Our All Reward With No Risk Offer, Part I

 In regard to the Afghanistan situation. It is my opinion that OPEC countries, to continue to anticipate military support from the U.S., will need to fulfill Biden’s request for more supply. 

Short of reading the entirety of the past years' writings, many that may have joined us recently may not have an understanding of the work that’s been undertaken here at People, Ideas & Objects. I thought that it would therefore be reasonable to summarize what it is that is being offered in our August 31, 2021 deadline. The way the past year developed was unexpected and difficult for everyone. It was an interesting year for me as I literally stumbled into things that were discovered seemingly serendipitously through the summer of 2020. The first was with what I wrote on June 2, 2020 when the collapse of prices from a lack of demand were in full effect and producers were being forced to shut-in production as refiners were unable to take any feedstock. Recall bureaucrats' argument towards the Preliminary Specification was that production could not be shut-in without causing permanent damage to the formation. We’ve learned subsequently that this was not the case and that no damage, permanent or otherwise, was experienced in any of the shut-in formations. I noted in the June 2, 2020 post that insurance providers of officer and director insurance policies have at times forced exits of officers and directors of firms through the threat that if they don’t leave, as in the insurance providers opinion the firm posed too much risk for them, they’d cancel their policy. Leaving the officer or director fully exposed to any subsequent legal liabilities if they stayed. This posting hit the highest all-time views of the fifteen years that I’d been writing here. Subsequently on June 9, 2020 Reuters reported that shale producers had increased their coverage of officers and directors liability insurance by 75%.

I was doing some personal research in the July 26, 1986 Calgary Herald. My step-mother had died in a car accident on July 24, 1986 and I was subsequently able to download her obituary on July 29, 1986. The first page I landed on was page 33 of the 26th of July, or the first page of the business section, which had two articles quoting OPEC representatives regarding the price war they had commenced against North American producers. Oil had collapsed to $9.25 as a result of the abundance that was precipitated by OPEC’s price war and times in the industry had never been worse, except for now. This was the beginning of the consequences of the North American producers misinterpretation of SEC regulations that all costs are eligible to be included as assets and the follow-on consequences of over producing unprofitable production. A situation that has fundamentally destroyed the global oil and gas industry, its commodity prices, the service industry and just about everyone's lives that are committed to working in the field. But hey, the bureaucrats are fine and they thank you for asking. Reading the article from July 26, 1986 contains the same content that would be relevant and headline news in the oil and gas industry in 2021 and each and every one of the past 35 years. The article is eerie to read and shameful that this is the case. I can’t recreate or publish the document as newspapers.com is behind a paywall but is available to anyone with a membership. Here are a few quotes from the articles entitled “OPEC Minister Can See Economic Destruction” and “Return to Glory Days Unlikely.”

Qatar’s oil minister has called on both non-OPEC nations and industrialized countries to cooperate with OPEC to work out a policy aimed at restoring stability to world oil or face grave consequences. 

But in Kuwait, the United Arab Emirates’ petroleum minister said OPEC has no alternative but an oil price war until rival producers agree to reduce output. 

Whether gasoline and heating oil prices will continue to drop or rebound instead, whether the devastated economies of oil producing states and provinces like Oklahoma, Texas and Alberta will continue to crumble and whether the debt problems of countries like Mexico will get more severe.

“I’m not aware whether the price war is the best policy to follow,” Nigerian oil minister and OPEC president Rilwanu Lukman was quoted as saying, “but as we’ve already started this approach, we must continue it until the market is stabilized.” 

July 26, 1986. Nothing has been done about this. In a world where the commodities you produce are dictated by the principles of price makers, where one incremental barrel of surplus production will detrimentally affect the prices realized on all production, nothing has been done for thirty five years. It’s not that this is unknown. It’s not that this is misunderstood. In a World Oil article of January 25, 2017 BP’s Chief Economist stated.

The world has about 2.6 Tbbl of technically recoverable oil reserves, with about 1.7 Tbbl located in the Middle East, North America and the former Soviet Union, BP said in the report. Cumulative oil demand out to 2035 is expected to be around 0.7 Tbbl, significantly less than recoverable oil in the Middle East alone, Dale said.

The world has enough oil reserves that can be extracted with current technologies to be able to meet demand two times over until 2050, Dale told reporters in London. As demand growth tapers, holders of these resources could potentially decide to produce sooner rather than later, he said.

Yes I can see now that consolidation is the answer as it addresses these points head on! Here is a list of the costs of production in the various countries. Which is inconsistent with the claims made by North American producer bureaucrats that Saudi Arabia needs $85 / boe for their budget. Which is true, and conversely the demands of just Biden’s next $3.5 trillion bill will be an onerous $737 / boe cost for North American producers. Let’s not compare North American production costs to Saudi Arabia's government budget. It may have been that BP’s Chief Economist and I were the only two people that were aware of the market dynamics over the long term. However, directors in the oil and gas industry know that doesn’t matter.

As I recall, this OPEC price war started the North American producers' now well developed and refined approach of blaming, excuses and viable scapegoats of why they were having such difficulty. They assured us however that they would “muddle through” which certainly satisfies, even still. This is the point that I argued that all that was required was to shut-in some production, rehabilitate the prices and move forward from there. It was the simplest solution to the most devastating and costly problem that the industry had ever faced to that point. Except there was absolutely not one possible way in which it could be done in the business model that existed at that time. And today, short of refineries stopping the intake of feedstock the producers remain unable to solve this. The two major issues that have stood in the way through 1986 to 2021 are the determination of which property should be shut-in. And the conflict between the operator and the Joint Operating Committee as to who has control and who has authority. 

To determine which property should be shut-in should be as simple as determining which property was profitable and which wasn't’. Shutting in the appropriate ones. (The unprofitable ones, if any bureaucrats are still reading.) Oil and gas accounting was and is very imprecise, which we’ll discuss the motivation for in this post. For example, for the province of Alberta natural gas royalties, in the late 1980s and early 1990s, for the second largest producer recorded their royalties in their general ledger at the district level. Which is fine and nothing at issue there other than they had five districts for the province of Alberta. Rendering any calculation of a properties profitability moot when we consider that royalties are by far the largest operating cost. In addition there’s no allocation of depletion or actual overhead at the property level. Overhead was from “allowances'' and both of these are still the practice today. To use anything but actual, factual accounting information in determining whether a property should continue to produce, or not, can not have accruals, estimates or allowances. 

It was May 1991 and anyone today would see this as a systems issue as I did when I started this. The company was Genesys Software Corporation and I was smart / stupid enough to assume that I needed another triggering event to enable me to get into the market. And then it happened, the Alberta government passed legislation and issued the regulations for what they were calling Royalty Simplification, a comprehensive re-engineering of the method and means of how royalties were conducted in oil and gas. Demanding, in my opinion, that accounting down to the well be undertaken. All my competitors were going to need to rewrite major parts of their systems and all producers were going to need a significant upgrade to ERP based applications when the government's system went live in 1994. Royalty Simplification was introducing high levels of systems thinking to the archaic government processes that had survived from the 1960s and putting into place an advanced well thought out requirement. This would be the foundation of our new system and the approach we promoted to Oracle Corporation. Which we jointly undertook from 1992 until February 1997. 

