How Will People, Ideas & Objects Achieve Success, Part IV

Environmental scientists have yet to determine the cause of the approximate 1.5 million Texans without power at 3:00 on Monday morning. Their commitment to return the planet to its pristine condition is unshaken even at the long term risk of people starving and freezing to death. It’s science! And yes they are blind to it. In related news Vladimir Putin has choked off gas deliverability into Europe as they experience similar “winter weather.” Sending natural gas prices in Europe to >$20.00. For those bureaucrats who may still be listening this may be called collusion. Artificially and unjustifiably holding back deliverability will never be accepted, that is collusion and not the answer. Managing inventories of products based on profitability as provided by People, Ideas & Objects Preliminary Specifications price maker strategy, our user community and service providers is just good business. The fact that our good friends the bureaucrats are unable to discern the difference between the two is only evidence of their corruption, in my opinion. At least their prayers for a cold winter have been heard.

The discussion to this point has focused on the areas that we will have somewhat under our control. The success of this initiative, once our budget has been secured will be a difficult task and we are not belittling the scale of difficulty that needs to be undertaken by our user community and service providers. We however do not in any way question their motivation, skill or desire to succeed in doing so. What appears to motivate people the most is taking the industry away from the chronic boom / bust cycle that is assumed to be a “necessary” part of the industry and why they have to sacrifice so much to work in the industry. Not everyone maintains a tolerance for risk throughout their career and over time they learn that the bad times are what define your career and management philosophy. “Muddle through” begins to make sense and becomes accepted for survival. Unnecessary but you need to survive. How is a decades long, steep, downward trajectory ever acceptable? The vision of the Preliminary Specification and the opportunities for the user community and service providers allow people to see a different vision for the industry. One where “muddle through” is not necessary and a dynamic, innovative, accountable and profitable industry needs to be rebuilt from what exists today. The need to do so is evident due to the level of damage that has been experienced and the lack of any action bureaucrats have conducted over the past dozen years of accelerating decline. This new industry vision sees people being the critical resource in making things happen in order to ensure that real profitability is achieved everywhere and always, and it is they who’ll make the difference. A complete inverse of the industry's culture as it exists today. One in which people will be able to seek out a worthwhile career, family and mortgage without the inherent risk of bad management subjecting them to the chronic waste of “muddle through.”

My concern here falls in the area regarding the producer firms. Their behavior and participation in the development of the Preliminary Specification must change as much as the people who are moving to the user community, and those who will eventually move to their service provider organizations. We know as a fact that organizations do not change, people do. Therefore the people mentioned in the first paragraph will be successful and the unsuccessful producer organizations will? More than likely continue on with the same culture. Although we should be relying on disintermediation, creative destruction, serendipity, spontaneous order and other economic principles that have renewed and refreshed the North American economy when the old just isn’t doing it anymore. Our two key difficulties in seeing any of these take effect are the capital intensive nature of the oil and gas industry, and the bankruptcy process being adopted as key to the foundation of the “muddle through” business model of the North American producers. These two attributes of the bureaucrats' toolkit have enabled them to continue through the past decade with business as usual and have never forced a day of reckoning. The exit of the investment community is well past five years and there have been no remedial actions contemplated or conducted to deal with the producers issues. What issues, bureaucrats would ask? This has become an untenable situation for everyone in the oil and gas industry. However it is much worse than that. Oil and gas is a primary industry that depends on the secondary and tertiary industries who in turn are solely dependent upon it. It is those primary industry revenues that the bureaucrats have diverted, the cash flow from the previous high levels of capital investment, into their own pockets. Destroying everything else associated with oil and gas. As long as there will be enough cash to fund the personal desires of the C suite and board needs, that’s all that matters. The culture of the industry as a result of this “muddle through” is to do nothing. 

I could have just quoted the definition of “bureaucracy” and provided just as much information. My concern is this culture that has been evident to me since the mid 1980’s. That was when the capitalization of high levels of overhead had become accepted as the status quo. This was therefore applied to the horrendously high interest payments due to the high interest rates that were present in the marketplace as at that time. I began this adventure in 1991 due to the inappropriate culture of doing nothing and the inability of producers to shut-in production to deal with the overproduction in the market. Overproduction that we’ve documented began at least as early as July 1986. How does one deal with this culture? Moving the administrative and accounting people into their own service providers will be an effective means of change. However the culture in the organizations of the producers is otherwise fixed and I am unaware how that changes without other wholesale changes in the makeup of the industry. 

I’ve proposed the reason the way things are the way they are is also a result of the adoption of computers in the 1960s. When producers began acquiring them the question was asked what can be done. Accounting was one of the first constructive attributes, tax, compliance and process management came soon after. Eventually the corporate perspective became filing the right form at the right time to the right regulator on the right colored paper and the Joint Operating Committee which is the business of the business faded into the background. The Joint Operating Committee provides the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the industry. The Preliminary Specification moves the compliance and governance frameworks of the hierarchy to be in alignment with the seven frameworks of the Joint Operating Committee which provides the producer firm, or however we want to describe the working interest owners, into an alignment of all of its frameworks. Generating a speed, innovativeness and profitability that we seek in the industry.

