have exposure to significant career risk as a result of being associated with People, Ideas & Objects. The bureaucrats have identified this project as being counter to their best interests. That is because we are working diligently to remove the bureaucrats from the landscape in the oil and gas industry. Therefore anyone who would be clearly identified as being associated with this project would be subject to the same warm and fuzzy feeling that I get each day from our good friends. Therefore the people who are associated with this project are kept confidential and are not exposed for any reason. Their career risk is significant and not something that can be mitigated. The bureaucrats, like elephants, have long memories.

This is also the key reason that our budget needs to be funded in its entirety. No one is going to commit to the level of career risk necessary to make this project viable without a viable going concern in which to move to. Since the only way that People, Ideas & Objects can be a viable going concern is to have the software developed, the user community developed and the service providers organized. The budget to bring those resources into being is necessary before we will be able to solicit the numbers and quality of user community participation to make this project a viable going concern. Classic issue in a modern manifestation.

To expect that people would volunteer for a project such as this is something that the bureaucrats would expect. They sit on a primary industry where the revenues are generated from oil and gas. And look down their nose at everyone of the tertiary industries that depend on the oil and gas industry for their revenues. What the producers need to begin to realize is that the ability for them to generate the oil and gas revenues depends on the members of the tertiary industries. Their behavior of turning on and off the tertiary industries revenue stream when oil and gas prices are up or down is a detriment to their own best interests. When prices were high they complained bitterly that the service industry was lazy and too expensive. Now with the prices being low they can't cut the flow of funds to the service industry fast enough. What will be the bureaucrats complaint next time oil and gas prices are high and people don’t want to work in the cyclical oil and gas industry? You really do reap what you sow.

The bureaucrats also have the attention span of the current quarter’s financial performance. Our project unfortunately spans a few of those quarters and therefore will be subject to the wandering minds of the bureaucrats. If we proceed on a pay as you go basis, once we are in full software development mode, the bureaucrats attention will no doubt turn to other “more pressing issues” and cut the funding to this development. Our ability to recover from a funding cut and resume developments would never exist. Its different when you have a physical asset like a drilling rig as the asset that you can idle for a few months. Our asset is our user community and software developers. Their Intellectual Property. Once this is stalled, it can not be restarted in my opinion. Therefore we must have the entire budget funded before their is any development work done.

The point about the boom / bust cycle and its impact on the service industry is something that we address in the Resource Marketplace module of the Preliminary Specification. There has to be a means in which the service industry can rely on the oil and gas industry to fund them. This method of turning off and on the taps is causing too many difficulties in terms of the service industries ability and capabilities that the oil and gas producers need. A dynamic, profitable and innovative producer needs to have the service industry innovating at the speed at which they are innovating. It doesn’t help to come up with the next great earth science innovation when all the rigs are idled, or, when all the rigs are contracted and you can't find a qualified crew. Tomorrow we will discuss the Resource Marketplace module in more detail in our “Our Solution” series.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.