The painful and difficult lesson that I learned leading to my first market failure. The one that I think the investors and bankers have now learned as well. Is what I learned in those formidable days in my previous company. I believed then that accurate and timely royalties would enable oil and gas producers to reduce their royalty obligations to the lowest possible level based on a sound application of these new regulations. Knowledge is not a great defence, it's an awesome offence. Producers believe that obfuscation is the best remedy in any and all regulatory, compliance and governance matters. I believe this is a facade they've been able to hide behind for too long and at great consequence to the industry. Hence my initial market failure, as no producer wanted to be transparent. It’s maybe best to ask an investor if this is why they’re now calling for better governance systems? It was in October 1997 that the Alberta government asked software developer companies to meet and discuss their plans for the future. It was there we understood that producer pressure, mostly through comprehensive non-compliance, had forced the government to make severe changes to the initiative and cancel much of the work that was done by the software developers and start on a new one. Anyone still needing an explanation as to why People, Ideas & Objects needs the funds up front before any work is done should understand the propensities and behaviours of our good friends the producer bureaucrats. Maybe one day I’ll document the activities that occured in that October 1997 meeting, the one that I refer to as my “Dead Cat Meeting.”

Heading back to the beaten path of this post. We come to the other reason that producers could not shut-in unprofitable production, and are still unable to do so today. There is a distinct conflict between the operator of the property, usually the producer with the largest working interest and capabilities, and the operational decision making framework that exists exclusively with the Joint Operating Committee. This is commonly referred to as the rights assignment issue. Here Professor Richard N. Langlois’ research provides us with an understanding of its application and resolution for oil and gas.

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 

The Preliminary Specification moves the compliance and governance frameworks of the bureaucracy into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. Through the Research & Capabilities and Knowledge & Learning modules the knowledge is moved to where the operational decisions are made. It is the separation of the authority from the Joint Operating Committee that is causing many of the performance related issues today. Who’s responsible, who needs to account for this performance or failure? Well there is never anyone held accountable for anything in oil and gas. It all gets washed away in the “muddle through” song and dance. Nothing is learned that’s new, that wasn’t learned five times last year and will be learned many times again. Accountability doesn’t exist anywhere or at anytime due to the conflict between those with, and those who exercise the authority. If a property produces a loss in oil and gas, does anyone hear it? Sorry that’s a tree joke. This unaccountability framework extends all the way to the good old boys in the boardroom. Where no one is ever asked a difficult question. Is it that directors are naive and haven’t an understanding of these issues? I think it’s fair to state that my ostracised and vilified career in this arena proves the old saying that “bullies don’t fight.” They’ve turtled, assuming their traditional posture, to support their “muddle through” strategy at every and any prompting. I can not think of one occasion where they’ve ever engaged me directly. Possibly their investors are familiar with these tactics. The issue that I have is that I’ve predicted many things would be the outcome of their situation. These were always based on the historical actions of others, in other industries over the past century. As a result I’m batting about 1/1000 in terms of accuracy regarding bureaucratic behavior. What I’m apparently unable to conceive of is the dependence and reliance, but also the success that turtling provides. 

This all assumes that I had a modicum of understanding, logic and common sense when the Preliminary Specification was put together. However, all this has been done without the support of the industry and I’ve never generated a penny in revenue! I seem to be getting closer to the point where I can’t discern which is the more pertinent point! But seriously, looking back at the vision I painted in last Friday’s post, where the “normalcy” of a healthy industry that one would expect in oil and gas is not even in the conscious thought of any of those that have control of the industry, is its saddest testimony. That this is all acceptable and part of the day to day in oil and gas is just fine and it’ll all come out in the wash, when given enough time. No it’s not and should never have been accepted beyond August 1986 and this failure is 100% attributable to the directors and officers of the oil and gas producers who have done nothing about this since then. We’ll be continuing with this series to better inform the directors of their upcoming August 31, 2021 decision that we put to them in our RFP Response during the month July 2021. 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (Summary & Conclusion), Part XIII

 To resolve the current difficulties that plague the North American oil and gas industry demands that we organize an approach to how it’ll be resolved. That is the work that People, Ideas & Objects, our user community and their service providers propose to do with input from the oil & gas, service and all the tertiary industries involved in the greater oil and gas economy. The new organizational structure will be the derivative software product of People, Ideas & Objects Preliminary Specification and the services of our user communities service providers in this overall ecosystem. Software is what defines and supports the organization in today’s society. Serendipity and creative destruction have been hamstrung by the fact that software also constrains an organization in proverbial cement based on its current process management definition. To make any organizational or process change has to be orchestrated through the software first in order to have the change take effect. Otherwise the organization will quickly regress back to the software definition of what the process is. This is the consequence of our dependence on Information Technology and is what we’ve called a modern day software bug. One that has cost the industry its prosperity as bureaucrats took this knowledge, never changed the organizations ERP software and therefore secured their methods of personal aggrandizement. 

Let's revisit two hypotheses that People, Ideas & Objects have asserted about the state of affairs in North American oil and gas. These are what we call our Managed Industry, and Abandonment Hypothese. Throughout 2020 we documented the material personal risk that officers and directors of the producer firms had incurred as a result of the catastrophic destruction they created. We’ve attributed this destruction to chronic overproduction of oil and gas, or as we describe it, unprofitable production. Which has occurred systemically throughout North America as far back as July 1986 and ever present since. This was the issue that prompted me to get involved in building ERP systems for oil and gas in 1991. All that was needed was to shut-in any unprofitable production. People, Ideas & Objects solution to this issue was finally completed in December 2013 in the form of the Preliminary Specification. 

I’ve been writing about components of our Preliminary Specification since late 2005 and at no time did producer bureaucrats make any effort to mitigate the damages they were causing. Upon the realization of their personal risks, officers and directors were noted by Reuters on June 9, 2020 to have increased their officers and directors liability insurance coverage by 75%. In late 2020 investors began litigating many of the producers for related issues. Exxon became the subject of an SEC investigation into the overreporting of assets, particularly in shale. The SEC was also rumoured to be issuing subpoenas to many of the shale producers for similar reasons. Businesses understand that overreported assets beget equal and commensurate overreported profitability, attracting disproportionate volumes of investors who in turn create overinvestment leading to the inevitable overproduction and the continuation of unprofitable production. This was done through a number of accounting shenanigans that we’ve documented throughout the history of these writings. Producer bureaucrats were only concerned with their “take” and not with the business of the oil and gas business. This became evident and obvious in the downswing that began in 2009 with shale gas volumes destroying the natural gas marketplace. Investors bailed on the industry in 2015 and nothing but lies, excuses and the naming of any and all viable scapegoats as the only action that we’ve seen since then. In summary the personal jeopardy that officers and directors have attracted in this process has been significant. 

At the same time that the industry experienced a cash and working capital crisis due to the exit in 2015 of their investors. Chronic unprofitable production demands new investors resupply the spending machine. Without investors to fleece, all means of accessing cash was used to maintain the operation. Initially, selling of oil and gas properties was the most lucrative as there was a ready market with some producers continuing with some alleged “liquidity” derived through increasing their bank debt. All of the industry's cash resources were eventually consumed by the producers' excessive overheads and the volume of properties for sale eventually overpowered the markets cash, collapsing the assets prices that were being offered for oil and gas properties. Which is odd, the oddity being that it was that same behavior and characteristic shown earlier during the collapse of the oil and gas commodity prices. Asset prices remained in positive territory but no one had any money to buy them at the fire sale prices. I believe this was part of the justification for the write downs of oil and gas properties in 2020. Creating a catch 22 scenario for bureaucrats where they’d destroyed their entire business model of building balance sheets and were in need of some method in order to rehabilitate their asset values and firms quickly. 