The answer to the question of how we overcome the culture may come about as a result of the Preliminary Specifications change from the corporate focus, as I call it, to the direct support and definition of the Joint Operating Committee. What I’m getting at here is that we can now look in a comprehensive way at the oil and gas industry differently. That it now consists of a decentralized pool of working interest owners involved in the direct ownership of their interest in the Joint Operating Committee. Organized, managed and provided through their use of the Preliminary Specification. Where the approach within the industry is that a property is a property, is a property. Where the accounting and administration are handled in a standard, objective manner whose costs are included in the Joint Operating Committee that is either always profitable, or shut-in creating a null operation. Where their earth science and engineering capabilities, if they desire to build that competitive advantage, are pooled with the other Joint Operating Committees working interest owners to manage the properties technical production and future development. Where the Work Order system of the Preliminary Specification ensures that the costs of these earth science and engineering efforts are charged directly to the Joint Operating Committees, and therefore reduce their corporate overhead burden, or should be seen as a second source of revenue for the producer who provides these services to their working interest partners or to other Joint Operating Committees on a consulting basis. 

What People, Ideas & Objects have objectively done is written a letter to the producer bureaucrats that would have gone as follows. “Dear Mr. Bureaucrat, you are disintermediated and redundant.” And that is rightly how they’ve interpreted the 200,000 words of the Preliminary Specification. The reason that I’ve effectively sent that letter is they’re unable and incapable of dealing with the speed of business today. They are unable in a comprehensive fashion to deal with the issues they’ve created which is causing the terminal demise of their organization and the industry itself. Solving these issues is why the Preliminary Specification has earned the push back that we’ve experienced. 

Parsing the producer down to its properties is the natural process of destruction of the culturally constrained, bureaucratic producer. Decentralization of business is an element of disintermediation. Consolidation is an element of the bureaucrats' survival. With the Preliminary Specification we have decentralized the industry down to the Joint Operating Committee of which there certainly are many of. Many contain only one well. Some would say correctly that we’ve decentralized the industry down to the individual. Which I think is valid and concur. However bureaucrats argue that the level of sophistication and organization necessary to do what is suggested in the Preliminary Specification is beyond what can be achieved. Which in the context of a bureaucracy is true, however for software it’ll be its purpose. 

To consider there is nothing of value left to reclaim in the producer firms is not what People, Ideas & Objects are asserting. What we are saying is that we can rebuild it from here without the bureaucratic culture that exists today. These organizations are cleared of their value, incapable of recovery for the reasons I’ll point out next in this post, a drag on society and through the process of repeated bankruptcy, only continue to serve the bureaucrats who are directly responsible for the destruction. Facing a steep wall of escalating rebuilding, refurbishing and reclamation costs without a plan or understanding of the issues. We don’t need and we certainly do not want to constrain ourselves with the culture, bureaucracy or organizational constraints that exist today in the process of rebuilding the industry. There is a better way which fits appropriately within the successful manner we propose and are detailing here. Oil prices are rallying as a result of the vaccines and the efforts of OPEC+. I’d caution bureaucrats to not get too excited as there are 7 mm boe / day in surplus capacity that exists within the domain of OPEC+. They had actively declared a price war on North American producers at this time last year. Any over zealous drilling response by bureaucrats may provoke a similar declaration.

Looking critically at the financial statements of any producer we see a number of attributes that are systemic throughout the industry. The systemic nature of these are a result of the cultural influences that began in the late 1970s and took hold in the 1980s. We have bloated balance sheets of property, plant and equipment that achieved their lofty heights as a result of the desire to “build balance sheets” and “you have to put cash in the ground.” There was also an assumption that financial statements emulated the value of the firm. Therefore bloating began and has never diminished. These assets are contrasted to the lack of anything else on the asset side of the balance sheet. Working capital if it exists is minimal and on a downward trend that began when the investors and now bankers began withholding their support. The liability side of the balance sheet are riddled with two very negative attributes. The massive debts that are a result of excessive spending on capital assets, and the very low interest rate environment that has existed for the better part of the last two decades. People, Ideas & Objects have repeatedly suggested that property, plant and equipment should be seen predominantly as the unrecognized capital costs of past production. And therefore 65% of property, plant and equipment should be depleted in the current year to establish a more accurate pro-forma understanding of the leverage of these producers. The banks hold the title to all the properties of producers and have expressed shock and surprise at the methods of management they’ve been displaying recently. I would suggest that an end to the bankruptcy process begins with the banks just seizing the properties instead of continuing the merry go round of biennial bankruptcy proceedings. Once seized they could then sell the properties to new owners operating under the Preliminary Specification, user community and service providers. The other attribute on the right side of the balance sheet of course is the many billions of shares that have been issued across the industry. Producer bureaucrats have shown no real level of concern or accountability to those shareholders in the past five years, as none of the remedial actions that are necessary at times like this have been taken. Who will be the first to buy in to the next round of funding and provide a year's worth of excess drilling that will collapse the commodity price for .001% of the company? The point is what is there for anyone left in these companies. The value has been exhausted and the only thing left is those that have rightful claims that will stand miles in front of you in the bankruptcy process. Bankruptcy being a defacto part of the bureaucrats business model. But let's not discuss trajectory and momentum or the need to reverse these. I’m an ambitious man however I don’t find anyone encouraged by this vision other than bureaucrats who know they can reap their personal rewards.

Speaking of rightful claims. We’ve documented how the bureaucrats will be busy for the next number of years, or will it be decades, defending themselves from those bankers and shareholders litigation regarding their lack of fiduciary duty. And lets not forget that not all litigation is about money. There will be those that are entitled to their litigation for the sole purpose of ensuring that the bureaucrats finally earn some skin in the game. No one ever sues over an unsuccessful venture that's true. However, when the producer firms have upped their officers and directors liability insurance as they did last summer, less than a month after I identified their risks, people are now “finding gold in them thar hills.” That’s on top of the personal financial empires these officers and directors pledged to those they’ve betrayed. These have sometimes been known as Class Action lawsuits. In addition, subsequent to that event in the summer, I was able to document that the overproduction of oil was occurring as early as July 1986. That the Preliminary Specification that deals specifically with that issue was published in December 2013. And that absolutely no action has been taken while the bureaucrats cleaned out the safes and set the place on fire. Sounds to me like the bureaucrats feelings of guilt and culpability are rightly earned.

Changing the existing culture and performance of the industry is difficult for me to see. Then I’m biased. Sales of properties out of the banks and existing producers could be the means in which a new industry based on the Preliminary Specification comes about. Our budget for the development of the Preliminary Specification may seem like an issue in this scenario. However, I believe that the cozy retirement getaway that beckons the bureaucrats won’t come about if they don’t do their fiduciary duty. Which if they funded the budget of the Preliminary Specification they would mitigate the issue of overproduction, and implement the solution to what they’ve created and are responsible for. Therefore they can fund the budget and live happily ever after or risk their last few decades in hell. And as I’ve stated before, the “issue mitigated, nothing litigated” is catching on more and more these days.

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.  

How Will People, Ideas & Objects Achieve Success, Part III

 People, Ideas & Objects key value proposition is that we ensure that all production is produced profitably, everywhere and always. We achieve this by way of the user community and its service provider organizations. The configuration of the industries accounting and administrative resources have been organized in this manner for a number of reasons which are. First, the application of higher levels of specialization and division of labor. Organizational changes designed around these economic principles are the only source of incremental value that have been experienced over the past number of centuries. The configuration of our user community and service providers specialization and division of labor are enhanced through the mechanisms in which we’ve endowed the user community vision. The capability to change is an inherent part of our offering with the user community having the power to change the Intellectual Property underlying the People, Ideas & Objects software and services that the oil and gas industry uses. This ensures a never ending application of further specialization and division of labor will continue as the profitable production deliverability in North America increases from the same resource base. People, Ideas & Objects feel the monetary value here is material and unquantifiable. It therefore hasn’t been included in our value proposition.

The second reason for establishing the user community and service providers is to enable the producer firm to focus on their key competitive advantages of earth science and engineering capabilities, and its land and asset base. Removing the administrative and accounting resources from each of the producer firms ensures that profits will be maximized when producers stop incurring costs that are replicated within each producer firm. Costs that are unshared and unshareable in their current configuration. As we’ve noted, it is the redundant building of these non-competitive capabilities within each producer firm that is exhausting much of the industry's profitability. Overhead costs are material in nature in oil and gas. It is due to the excessive amounts of overhead that producer bureaucrats expertly conceal in their aggressive capitalization of overhead that no one is aware of what these costs total. People, Ideas & Objects have consistently argued that overhead and interest were heavily capitalized by all producers. Since then we’ve seen a change in producers reporting to detail the amounts of capitalized interest, whose interest capitalization percentages have declined markedly over the past few years. Yet to date we’ve seen nothing in terms of enhanced reporting on overhead. I find this fascinating, and representative of the guilt and culpability that bureaucrats have so rightly earned for their obtuse reporting of literally every possible cost as capital.

Service Providers

The critical reason for this reorganization of the accounting and administrative resources of the producers is to achieve what is called in the Preliminary Specification our decentralized production model’s price maker strategy. Where the fundamental issue of overproduction has been documented to exist since 1986 in oil and 2009 in natural gas. These overproduction scenarios would eventually self correct as is the basis of the “muddle through” strategy of the current industry. However shale destroys the old business model of scarcity and introduces a new industry dynamic based on abundance that demands new business models such as the Preliminary Specification to address the unique characteristics of shale based reservoirs. Characteristics that include the exposure of massive reserves through long laterals and multi-fracing. Prolific initial production with steep decline rates. These are enhanced by spectacular drilling and completion costs with significant re-work costs being undertaken within months instead of years. Under the existing business model, assigning these high costs of drilling and completion to the many, many decades of reserves that were exposed allowed bureaucrats to claim they were “commercial.” When in reality the capital markets have now deemed shale to be uncommercial, yet bureaucrats conveniently ignore that message. The current “muddle through” business model does not contain any production discipline. Everything is always produced. What is needed now is for the production discipline that would be instilled within the industry from the Preliminary Specifications price maker strategy. It ensures that only profitable production is produced everywhere and always. And therefore producers are, or at least should be, motivated to ensure that their profitability is the highest that can be attained.