The performance of shale never happened and the wholesale abandonment of that concept was completed without a whisper or second thought. Our July 2019 white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale'' provides the means to turn shale commercial. This was never considered a solution and therefore did not motivate the bureaucrats to action. It was summarily rejected as it required them to work. Besides, their directors never held them accountable for any of their past failures. Leaving the remaining life of an oil and gas producer to pursue the previously renounced and otherwise abandoned areas of conventional oil and gas, offshore, heavy oil or the arctic to pursue as the oil and gas frontier? Like shale’s renouncement, these areas were approached with no understanding or concern about their profitability until it was absolutely proven otherwise. And once unanimously proven across the industry they were abandoned with no remedial efforts to rehabilitate them and bureaucrats were able to pursue their next bright shiny object. Today their chosen new frontier is clean energy. An area proven to have never been profitable, even with government subsidies. An area where there are no plans on how to make them profitable. It has however the one redeemable feature of avoiding accountability for shales unprofitability. Reflecting the inherent lack of understanding and business sense of the entire bunch. After six years of investors withdrawal we’ve seen no change in their behaviors, attitudes or actions! These issues are culturally ingrained and the only method to rectify them are to rebuild the industry brick by brick, and stick by stick in the vision of the Preliminary Specification. 

We now add the method that was used to raise the value of property, plant and equipment and the value of the producers' share price. Making it appear like its good times in this “Managed Industry” and our hypothesis. This was done with two mechanisms. Consolidating producers at the higher “market values” of property, plant and equipment. High enough values that they would exceed what was on the books in 2019 and erase any public memory of the collapsed asset marketplace. These transactions would all be financed with shares of the producer firms. There’s never been a bureaucrat that would not dilute their shareholders and this of course went down without a second thought. The other leg of the transaction was to use the last dregs of their cash and more fully plumb the depths of negative working capital to expend what was left or remaining in the stock “buy-back” authority to participate in the “rally” that would happen in the acquiring company's stock. The proof that we would point to for our Managed Industry hypothesis is the following question. Why weren’t the consolidations valued at the current market price of the assets? The last element of the Managed Industry Hypothesis is the Abandonment Hypothesis which is where I think we are today. 

The Abandonment Hypothesis is simply a resumption of the past centuries management's activities during similar failures and that there’s nothing in oil and gas left for the bureaucrats, all the cookie jars are empty. It will take substantial work and effort to turn the industry around and they’ll admit that’s not their forte’. What’s obvious is they don’t know how or what to do. In a world such as theirs, focused inwards, they’ve acquired risk through the signing on as officers of the producer firms. A risk that will be with them unless they can dispose of it in some reasonable way. That is their focus of concern and where their obligations and priorities will lead them. With the rally in the producer's stock behind them, they'll need to exit the firm quickly and say they did so when the ship was sailing well and they had nothing to do with any subsequent failures. 

They say that gold is a dead asset. Meaning it doesn’t generate a profit, doesn’t generate any economic activity. Theoretically provides a hedge against armageddon. The same could be said of many commodities. Does that apply to the petroleum reserves that were once so coveted by these bureaucrats? The ones they’ve now been able to reestablish at the high valued paper assets on their well built, big, beautiful balance sheets? They’ve proven over the past four decades that none of these “assets” can be produced profitably and are now actively disproving that they generate any incremental economic activity. Without profits in their real form there isn’t much else. Past industry activity has been more or less just like when we were all kids and traded hockey or baseball cards. Some were seen as more valuable than others and that’s where the fun was. And just as we don’t deal in the trading card world anymore, do we want to live in a world where those who own gold today are the dominant power in society? Bureaucrats never saw the larger purpose in their activities, other than to secure the best baseball card or the biggest balance sheet. The paper stuff they deemed valuable.

Since OPEC+ resolved their production allocations there has been a capitulation in the industry. Post covid elation is turning to the reality of the situation and the difficulties the bureaucrats put the business in over the past number of decades. These officers were never held accountable for anything by their boards. Rubber stamping and back slapping were all the rage. Contrived initiatives that were allegedly shareholder driven, such as Encana's overwhelming need to split into an oil producer and a gas producer, or Exxon’s clean energy proxy war for board seats were never questioned with any logic or common sense. Until just a few years ago I was considered crazy for suggesting profits were an issue and needed in the industry. The level of conflict that has been created and exists between bureaucrats and myself is a healthy thing as far as I’m concerned. I’ll never be able to work with them again. But they’re leaving the industry and have nothing to do or say anyways. 

Appealing to the directors is the last hope for the oil and gas industry for these organizations as they exist today. Shareholders deserve to be treated fairly and provided with an effort that is commensurate with what had been promised those many years ago. Profits. The service industry, those that are and have worked in oil and gas and the greater oil and gas economy also deserve the same. Real profits of a primary industry everywhere and always is the responsibility of those that are representing the shareholders and received their money to do so. Directors share the same risks that the bureaucrats have acquired in the process of this chronic mismanagement. Their risk is commensurately higher as a result of the risk of bankruptcy terminating the directors immediately. Courts are beginning to look to the directors and officers liability insurance policies as assets of the firm. Leaving the directors on the outside, funding their own defence and fully exposed. Directors may think the shareholders won’t sue if there’s no insurance proceeds available. Lawsuits have never been about the money.

People, Ideas & Objects RFP Response should be seen as an olive branch that will alleviate the directors personal litigation risks. Providing directors with the opportunity to explain to the judge that they took the steps to remediate the damage that occurred. When steps to mitigate the damage have been taken there’s nothing to litigate. Alternatively, explain to the judge why the RFP of People, Ideas & Objects was disregarded. And make sure to generate the arguments that can be used to refute the individual points made in this RFP Response and those in the Preliminary Specification. What our response was to those specific arguments. Or directors could tell the judge how their actions were effective and they didn’t understand our argument. That may be their best approach. If the courts perceive there's a consistency in each of the producers' destruction and throughout the industry they may find that curious. Who is the producer that has competitively drawn down their account of property, plant and equipment in the past decades? And now has a low cost of capital that performs in this environment?

This ends the RFP marketing series highlighting only the larger points of the Preliminary Specification. The rest is contained in the two hundred thousand words of its thirteen modules. If directors have found the dialog here too condescending then they should probably get used to it, or maybe after the past six years of waiting in the investors' reception areas and waiting rooms they already have. I’m putting the deadline of August 31, 2021 for a response to this RFP as the deadline for commitments by the producer firms. This follows with a 10% deposit of the producer's obligations by September 30, 2021 and the balance due by December 31, 2021. Any non-participating producers will trigger a reassessment of the participating producers for the shortfall in our budget. This should precipitate the need for participating producers to ensure their working interest partners in their Joint Operating Committees are participating in this RFP. These are and should be considered tight and final deadlines. After thirty years I’ve lost my patience and want to begin the development of the system. As soon as these organizations are no longer seen as viable, based on their choice to opt out, the better as far as People, Ideas & Objects are concerned, and the rest of the industry can commence rebuilding the industry brick by brick and stick by stick in the form of the Preliminary Specification. Allowing directors the time necessary to tend exclusively to their legal matters. 

Postscript. Some may feel that this series should have included the compliance frameworks of the various regulatory authorities involved in oil and gas. I disagree. Bureaucrats have had these handled well in their model. That didn’t aid them in any way to better manage the firm or increase their accountability. Just as it’s believed that you don’t let the tax tail wag the dog, I feel we should not allow any of the compliance frameworks to wag the dog either. In the Preliminary Specification compliance to the various regulatory agencies will be the fall out consequences of the decisions and actions that are taken by the producers. 