What our price maker strategy provides is the following. Due to the separation of the accounting and administrative resources from the producers into the service providers. And the ERP systems of People, Ideas & Objects being prepared by the user community members who are the principles within each of the service providers. Each service provider is managing one process of the many processes that a Joint Operating Committee conducts. These individual processes are therefore conducted on an objective basis across the industry where the service provider applies the same standard accounting and management to all of the producers. Therefore the accounting will be conducted on a standard and objective basis across the North American continent. Focused on each of the Joint Operating Committees, each producer will know that if a property has been reported to be unprofitable, they’ll know it received the same accounting treatment as all other Joint Operating Committees in North America. So in order to maximize that producer's profitability, they’ll decide with their working interest owners in the Joint Operating Committee to shut-in any and all unprofitable properties and move them to an inventory of shut-in production. Once there these properties will be subject to further innovations in order to return them to profitable production as soon as possible. The standard and objective accounting will provide them with the assurance that their property is either profitable or unprofitable and accept that finding. In addition, the same criteria can be applied to wells within a unit or similar grouping. If one or two wells are unprofitable, by shutting in those individual wells the properties profitability would be enhanced in addition to the producers. 

It is at this point the service provider's value to industry kicks into high gear and delivers the $5.7 trillion in incremental value from our value proposition over the next 25 years. What the Preliminary Specification does through these changes is move the producers fixed cost administrative and accounting capabilities into the industries variable cost administrative and accounting capabilities. When a property is shut-in there is no activity occurring and hence no operational data being produced that would be transmitted through People, Ideas & Objects task and transfer network to the service providers. Therefore none of the processes for production, revenue or royalty accounting etc, as examples, are conducted and hence no billing from the service providers will be produced or rendered to that Joint Operating Committee for the administrative or accounting costs during any of the time the property is shut-in. The property incurs a null operation, no profit, but also no loss. Enabling the producer to attain their highest level of profitability when unprofitable properties losses no longer dilute other profitable properties profits. Turning the producers overhead costs variable, and indirectly controllable. Motivating them to maintain their production discipline of only producing profitable production everywhere and always in order to realize the highest level of corporate profitability. Whether that is at 500 thousand boe / day or at 100 thousand boe / day. They would always be proportionally profitable. Keeping their oil and gas reserves for a time when they can be produced profitably. Not having those reserves having to carry the incremental losses as a result of continued unprofitable operations. Those reserves can be seen as stored volumes with no storage costs associated with them. And the most important point of all, removing the unprofitable production from the commodity markets allows these markets to find their marginal price. 

Bureaucrats have argued this is collusion and fail to understand that managing inventories is a necessary part of every business. On many occasions in natural gas, and in April of 2020 producers substantially overproduced and drew down commodity prices into negative price territory. Which proves three things, oil and gas commodities are subject to the economic laws of price makers, bureaucrats believe down to their bones that to employ People, Ideas & Objects price maker strategy would be collusion and they’re good at feigning this naivety. Making independent business decisions at each Joint Operating Committee to produce or not based on actual, factual, objective and standard accounting information that determines profitability does not in any way involve collusion. It’s good business sense. We are adopting the market price theory and using it. That is, all the information that is necessary for anyone to know about a market is contained within its price. If the price is adequate to earn a profit, producers will produce. Instead bureaucrats have invented extensive Rube Goldberg devices employing redundant individuals in each producer firm to analyze through satellite imagery, employing Artificial Intelligence to determine what the shadows on the oil storage tanks were and therefore imputing what level of storage was available in each area of the world. Yet continued to produce at 100% all of the time. This information was then compiled and analyzed extensively to the point where oil prices hit negative $40 in April 2020. The only question that should be asked of the bureaucrats is at what point did they know the price was going negative $40? Whereas I can look at the price of negative $40 for oil and say unequivocally, that not one producer earned a profit at that price. And I do not have a satellite dish.

People, Ideas & Objects have mentioned the user communities service provider organizations will not be competing on the basis of price. We find the use of price competition by the oil and gas bureaucrats these past decades has done more harm than good. The license that will be provided to the service providers will give them a monopoly on their assigned processes jurisdiction. (Please review the service providers definition for details on how that assignment is determined.) What we need to be conducting is profitable production everywhere and always in North America and commercializing shale. This is not going to be achieved when everyone is being attacked on their flank by competitors that use price as their sole competitive advantage. We need to be rebuilding the industry infrastructure, capacity and capabilities and only that is what we should be focused on. That includes everyone with their shoulder to the wheel. We have substantial work ahead of us in terms of what oil and gas needs to achieve in order to provide the consumers of our products over the next 25 years, at a minimum. Otherwise the state of affairs in the industry will not be there for them when it’s most expected of us. 