I’ll be taking a few weeks off from posting but am available and can be contacted at any time. Check our Twitter feed for a weekly summary of the number of calls, emails, discussions and commitments that industry has engaged with me. When I post just the word "nothing" I'm sure you'll understand my point. I’ll be returning on August 16, 2021 with our blog's first post on the second quarter result of our sample producers. And begin anew on September 1, 2021 regarding which direction we go from here.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (S&DOL), Part III

 It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil and gas has now been deemed a failure by our good friends the bureaucrats. They’re getting out, selling properties and writing down those assets that held such promise in all of those investment offerings. These Keystone Cops are on to the real thing now with clean energy and are making the transition with the revenues established by prior investors in an unauthorized fashion. Remember it’s cut and run. Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Granted it’s self serving as it involved developing the Preliminary Specification and demanded the bureaucrats conduct some serious effort, or work! After two years of this paper's publication; is it now acceptable to just walk away from the catastrophe they've created and venture off into territory that has proven never to be profitable? Or do they have a plan to make clean energy profitable? If so they should have submitted that in the business plan they needed to seek authorization for such a radical change in the underlying business. Why is it acceptable to let the bureaucrats saunter off now and forget about the failure they’ve created? Who will hold them responsible and accountable, it should be the boards of directors. And why is this method of failure the consistent behavior of these bureaucrats over the past four decades? Or am I mistaken about this and am unaware of some amendments to the Directors and Officers Insurance contracts? This behavior is unacceptable and reflects their moral and ethical depravity. And why would they do anything about this if they’re never held to account?

With this post we begin a series within a series where we’re describing the number of organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil and gas producers. These define the “what,” “how” and “why” of the Preliminary Specification. But most of all adopting a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

I have to admit I’m quite excited about this marketing phase People, Ideas & Objects are in now. I no longer have to concern myself with the bureaucrats and their activities, they’ve left a legacy they need to live with and I’m sure there will be more to talk about. I’ll find no argument anywhere that they’re the ones responsible for the industry wide damage that’s been done, no one is listening to them anymore and they’re probably on their way out anyways. The untenable nature of the producer firms is reflected in the downward trajectory of these organizations. The extent of the damage is so severe they are beyond remediation and the economic principles of creative destruction and disintermediation are fully in play. The situation on the ground is therefore ripe for a solution such as the Preliminary Specification, our user community and their service provider organizations. Marketing is a much more enjoyable situation for me as I do not need to be the grumpy guy in that far off distant corner of the Internet anymore. Our appeal to the directors of the producer corporation is simple. They decide which ERP software to implement within the organization. People, Ideas & Objects know that the directors are just as concerned with continental self-sufficient deliverability of profitable oil and gas operations and providing abundant, affordable energy to the consumers. People, Ideas & Objects assert, as in every business today, it’s not enough to just own the oil and gas asset anymore. It’s also necessary to have access to the ERP software that makes the oil and gas asset profitable. Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil and gas today and the systemic lack of profitability throughout the industry. It is what we refer to as a “modern day software bug.”

The creative destruction being undertaken provides opportunities for everyone, except the bureaucrats, and these opportunities would definitely include the directors. The new producers may be the best opportunity we’ve seen for a long time in the industry and what these companies could use more than anything is a steady hand to help navigate this road ahead. The advantages that People, Ideas & Objects Preliminary Specification brings for all producers is significant. Whether that is Exxon or the producer firm that was started at the breakfast table this morning. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil and gas economy, no matter their size. However, in the categories of the junior and startup oil and gas producers, the advantages we provide put their organizations in the driver's seat in terms of how they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under the bureaucrats' business model. This will begin being detailed in our next post. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We feel the overhead costs of the producers demand these be dealt with by making these organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed producer based capacity and capability, into a variable industry based capacity and capability, their variable behavior being based on a Joint Operating Committees ability to produce profitable production. Another reason for the high overhead costs of each producer is that all of their capacities and capabilities are replicated within each producer firm in an unshared and unshareable form. Today these accounting and administrative capabilities and capacities are purpose built within each producer organization to meet the demands of the various stakeholders and these overhead costs are the secondary cause to the lack of profitability throughout oil and gas. These costs do not form part of any of the producer's distinct competitive advantages.

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to their Joint Operating Committees. If it’s not profitable then the property will be shut-in and none of the service providers will therefore receive any data from our task and transfer network and therefore no processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

There are many benefits for producers to begin their operations in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. Whether that is at 25% or at 100% of the producer's capacity. When all costs are variable, production will be profitable at any volume of their production profile. This will preserve their oil and gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have occurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage where the costs of production and storage are zero. Producer bureaucrats assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once the bureaucrats realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such nonsense. That is until they ran the oil price down to negative $40. The refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of production the reserves reflected there was no damage whatsoever. These are just some of the many reasons for the Preliminary Specifications implementation. Oil and gas commodities are price makers, not the price takers the bureaucrats assumed they were for all these decades. One critical aspect of a price maker is that they only bring on new production when it’s profitable. The method we’ve developed is detailed further in the Preliminary Specifications Preamble. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil and gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in previous years. With technology and other industries providing growth opportunities, for oil and gas companies to assert they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect the producers capital allocation and capital discipline too. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets” and the like to the scrap heap. 

Cash demands in the industry are currently one of the producer's pressing difficulties. This is due to all of the producer's costs outside of operations being more or less capitalized and then recognized as depletion over the course of several decades. Including the capitalization of large percentages of overhead and interest. By not recognizing overhead costs in the current period producers are able to more easily declare their specious profitability. However, the cash that was consumed in those overhead costs is not returned in the current period in the prices of the commodity charged to the consumer. These overhead costs then sit as assets on the balance sheet in property, plant and equipment, or as we call them “the unrecognized capital costs of prior production,” for the next few decades. Therefore the search for new cash each month to replenish the cash float has been the issue for the past number of decades. When investors were willing, this was not an issue with the annual top up of investors dollars. Now the reality of their specious accounting haunts them daily as they try to find this new cash to cover the basic costs of their operation. Working capital has been and will continue to be a crisis in the industry under the current business model. No matter what commodity price is attained. Basic cash management would have indicated this to the bureaucrats many decades ago. (I wonder why they never changed these methods? I’m sure they must have had their reasons!) With the Preliminary Specification recognizing overhead in the current period as part of the operation, capturing that in the price charged to the consumer, return of the cash to the producer will occur within that production month. That however assumes profitable operations are conducted and all costs are accounted for appropriately. I’m on record, and allege that hasn’t happened. Calling the producers accounting specious and deliberately deceptive. I do at times wonder what costs are in that capitalized overhead that no one is aware of. Both in terms of its size and its composition. 

As a director of an otherwise terminal organization this might appeal as a more exciting type of work. With a directors experience, skills, knowledge and ideas, or what form the basis of an individual's capabilities. The directors would be valuable and rewarded throughout the industry. Don’t count yourselves out. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

To: The Board of Directors, Our RFP Response, Part I

 A quick note to say we never received an RFP. We would never be included in the bureaucrats list and don’t expect one at any time. This blog series would be our response if we did.

We’re marking another milestone here at People, Ideas & Objects. A point in time that we have not achieved and have not been in a position to conduct until now. Today we begin the active marketing and sales of People, Ideas & Objects, our user community with their service provider organisations and our Preliminary Specification to the North American based oil and gas producers. What we’ve been upto these past few decades is a matter of discussion. I’ve been of the belief that we conducted the necessary research into the issues of the industry's poor financial performance. Brought about a robust discussion of the issues and opportunities involved and brought the fight to those that I felt were the culprits responsible for the damage and destruction that they’ve caused. We identified a historical process that industries have seen repeatedly when faced with the demise of their organizational methodologies. That process is in its final days as we expect the bureaucracy have achieved what we’ve hypothesised as their “managed industry” scenario where the appearance of normality allows them to slip into the darkness without the awareness of their destruction's culpability. Leaving others to the potential catastrophic results when the facade of the “managed industry” fades back to reality.