It is therefore all of these reasons that we have settled on the following criteria that the service providers will form as their competitive advantages. The first and probably most important of all criteria is leadership. These will all apply to both the user community and those within the service provider organizations who work for the user community member. Leadership has been defined in a number of ways, all poorly as it's a difficult topic to qualify. Readiness, Willingness and Ability. “Fixers and troubleshooters rather than production (wo)men.” Joseph Schumpeter. Four kinds of behavior account for 89% of leadership effectiveness. 1) Be supportive, 2) Operate with a strong results orientation, 3) Seek different perspectives, 4) Solve problems effectively. They must have forgotten about price competition. The other competitive advantages I mentioned in my previous post were automation, innovation and quality. What I would like to do is add to that list with what I feel will be some of the other competitive advantages of the user community members and their service provider organizations. And at the same time I would not want to define the list as definitive and absolute, they are subject to change within that community at their discretion. Issue identification, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromising, financing and resolving issues. These with whatever are added are what stand in stark contrast to what price competition provides, in my opinion. We can also contrast these to what computers are capable of, which amounts to storage and processing, which is little of the tools we need for where we need to be headed. 

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.

How Will People, Ideas & Objects Achieve Success, Part II

 Once we’ve secured our budget, whenever that is, People, Ideas & Objects would be unconstrained in pursuing the objectives and plans that we’ve been discussing here for the dynamic, innovative, accountable and profitable oil and gas industry through to its successful conclusion. The next critical aspect to our success, once that budget is secured, is the work of our user community and its role in providing the most profitable means of oil and gas operations, everywhere and always. Undertaking the development of any quality software today demands an enhanced role of the user front and centre. People, Ideas & Objects competitive advantages are its Intellectual Property, research and user community. It is these attributes and the methods we’ve used to establish the user community that we can ensure the oil and gas industry will achieve a speed, innovativeness, profitability for it to be successful for the short, mid and long term. 

Our User Community

The configuration of our user community is unique. Consisting of 3,000 individuals who are available on a part-time basis. They will have the accounting, administrative and related understanding of the oil and gas industry and how their role with the Preliminary Specification provides value. The initial step in People, Ideas & Objects development will be the formation of the user community. Its formation will be critical to the success of our initiative in its initial commercial release and the subsequent 25 years. Focusing on this initial requirement will pay dividends throughout the projects development, implementation and life cycle. This is why we established the development of the user community as our primary focus beginning January 2014, soon after the Preliminary Specification was published. With the publication of the user community vision we began promoting these developments and soliciting user community participation consistently. Although user community development is traditionally a long process that is difficult to focus on and easy to skip through when the pressure to perform exists, we didn’t start yesterday and are fully committed to user based software developments. 

Until our budget is secured we will continue to protect user community members from the bureaucrats' vindictive ways of punishing those that would think otherwise. Power is an interesting topic when it comes to the dynamics of disintermediation, software development and change. Push back comes from all corners and from the most unexpected people. Until one is financially secure in their position it is best to be absolutely quiet. GameStop is an excellent example of this, and only the most recent instance. Upsetting the apple cart and creating a lot of damage to those that have not been playing fair is the first implication of all disintermediation. Until our user community can be assured of the completion of their efforts from a financial standpoint, there is no point in risking their careers. After the budget is secured the only jeopardy they’ll experience is the potential of the overall project's failure. Something that I feel falls within their domain of control.

I began this most recent approach with People, Ideas & Objects of developing ERP software for oil and gas with a different perspective as a result of some difficult lessons I learned in the different approaches that I made in the 1990s. The key lesson was that Intellectual Property is now the only asset worth anything, in the sense of building value in this new world. Unlike the 1990s where your ideas would easily become their ideas in what I now call the wild west of IP management. Today, IP is respected at the highest level of the law. Except now its management has absolutely nothing to do with the law and is wholly political. Once established with a strong history of its development and origin of its beginnings it is irrefutable. The Preliminary Specification is based on an idea that arose when I was doing my graduate research, which then formed the basis of my master’s thesis. This was subsequently published commercially in the form of the Preliminary Research Report. It suggests that the use of the Joint Operating Committee is the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. By moving the compliance and governance of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee we would achieve a speed, innovativeness and profitability that we seek in the industry. This was published as a research proposal to industry in August 2003 with the Preliminary Research Report published in May 2004. It was 100% funded by myself personally and therefore I earned the Intellectual Property. This “idea” had the potential of removing significant conflict that exists in the industry and bring about a framework where any and all financial, administrative and operational issues can be mitigated efficiently and effectively.

The research I then undertook was to define what the industry and producer would need to look like and how would it function if we did change to the Joint Operating Committee as the key organizational construct? What software would be required and how would it need to organize the industry and producers? This research was completed in December 2013 in the form of the Preliminary Specification. Once again all of this was funded 100% by myself and therefore became my Intellectual Property. Therefore I have the ability through contract to control the deployment of this IP and that is what I’ve chosen to do by licensing the user community. Therefore the IP necessary to conduct the work that is needed to be done to ensure the industry attains and maintains the most profitable means of oil and gas production, everywhere and always is in the hands of the user community. The three critical components of the user community's founding were provided in the March 2014 user community vision.