In the beginning we identified that the lack of real profitability in the industry was to be felt across the industry but also with everyone involved across the greater oil and gas economy. Without profits there is no value being generated and therefore the decline and destruction of the activities being conducted. This point is well understood and appreciated throughout the greater oil and gas economy. The efforts of everyone whether that be time, energy or money have been wasted by the self interests of the bureaucracy, who we’ve defined as the C suite of the producers. The capitalists focus on profits being earned by investors is therefore appropriate in any and all cases. When the investors are satisfied, they are there to provide for the future. When they’re not satisfied, they are quickly able to leave, sending the ultimate message of disapproval of the activities being carried out. It is our belief that investors, as were others, were duped by specious accounting that did not represent the situation on the ground. Aggravating the poor performance of the industry for a protracted period of time. Leading to the comprehensive exhaustion of value from the industry. What is represented today in the financial statements of the producers would not be something to be proud of. Producers' financial statements reflect they are in serious long term financial jeopardy. And none of these financial statements are representative, they are as specious as they’ve ever been. 

Throughout People, Ideas & Objects history it has always been our objective to appeal to the investors of the oil and gas producers. This will continue and nothing has changed. The Preliminary Specification provides for the most profitable means of oil and gas operations, everywhere and always. We will not waver from what we believe to be our ultimate competitive advantage over our ERP software competitors. Investors are however not the decision makers that are able to influence the producers towards the selection of People, Ideas & Object et al. What we are now doing in this marketing shift is that our focus has moved to the investors representatives, the Boards of Directors of the producers. Ultimately they are the final decision makers that will be making the decisions as to which ERP system provider they’ll use within the producer firm. Based on the bureaucrats recommended list of vendors. Of which we most certainly would never be on any of these lists due to the creative destruction and disintermediation forces we have leveraged and focused on these bureaucrats. Therefore we are now seeking to exploit the sunlight that we see breaking through between the Boards of Directors and their bureaucrats. 

If we are correct in our opinion of the situation on the ground as it stands today. Those being these three main components. The critical financial jeopardy the producers are in, the current state of the “managed industry” and the probable exit of the bureaucrats. There is much to be concerned about for these directors. We have discussed what we believe the financial situation in oil and gas to be and won’t revisit that. The “managed industry” is somewhat of a new hypothesis that I developed recently. It began last summer when we noted the legal jeopardy of both the officers and directors in terms of identifying their specific personal risks as a result of the long term issue of overproduction in the industry. Since July 1986 we’ve been able to document the fact that overproduction has been the source of a lack of real profitability throughout North American oil and gas. Secondly we noted that the Preliminary Specification addresses overproduction specifically with a direct solution to that issue and as a result generates profitability everywhere and always. It was published in December 2013. Noting these two facts would allow their insurance providers providing their Director & Officer Liability (D&O) insurance coverage to void the contract. The solution to this probability was a strategy that we were stating as “Issue Mitigated, Nothing Litigated.” Directors would be able to achieve the mitigation of their personal risk by adopting the Preliminary Specification and avoiding any claims of mismanagement. From Holland & Knight.

The Application Severability Provision (as an example provided from this website.) 

Absent an “application severability provision,” if any insured had knowledge of a fact that was misstated in the application (regardless of whether the insured knew the fact was misstated in the application), coverage under the policy could be voided to all insureds. An application severability provision avoids this potentially unfair result by making it clear that the knowledge of an insured who knew of facts that were misrepresented in the application will not be imputed to any other insured for the purpose of determining whether coverage is available under the policy.

Coverage under this policy shall be void as to the following:

Clause 3. the company if any past or present chief executive officer, chief financial officer or chief operating officer of the organization knew, as of the inception date of the policy period, the facts that were not accurately and completely disclosed in the application.

Such a provision helps ensure that “innocent” insureds do not lose their coverage through no fault of their own.

However, in light of the fact this issue of overproduction was raised as early as July 1986. Has been the systemic cause of financial destruction in the industry for all but 5 of the past 35 years. The Preliminary Specification as the solution to overproduction was published in December 2013. How does one claim innocence? People, Ideas & Objects have also stated, repeatedly since May 2004, that software defines and supports the organization. Therefore any organizational change will have to be made in the ERP software first or the organization will regress to that which is defined in the current software. This has been used by the bureaucracy to secure their franchise by sponsoring no ERP software developments in the industry. Leaving them uncontested in their methods of “governance.”

Knowing today how bureaucrats think; they may have adopted our “Issue Mitigated, Nothing Litigated” insurance loss mitigation opportunity however, with their own plan. If they could make it appear that all was back to normal, in the form of a healthy and prosperous industry. That facade would provide them adequate cover to make their hasty exit and be able to state unequivocally that they left when the company was performing well and they’re not responsible for anything that may happen subsequently. People, Ideas & Objects hypothesis, unproven as it stands today, and undetermined if the current oil and gas industry is in a “boom” as alleged or a “managed industry” environment. Our “managed industry” hypothesis being roughly defined as the consolidation of peers at or above the listed book asset or reserves value through a further dilution of shares, stopping the pursuit of new production and aggressively buying back the remaining shares on any share buyback authorization.

It is true to a larger extent that the directors of the producers could exit just as easily as the bureaucrats. From what I noticed however, most of them were re-elected for the 2021 fiscal year and the opportunity to retire from the board may not arise for another three quarters. That may be too late. They could leave now however that would look bad if our hypothesis became valid. I see them being somewhat stuck as a result of the bureaucrats exercising their goodwill and good judgement that we’ve learned from them over the past decades. It is also true to a large extent that the shareholders are being provided with the opportunity to exit their positions with the higher valuations being realized by the producers in this “managed industry” scenario. To what extent this would be possible is and would be the question. I believe in either scenario, Directors need to consider the implications of their D&O Liability insurance.

It will therefore fall to the Boards of Directors to establish new governance and compliance methods, new organizational structures and start the rebuilding process anew. It is generally well known that the industry does not use first tiered ERP applications such as Oracle. The underlying base of the Preliminary Specification. This will be a mandatory requirement in order to win back the trust of the investment community in the future. The reputation of the specious accounting and systems obtuseness is well known and understood throughout the investor community and the need to address that today is the first priority of these directors. Our good friends the bureaucrats were well aware of these issues and it is not happenstance that the governance is as bad as it is. That none of the necessary software developments were undertaken were a result of our Preliminary Research Report published in May 2004 that stated ERP systems defined and supported organizations. 

People, Ideas & Objects, our user community and service providers stand at the ready, with the well researched and functional business model of software and services defined in the Preliminary Specification needed by the industry. Ready, willing and able to deal with the issues and opportunities of the industry today and in the future. I would personally assert that September 1, 2021 is an ideal time to start an initiative such as the Preliminary Specification, however not the only time. People, Ideas & Objects uses the Joint Operating Committee as the key organizational construct of the Preliminary Specification. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. We move the compliance and governance frameworks from the hierarchy and align them with the seven frameworks of the Joint Operating Committee to achieve speed, innovativeness, accountability and profitability in the producer organizations. 

It’s so good to have made the transition to a marketing phase of these developments. The difference in my writing is self evident isn’t it. I’ve never criticised a client as a policy of my business career. Today I don’t have any clients though. I’m therefore consistent with my policy and will continue to always be. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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. 

We Won't Be Fooled Again!

 Credibility is what the bureaucracy needs now more than anything. They should remember however, credibility once lost can never be regained. It may therefore have been in vain for People, Ideas & Objects to provide a means in which bureaucrats could have re-established their credibility, particularly in terms of real profitability. Credibility is one thing, there’s also doing the right thing nonetheless. Something that is obviously foreign to them. They’ve slammed the door shut on that opportunity as we’ve determined to cultivate other means in which to pursue People, Ideas & Objects et al funding and development as the final and definitive way to eliminate these bureaucrats. It’s now time for them and myself to deal with the consequences of this closed door decision and the performance legacy of the producer firms. They can argue that People, Ideas & Objects commitment consists only of words which contrast their millions of barrels of oil produced each day. Which is true, and consistent with the thinking behind their great science experiment, one that has produced nothing of value outside of the healthy executive compensation that sustains them personally. It’s time therefore to ask what is it that the producer bureaucrats are committed to? As the CEO’s, CFO’s, COO’s and members of the Board of Directors responsible for the producer firms they occupy space in, are they committed to making it a business? Are they committed to profitable energy independence across the continent? “What” is it that they are committed to and “how” will they fulfill that commitment to the satisfaction of everyone in the industry and greater oil and gas economy these producers depend upon. 