• Only the user community is licensed to make changes to any of the underlying Intellectual Property of the Preliminary Specification and its derivative works.
• People, Ideas & Objects licensed developers will only look to the user community. We are deaf, dumb and blind to all others. 
• The user community has their own budget. ($1.37 billion.) They are independent business people. Not “blind sleep walking agents of whomever will feed them.”

Within People, Ideas & Objects user community vision, through a licensing contract, the user community are the sole authorized individuals capable of creating derivative works from the Preliminary Specification. If any user needs a change in the People, Ideas & Objects ERP software it will be the appropriate user community participant that will research the change, verify it and implement it within the software through our developers. This will be through a structured and well defined change management process. Only the user community participants are capable of making changes to the IP and therefore providing the solution to industries needs. Our developers will be deaf, dumb and blind to everyone and anyone other than the user community for their input. Developers are authorized to take direction from no one other than from licensed users. Therefore anyone in the industry, including but most particularly the producers, only have to talk to the user community participant who has chosen to specialize in the one specific area of the producer's concern to have their needs met. That user community member will also be the principle behind one or possibly several of the approximately 3,000 service provider organizations that will be established by each of the user community participants. These service providers will be the organizations that are providing People, Ideas & Objects software and their organizations services to the oil and gas producers. Services that include the initial systems implementation through to all aspects of the producers accounting and administrative needs for the long term. Service providers deliver the implicit knowledge that they’ve captured through their development in the software, and their tacit knowledge as a service in a comprehensive solution to the producers. 

Competition within the user community and service providers is different as a result. We have discussed repeatedly that we see no value in having the service providers being subjected to unnecessary price competition. Each of the service providers will be provided with an exclusive license for the domain in which they operate. Therefore never having to watch their flank for any unauthorized service organization interfering with their solutions delivery. Focusing on providing the quality service the producers need to ensure that all production is produced profitably. Price competition has been the favorite game of producer bureaucrats to wash the IP of their service industry representatives and other vendors with that of their direct competition. Therefore sponsoring indirectly the competition that will then compete based on price. This is the focus of the bureaucrats preferred method, which has its advantages as we can all see the oil and gas industry circle the drain. The service providers are the direct replacement to the administrative and accounting resources that are currently deployed within the oil and gas producers. These people are reorganized into the service providers for reasons of the decentralized production models price maker strategy, specialization and the division of labor and more. We will be discussing these further in our next posts. 

Each service provider will focus on one specific process of the industry's needs. Let’s assume it's the payment of surface lease rentals. They would therefore be responsible for the surface lease rental process for the entire industry. Management of that one process would seem rather boring and a regression from where we are today. That would be a misunderstanding of where we’re at. The service providers would focus on providing a quality service based on their high level of specialization and division of labor. With their ready access to our developers for the next 25 years they would have the much touted “big data” to consider the use of Machine Learning and Artificial Intelligence to apply to. Automation of the process would be at a high level and would never stop due to the fact that as the principle in their organization, the user community member is the one that can make changes to the system. They’ll innovate and provide leadership to the way the producers operate and will act in response with other service providers to the overall changes in the industry. Adapt to new technologies when they provide discrete advantages among the many other advantages of the service providers. Applying their knowledge, experience, skill and ideas to what they know and understand. The only question I have is who does one go to in order to have a change in their systems being used today? 

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. 

How Will People, Ideas & Objects Achieve Success, Part I

 A quick comment before we begin our post today. We see in the increasing commodity prices of this past week the commensurate increase in the value of producers shares. This is also the bureaucrats “muddle through” strategies' big payoff. Actually their only payoff. Their dividend is the reduction in any pressure to act to fix the underlying overproduction or other difficulties that should be addressed in the business. The only concern at this point, as far as the bureaucrats are concerned, is how to reclaim some of the lost executive compensation of this past decade. The traditional response has also been to chase more production by drilling as many new wells as they could. That may not be the case this time. The service industry has been degraded significantly in terms of its capacity and producers, based on their fourth quarter 2020 reports, have diminishing cash and much greater demands for that cash if and when it does show up. This boom / bust cycle has been playing out consistently over the past four decades which the bureaucrats have been able to generate their great personal compensation from. For most everyone else it became boring in the early 1990s. Therefore, strike up the band, it's time for the bureaucrats to chase that cash one more time, at least for the rest of this month. 

Alternatively how everyone can achieve success throughout the industry should be the number one question going through people’s minds as they contemplate the difficulties in oil and gas today, and the contrast People, Ideas & Objects, our user community and their service providers present with the Preliminary Specification. What we’re undertaking in the development of this industry wide ERP software as we’ve defined it to date. With the establishment of the user community and their service provider organizations is unique and hasn’t been done in any other industry anywhere before. Building a permanent ERP focused software development and user community based capability and capacity. My assessment of the Information Technologies we’ll be using is that their level of maturation is more than adequate to meet the demands of our architecture and the difficulties and complexities we’re throwing at it. Our impediment to this point has been bureaucratic resistance to change. Disintermediating oil and gas in the same style that’s been experienced in many other industries over the past few decades and what will be occurring eventually to all industries. Bureaucrats have effectively resisted the inevitable elimination of these new forms of organization. To the point where today they’ve fundamentally destroyed the industry in the process of defending their turf. 

A couple of catch phrases in there, added to the mystique and magic of IT, wrapped in an air of certainty and filled with the hope that only vaporware provides. This should stand as testament to the efforts of oil and gas bureaucrats in denying any challenge to their methods of operation. You only get what you pay for and they never supported what the industry needed, it conflicted with their personal compensation. If they looked critically in the mirror the only reasonable question they could ask themselves would be “how is it that we’re still alive.” I can honestly say that People, Ideas & Objects are ascendant to contrast their steep downward trajectory. In terms of options and opportunities to deal with their future, I am biased, and unaware of anything outside of our vaporware. That is I know that our vaporware is the only vaporware that exists. My persistence over these past thirty years is due to what has taken these issues to finally manifest themselves into the wholesale melting down of all aspects of the oil and gas industry. Specious accounting has hidden the real damage for many decades which can only raise serious questions as to the quality of that accounting. Where were the audit firms? Now that these issues are here bureaucrats have three options. Two of them are incapable of solving the issue. Those being bankruptcy and the self declared movement towards clean energy. The third is they take the responsible choice of funding the Preliminary Specification in order to mitigate their responsibility in the destruction of the industry, and provide the solution to ensure that they can claim “issue mitigated, nothing litigated.” It’s the easy way out and by far the most effective way to deal with their problems. When I say their problems I mean their personal issues that are now center stage in terms of what concerns them. 

Our Budget

Let’s explore that third alternative for the bureaucrats. Although they may blame the most viable scapegoat that comes to mind that morning. The reason for the difficulties that oil and gas producers and the industry face today is due to the C suite and board of directors primarily focusing on innovative and creative solutions of how to enhance their personal executive compensation. As far as they were concerned that is what they were there for. Nonetheless their personal fortunes now stand in contrast to the value remaining in the industry and its inability to generate any value without direct outside investment from investors or bankers. Money only ever went in as they say and never came out. Or as the bureaucrats would say “you have to put cash in the ground!” The issue’s cause is a result of a lack of production discipline and chronic overproduction. We can trace the origins of this issue back to at least July 1986 and it has been ever present in oil since that time, and in natural gas since late 2009. Shale makes overproduction a permanent and tragic consequence of the bureaucrats “muddle along” strategy and business model. This is the point in which the directors and officers should have begun seeking a solution to the overproduction issue, in late 1986. In December 2013 publication of the Preliminary Specification occured. Our product deals specifically with the overproduction issue by applying common business principles. It was at this point that the producer bureaucrats redoubled our beatings and increased their overall efforts to silence us. We therefore have the established historical points where the issue is well defined, and the only viable solution that exists for the overproduction issue has been available. Yet nothing was done by said bureaucrats but to raise superfluous claims, outright lies, blaming of others and viable scapegoats. They were too busy “putting cash in the ground” and “building balance sheets” to concern themselves with the business of the business. Besides investors and bankers were buying the producers specious financial statements the producers were issuing. “See the accounting firm signed it too,” the bureaucrat states. 

Therefore the scene was set for today’s decline in the North American oil and gas industry. The personal fortunes of the officers and directors were untouched as they knew not to eat where they were working. I pointed out to them last summer that their officers and directors liability insurance was an issue at which point they promptly increased their coverage at that time by 75%. How much has their coverage gone up since then? And who says these people can’t act quickly? When I pointed out their liability and obligations the first thing they did was increase their coverage. Which I thought was an innovative idea. I then asked if I moved everything I owned into my house and set it on fire, would it provide me with a liquidity that I could appreciate? I still haven’t received an answer from them on that last question. We have however received a number of fourth quarter 2020 reports and they certainly support that cash continues to be put in the ground, and be firmly in place there. The SEC has allegedly launched an investigation into Exxon for the valuation of their assets in property, plant and equipment. This investigation may also extend to shale producers in general. An issue that we feel is directly attributable to the overproduction issue. When you overreport your assets, as a consequence you overreport your profits, which causes investors to pile in to chase the high profits which causes overinvestment leading to what has turned out to be chronic overproduction in North American oil and gas. What we should have all now learned from that is the middle man, our very good friends the bureaucrats, were personally benefiting financially throughout each one of those stages of creating the overproduction. Therefore why would they recognize the issue in 1986 or the solution in 2013?

Bureaucrats are supposed to be the responsible ones, they are also the culprits, they were the ones that were authorized to ensure these types of things didn’t happen, and if they did correct them. And most importantly of all, they have signed their John Hancock in order to commit themselves as personally responsible if anything should go wrong during their watch. In the process they have subjected their personal fortunes as a remedy to resolve any losses for those that they’ve betrayed by any of these (in)actions that caused damages to their stakeholders. Therefore let's discuss the third option that they have outside of bankruptcy and bailing on oil and gas for clean energy.