Commitment is an act, not just words. Bureaucrats need to show their commitment to the people in the greater oil and gas economy. And to do so in a credible way. We would note and advise them that in publishing our commitment our Intellectual Property is protected and unavailable to them for their use. The ideas expressed within his blog and the Preliminary Specification are for the purposes that we set out here. Therefore whatever commitment they’ll provide will have to avoid the use of what is expressed here. As law abiding corporate citizens we know this is understood, recognized and will be respected. This would apply as well to any of our competitors who’ve supported what we describe the “corporate model” in their applications. We also understand that this issue is moot from the bureaucrats point of view. They weren’t interested in doing anything with People, Ideas & Objects et al throughout our history, why would they want to start anything regarding aspects of our blog or Preliminary Specification without us. 

As our previous post detailed with the definition of the Artificial Intelligence module. There is an infrastructure, organizational method, data model, technological framework and other aspects proposed throughout the Preliminary Specification, our user community and service providers that will fulfill the commitment that we’ve expressed in the words of this blog. Granted these are just words as the bureaucrats have rightly belittled us for. In my defense I would state that we’ve never received a penny from any oil and gas producer during the entire 30 years that I have been committed to making this real. (May is our 30th anniversary.) Proof that I’m either certifiable or I’m right. Since the industry is in such disarray, it didn’t get to this state last night, and the bureaucrats existence is threatened through the disintermediation that occurs within the Preliminary Specification. I am therefore satisfied in any state of mind that I’m right. It would be satisfactory to all those within the greater oil and gas economy, understanding that the bureaucrats commitment is wholly self-centered, to at least see some words as to what the plan for the future may be. After all, they’re just words, it would be so easy to do so, and think what it might do for their credibility. 

If being right was all that drove me I’d probably have been satisfied in Grade 1. People, Ideas & Objects Preliminary Specification provides oil and gas producers with the most profitable means of oil and gas operations, everywhere and always. We are driven to have the greater energy economy throughout North America succeed. And ask the question why hasn’t it been successful from a spectacular point of view every day of its existence? It is the only industry involved in the exploration and development of products that are irreplaceable, irretrievable and unrecoverable. Who gave us the right to exploit these resources at the expense of future generations without accepting the obligation of handing them a prosperous, capable industry in which to manage their needs, and without the ability to use the market mechanisms determining what the commodity prices should be based on the actual, total cost of that exploration and production plus a reasonable profit. It’s only in that way that these resources can be sustained for the long term. Instead what we have is devastation at the hands of a very small group of people who have felt entitled. How can such a valuable resource be so badly mismanaged? Sitting on top of a primary industry whose revenues represent the entire greater oil and gas economy and dictating their approval / disapproval with their left thumb. With great power comes great responsibility and all that we’ve seen is its abuse and self aggrandizement. Acceptance of this responsibility might be reflected in a commitment that consists of “just words.”

What the Preliminary Specification et al has presented through our commitment is a solution to the issues in the North American oil and gas industry. Profitability, everywhere and always. If the property's cost structure exceeds the commodity price being offered in the market, then it is shut-in to enhance the corporate profitability, save the reserves for when they can be produced profitably and remove that marginal production from the commodity market. To highlight only three of our many advantages. Providing an inherent ability to deal with the cost escalation of each incremental barrel of oil produced. As time passes the easier production is produced leaving the more costly and difficult oil and gas remaining. Our model accommodates this cost escalation at each and every property, each and every day with each and every barrel of oil produced. A reasonable approach to the oil and gas business. Assuming it was operated as a business and not a personal bank account for surreptitious purposes. Recently we identified four new trillion dollar cost categories that would need to be dealt with by the North American oil and gas industry. These included the final recognition of what we’ve described as the bloated balance sheets of the producers property, plant and equipment account, or as we’ve described them more accurately as the unrecognized capital costs of past production. Therefore these four new cost categories are recognizing these capital costs of past production, refurbishment and rebuilding of the infrastructure, capacities and capabilities and reclamation costs. Suggesting that the recognition of the category of unrecognized capital costs of past production, when recognized, would be able to generate the necessary cash to provide the liquidity to fuel the industry for the next generation. This process is the simple retrieval of the investors cash that has been consumed in the fraud of “building balance sheets” and “putting cash in the ground.” The expectation that investors and bankers will line up for a further fleecing is beyond ludicrous. The only line up I see them forming is at the courthouse. The only source of cash large enough to approach the financing of the future costs and difficulties of the industry are the consumers of the oil and gas products themselves. Passing the actual, factual costs onto them in a timely manner is the only business that will be acceptable and profitable. 

In addition to the four new cost categories we identified seven crises the industry is facing in the current term. Any one of which would be adequate to consume the time and efforts of the brain trust of the producer firms. These crises were listed as. 

1. The chronic and systemic overproduction that is evident across the North American production profile since at least July 1986. There is no evidence of even any recognition of this as an issue in the bureaucracy today. 
2. The coronavirus impact in the short and long term. Long term being the work from home phenomenon and its impact on commuting and air travel. 
3. Debt levels in the industry are at critically high levels based on the current financial statements. Due primarily to several decades of low interest rates. These were supported by the high values of property, plant and equipment which are now suspect and being written down aggressively when triggered by SEC investigations and audits. Leading to increased leverage levels that will precipitate remedial actions on some banks behalf. Cutting off many producer firm's last lifeline to funding.
4. OPEC+ could resume their war on North America (or Russia) at any time. With 5 / 6 mm boe / day available post virus, high $60 oil prices are tenable. Natural gas prices at 22.8 times oil, rehabilitation of that market has clearly not begun, considered or committed to.
5. Industrial capacities and capabilities of oil and gas producers and the service industry are in steep decline. Senior service industry representatives such as Schlumberger and Halliburton appear profitable and satisfied with their exit from North America. Which is fine as far as the bureaucrats are concerned, the question they should concern themselves with is how do they get them back?
6. Bureaucratic motivation. Litigation, insurance company policies and sinking ships are great distractions to occupy one's time while inside the firm. For those stuck outside, not so much. 
7. The Biden Regime. 

As with the capability to deal with the never ending cost escalation of oil and gas exploration and production. People, Ideas & Objects Preliminary Specification provides oil and gas with a profitable and flexible organizational structure that is capable of dealing with these crises and cost escalations. But those are just words once again. Words that are comprehensive in scope and scale, deal specifically with the issues and opportunities in oil and gas, forming a coherent, viable, sound and workable business model. One based on the people, technology and culture of the oil and gas industry. This is however, just our commitment, but please remember commitment is an act. Where are the words reflecting the commitment of the bureaucrats. What actions have they taken to even address these points. Drilling wells is not a business model. Cost control is not a business model. What is their commitment, how will they implement it and where is it that we can see this commitment reflected by the producer bureaucrats? If it’s just words, where are theirs?

In their pursuit of unauthorized changes to clean energy, (will the Annual General Meeting finally seek approval for this fundamental change in business?) drilling, “capital discipline” and the consolidation miracle we’re witnessing. We see no discussion about profitability or how to attain it by any of the producers. It is in fact the pursuit of clean energy that proves they haven't been profitable and have no understanding or plan on how to rehabilitate their organizations profitably. No discussion of how they’ll approach the changes in the business or how they propose to solve their difficulties. An industry focused on tomorrow's crises doesn’t have the luxury of naval gazing about 2030 or 2035. It’s business as usual for them and People, Ideas & Objects claims of profitability everywhere and always, or the issues it resolves, have no interest to them whatsoever. They have better things to occupy their time and energy with. 