In order to prove they undertook their fiduciary duties towards their stakeholders. Officers and directors will need to show what it is and how it is they sought to deal with the decline in their organization. I challenge anyone to think of any activity that has been taken by any of these producers bureaucrats? We began a decade ago with the remedial action in the natural gas side of the business by “praying for a cold winter,” stating “we’re profitable,” and suggesting mythical theories of “market rebalancing,” how their accounting was irrelevant “now all of these losses are just accounting! And it deals with the sunk costs of the past!,” and a recent favorite “we can’t shut in production.” These top a very long list of excuses that were used to provide time in which bureaucrats didn’t have to do anything. Blaming everyone from OPEC+, to their own employees, the “service industry is lazy and greedy,” to the most recent, virus induced, “the government has to save us with direct support or tariffs'' or… That is their pathetic and culpable record of their fiduciary duty these past four decades. And now in order to avoid losing their personal fortunes in the process of chronic personal litigation from the producers stakeholders. Stakeholders that have claims that survive the bankruptcy process. The bankruptcy process that may deem the officers redundant just as the directors are on the street immediately upon the declaration of bankruptcy. Where they may have to fight stakeholders with their own resources if… The bankruptcy judge deems the officers and directors liability insurance coverage to be an asset of the corporation and therefore seize it. Where the officers and directors will be on the outside looking in with nothing but their personal asset exposure to protect them. Avoidance of risk should maybe be seen as the first rule to its exposure.

I thought this was about funding People, Ideas & Objects budget, and more importantly how we’re all going to achieve success as a result of the implementation of the Preliminary Specification? And you’d be correct which is why this has turned into a comprehensive series. The budget is the first aspect of our success. As ridiculous as our task is, the cost is among the most significant ERP implementations ever undertaken. Our costs stand at $3.7 billion U.S. dollars. People, Ideas & Objects are a business and businesses are profitable. We are in the Intellectual Property, research and user community business as our key competitive advantages and therefore these have costs that are associated with these attributes. As a result our entire budget comes in for the North American based oil and gas industry at $12 billion U.S. dollars. This is assessed on the basis of North American production per barrel of oil equivalent for the year 2019. This assessment stands at the one time cost of $315 / barrel. Which the bureaucrats might see as the deal of the century due to the fact that they’ve destroyed trillions of dollars in the process of raiding the industry. Personal guilt can be a great motivator. People, Ideas & Objects and I myself justify this budget on the basis of our value proposition that we present to the industry. It is determined to be $25.7 to $45.7 trillion dollars over the next 25 years as a result of making the North American sector profitable, in the real sense of profitability, everywhere and always. Bureaucrats have always scoffed at our budget as comical. I would ask what their value proposition has been?

This budget has to be secured in whole prior to any work being conducted. People will not commit to a project that will be subject to the financing whims of the bureaucrats mosquito like attention spans. Cancellation would terminate the project and nothing would ever be resurrected in its place. It would be an effective method for the bureaucracy to permanently continue. In addition those that have committed to the project would be left unemployed and most importantly tagged with a scarlet letter from the bureaucrats in terms of their career contributions in the industry. All for working to make things better. We need to begin the task of building and implementing the Preliminary Specification and finish it in uninterrupted fashion to ensure that those that participate are not subject to the consequences of their participation being an issue should bureaucrats be given any means in which to reassert control. We will not be “blind sleepwalking agents of whomever will feed us.” People, Ideas & Objects are offering an out for the bureaucrats to mitigate the personal financial risks they’ve created for themselves. Risks that have the potential to establish a miserable life for them that consists of court and legal issues. One of defending the ill gotten gains they pride themselves on today. We are offering them the opportunity to set in place the solution to their lack of fiduciary duty, manage the business in the interim while we build the alternative and then exit into their previously planned, peaceful and prosperous retirement. The best deal they’ve ever been offered. 

Since I’m in such an inquisitive mood today I thought I’d ask a few more somewhat related questions. Is it irresponsible for producers to assume that they can walk away from the oil and gas industry, allowing their production volumes to atrophy and leave the market without any production, chasing dreams of clean energy? This is in fact what they’re doing with their move to clean energy, abandoning the oil and gas industry because it’s in such disarray and so damaged by their bureaucratic destruction. Why don’t they take People, Ideas & Objects offer and leave oil and gas in the hands of new leadership? Are using the revenues from oil and gas to fuel dreams of clean energy, a radical change done in the classic stampede style mindlessness that has become the expectation in oil and gas, and without authorization from shareholders, a new low for these bureaucrats? Understanding all that is discussed on this blog, bureaucrats also need to ask themselves the following questions. Hasn’t enough damage been caused, if not how much more is in the plans? If these points identifying their personal risks don’t motivate them to act, what will? Knowing the general direction and trajectory of the industry. How many more careers need to be destroyed, money lost and how much longer will it take for bureaucrats to achieve these extra destructive attributes they need before they will be motivated to act? Asking for a friend.

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.