The successful oil and gas producer will be the one that commits to using People, Ideas & Objects Preliminary Specification, our user community and service providers and be bureaucrat free. Why would investors and bankers continue to fool around with a bureaucracy that feigns not to know what real profits are, are only interested in themselves, have no financial resources in which to proceed and a future that we’ve defined at People, Ideas & Objects as a wall of incremental trillion dollar cost escalation and unending crises. They’re not going to be the ones in a decade from now feeling like they’re the bigger fool. Producers that are not committed to recognizing or addressing any of these points and have proven this over and over again in their behavior these past decades and through the scope and scale of destruction they’ve authored. It’s only themselves they’re fooling this time. 

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. 

The Tragic State of Affairs, Part II

 The one thing that People, Ideas & Objects have been able to prove over the past fifteen and one half years throughout our writings on this blog is our general concern for oil and gas. And the fact is the bureaucrats don’t care about the business. So if we talk about the tragedy that is the current state of affairs of the oil and gas industry the audience we are speaking to is everyone else as it's always been. All of our attempts to convince the bureaucrats of their need for action have been in vain and I really don’t expect any of that to have changed. Although bureaucrats have been put in personal financial and legal jeopardy. Enough jeopardy to materially impact their quality of retirement and the value of their personal holdings. Their ability to act remains in doubt and by giving them the benefit of the doubt, that they would act at some reasonable time and in some reasonable way, would be foolhardy on our behalf at any time. To be clear it must be difficult for bureaucrats to understand and appreciate the difficulties they’re in and to finally realize that they’re alone and their situation has become untenable. The speed of business today is blisteringly fast. The speed of the issues of the oil and gas producers officers and directors are facing are far greater than what humans could handle. Their organizations are dinosaurs in terms of what is possible. I am in no way soliciting sympathy for their cause. The traditional strategy they’ve employed would have seen them exit their role in the organization and avoid the fallout. I’m thinking they left this one too late and are unable to do so at this time. They’re trapped for all intents and purposes. If they should happen to leave the producer firms, they’ll lose control of the leverage they have in managing their personal legal and financial risk. . 

Enough of the bureaucrats, let's talk about the details. The past couple of months we’ve been able to document the demise of the industry in a number of series here at People, Ideas & Objects. They’ve painted a picture of the industry as it stands today from my point of view and although some may feel it’s a unique point of view. It defines a steep downward trajectory that accelerates unabated each and every year. My assertion that this has been in place for four decades can provide an understanding of the momentum behind its current trajectory. Much like a log rolling down a hill, catchable in its initial stages, becomes progressively more difficult as time passes. The future of the industry is what concerns me and how do we get to the point where the North American continent can consistently and profitably produce oil and gas to achieve and maintain energy independence. Where consumers are provided with the lowest possible cost of energy that keeps their economy as robust and growing to maintain its dominant position in the world. Imputing that producers would be dynamic and innovative in order to attain their profitability. Where the next six generations, or however long, of oil and gas exploration and production are maintained in a profitable and healthy greater economic environment where everyone can benefit and grow. To hand down an industry that is healthy and prosperous to each new generation for them to continue as the situation demands. 

We have suggested that the current environment that exists is the greatest difficulty that the oil and gas industry has ever faced. Not one area has been left undamaged by the inactions and purposeful ignorance of the bureaucrats. People throughout the greater oil and gas economy are the ones that have lost the most. They trusted the bureaucrats, and to a large extent many still do, the sting of betrayal is sometimes hard to accept. However, once the betrayal occurs there is no going back to the trusting relationships that existed before. Either the people who were betrayed will leave or the bureaucrats must go. It’s a simple choice. 

What is it that the bureaucrats are offering? I don’t know. I can not discern that they understand or appreciate their own organizational difficulties or much beyond their own skin. It is therefore fair and reasonable to project that more of the same will be happening. With the current trajectory there’ll be no volunteers willing to step in front to die for the cause. I suggested the producers were too far gone for the Preliminary Specification to get involved in the producer's business during July 2019 in the publication of our White Paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” Maybe more people will now see my point. A fundamental rebuild of the organizations within the industry are what is necessary through the development of the Preliminary Specification to define and support the organizations necessary for a dynamic, innovative, accountable and profitable oil and gas producers and industry. Where we provide the most profitable means of oil and gas production everywhere and always. An appropriately researched solution based on the fundamental culture of the industry, the Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. A ten year research effort that defines what the industry and producer firms would need to look like and how they would operate to adopt that organizational construct. The Preliminary Specification is the result of that research which is a 200,000 word, 12 module definition of a workable business model that functions in the way that a 21st century industry and organization needs to. 

And what is it that we now know about the bureaucrats that I honestly did not know at this time last year and only learned in the summer of 2020. It was in my June 2, 2020 blog post that I discussed a nuance and dynamic of officers and directors liability insurance that was at best brief. The logs to my blog blew up. It was one of many comments in the post and therefore I didn’t know specifically what it was that attracted all the attention. That is until Reuters told me on June 9, 2020 in their article entitled “Shale Companies Look to Bolster Insurance for Officers and Directors.” My naivety and stupidity hit me all at once. For decades I’ve been detailing the consequences to the industry and producers of the bureaucratic inactions. That's where I was being foolish. Bureaucrats don’t care. We can say with perfect clarity they’re only in it for themselves and the fact that they felt personal financial risk and legal jeopardy was the only cause to immediately upgrade their insurance. It also made me realize I had to change my focus. 

What proof did I have that this issue has been evident for four decades? Another good question that I’d never answered directly and one that I relied on my own understanding of the history of the industry. Therefore I set out to prove the overcapitalization leads to the commensurate over reported profits, which leads to investors rushing in to capture those profits, leading to overinvestment which produces overproduction. And as we further defined overproduction as unprofitable production. These are simple basic business principles. Then I stumbled in the most circuitous route imaginable upon a newspaper article in newspapers.com (paywall) that hit all the high notes. A set of July 26, 1986 Calgary Herald page 33 articles that document the desire of OPEC to work within the greater oil and gas market to deal with the consequences of low oil prices. The first article is entitled “OPEC Minister Can See Economic Destruction” and its opening paragraph is. 

Qatar’s oil minister has called on both non-OPEC and industrialized countries to cooperate with OPEC to work out a policy aimed at restoring stability in the world oil market or face grave consequences. 

But in Kuwait, the United Arab Emirates petroleum minister said OPEC has no alternative but an oil price war until rival producers agree to reduce output. 

This coming from 1986, which I assume means the overproduction was well in place for OPEC to have raised it as a concern, as they did in the article, as the justification for the war they had declared on North American producers, and the reason for flooding the market with oil till the price hit $10 U.S. I then noted that this was documentary evidence of these chronic business symptoms, that were discussed above, going back to at least 1986. I then noted the Preliminary Specification as a solution was published in December 2013. A solution that I have been working on in several different iterations of software companies since May 1991. The North American producers response to this, as it has been every day over the past four decades, was to continually increase production in a declining price environment, creating losses that would be offset by new investors being called upon annually to make up the cash shortfall. Shareholders that had been motivated by specious accounting that reported profitability throughout this time. 

If I, who am too thick to understand that bureaucrats only work for their own interests, could see the problem in 1991 and eventually develop a solution by 2013. Why couldn’t the bureaucrats just read the Preliminary Specification? But they did. I have a multitude of evidence of the interactions that People, Ideas & Objects has had with producer bureaucrats since the publication of People, Ideas & Objects Preliminary Research Report proposal in August 2003. This was the founding document that proposed the use of the Joint Operating Committee as the key organizational construct of a dynamic, innovative, accountable and profitable oil and gas industry and producer. The basis of the research undertaken to develop and publish the Preliminary Specification in December 2013.

Putting two and two together. If the issue was evident on a global basis in July 1986 why was no action taken by the bureaucrats for the past 35 years? We’ve seen in the shale era a further deterioration of the business into natural gas and last year's obscene oil prices. Yet, nothing but excuses, blaming, and viable scapegoats from the bureaucrats as they “muddle through.” Creative executive compensation however has placed oil and gas companies bureaucrats in the top three in terms of all industries. 

Shareholder litigation against the producers, and specifically the officers, has therefore begun. Exxon and Apache are currently the subject of several proposed class action lawsuits seeking certification. The SEC has begun an investigation into Exxon and is sending subpoenas to many of the shale producers. These investigations and lawsuits are either directly or indirectly on point to the issue of overcapitalization through to overproduction. The SEC investigated and prosecuted PennWest for the capitalization of operations and royalties which subsequently destroyed the organization. Clearly the SEC’s message was not heard by all the producers during the PennWest case and I’m not of the belief that this time the investigations and prosecutions will stop at a single firm. They’ll need to make an example of a much larger population of producers in order for the concept to stick. The point I’m making is that the bureaucrats' reliance on “our policies are within the guidelines and regulations” is nothing more than a viable scapegoat used for the past few decades to justify their overcapitalization of these costs. The SEC never issued any guidance stating that what has happened is acceptable. Basic business practices state that this would never be acceptable. Bernie Madoff’s prison sentence of 125 years states that this type of practice is never acceptable. That the culture of the oil and gas industry has developed to where this is acceptable by producers, by their CPA firms who are allegedly there to safeguard shareholders from such ludicrous actions, to such a scope and scale, for this long is going to go down in history as a primary failure of bureaucracy. 

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 People, Ideas & Objects Will Achieve Success, Part V

 People can intuitively understand and appreciate the need for profitability in oil and gas. The lack of profits has had a devastating effect on producers, the quality of life of all of the people who work there and each of the many industries that are directly employed in the service of oil and gas. This difficulty may be somewhat hidden as a result of the initial and current virus related lockdowns. The need for profit is well understood through its absence. Therefore adopting profits as our purpose, which has been our focus from the beginning, by industry, its people, the producer firms, service industry, its investors and bankers is something that everyone can resonate with. We’re unable to survive without the profitability that we seek. The role of the investors is not to fund the bureaucrats insatiable addiction to spend money. Investors will never have that much money. Investors play a critical role in making decisions as to what happens, where, when and why. They’ve decided that the lack of profitability is unacceptable. The capital needs of producers is beyond what they’re capable and willing to provide. Particularly those trillions of dollars we’ve identified in the categories of rebuilding, refurbishing and reclamation costs. Costs that have no capacity to provide a return on investment. Investor action of withholding their financial support should have triggered the remedial actions necessary to avoid the protracted depression we’ve found ourselves in. However, bureaucrats are obstinate. And it would appear that the potential increases in oil and natural gas prices could lead to the success that bureaucrats have always found in the industry. It's just that no one else ever gets to share in their success. If we continue on in this destructive, bureaucratic direction for the next decade, who’ll be the biggest fool of them all?

An easily expressed purpose of profitability is relatively easy to define. You know when you see a profitable activity and what is not. Wholesale changes to the organization to pursue objectives in other industries such as clean energy with zero emissions targets will never create profitable operations in oil and gas. Why are bureaucrats doing it? Is it the opportunity to fleece an entire new class of “willing and enthusiastic” investors? If People, Ideas & Objects, the user community and service providers accounting are reporting that an oil and gas property is unprofitable that’s a drain on the organizations profitability. The need to cease the drainage of value should be seen as an immediate necessity with actions taken to figure out what to do with the specific unprofitable investment. What opportunities are available?  The Preliminary Specifications price maker strategy ensures that all production is produced profitably. It also establishes the necessary organizational infrastructure throughout the industry to enable and encourage innovation. Can costs be innovatively reduced or reserves expanded, deliverability may be enhanced or should the property be sold to a partner or adjoining facility? Innovation is used to ensure that the consumers are provided with the lowest costs. Sitting idly by while value is flushed from everywhere in oil and gas, stating that you're profitable, you just need more cash, isn’t working. Will the move to “clean energy and zero emissions” be 2021s viable scapegoat just as “waiting for a cold winter” was in 2010? Implying a new sophistication in the creation of excuses, blaming and viable scapegoats, after all it has been a decade, and bureaucrats must have developed and evolved in some aspect of their lives. Recently Shell announced (additional?) 9,000 layoffs for the next 2 years with no salary increases or bonuses for anyone. Their transition to clean energy is their focus and to be honest I never thought Shell would be one of the first to just give up. Another alternative route being offered is Chesapeakes who gloat they now have 85% less engineers and geologists post bankruptcy. Exciting times in oil and gas! 

Our White Paper was entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” for a reason. The bureaucrats have lost the script and don’t know what business they're in. Shale has disrupted the oil and gas business model. Changed the industry from scarcity to abundance and there has been no change in how the industry approaches the business. Investors believe that shale is not commercial and have seen no response or reaction from industry otherwise. Claiming profitability and earning profitability are two fundamentally different approaches and demands. Spelling out the future of the industry in the Shell or Chesapeake world only demands a high tolerance to pain. People, Ideas & Objects, our user community and service providers invoke a vision throughout the industry where the future is established in a way that is secure for those that choose to pursue oil and gas. Those interested in clean energy can choose that field to move to. Our vision has a demand where everyone needs to concern themselves with the justification of what they’re doing is profitable. And if not, how to constructively remedy that. A dynamic world of thinking constantly about what you're doing and interacting with your environment to ensure that everyone remains moving forward, dare I say profitably building value. As we know with this objective and purpose in mind, if that isn’t evident to the individual today, it can be easily learned with the appropriate feedback that some call accounting, and a sense of profitably building value can replace the daily grind of daily attendance and participation in the bureaucratic malaise of “muddle through.” 

Speaking of accounting and real profitability. We need to separate the reporting of property, plant and equipment from its determination of the value of the firm. This has become the cultural means of what is done in oil and gas. Any cost that is incurred, except for royalties and operating expenses are capitalized to property, plant and equipment at high percentage values in order to attempt to replicate the value of the reserves on the balance sheet. The reserves can be detailed in the Management Discussion & Analysis of the Annual and Quarterly reports. They are a clear reflection of the value of the firm based on how the producer has conducted their operations and the success they’ve achieved, or not, in the form of oil and gas exploration and development. These are a subjective science and the methods used to report these numbers are by independent third parties who use the same criteria somewhat consistently across the industry. They are reconciled and updated on a biennial basis and provide worthwhile and valuable information. When the value of the firm is thousands of feet below the surface it’s the reasonable method of reflecting what the organization is worth. 

Accounting is no such animal. It has nothing to do with value or what the outcome of the management has been. That value is to be determined based on the reserves and the equity markets based on the investors perception of that value. Accounting doesn’t come into that part of the equation. Oil and gas needs to move away from the perception that accounting must reflect value. What accounting does is evaluate the management on the basis of how they performed from a financial perspective. Did they perform financially, were they profitable in a financial sense. Have they been accountable for the money they’ve spent etc. It is quite possible that the situation occurs on some basis of reasonableness that the producer built significant value in terms of the exploration and development of oil and gas reserves, but could never report a profit. What is the purpose or value of those reserves if they can’t be produced profitably? Conversely, a producer may be abysmal at exploration and development of their reserves base, yet are a wildly profitable producer, in the real sense of the word profit. What is the value of these two producers? How do any of the producers fall within the scale of both reserves value and financial performance? We don’t know and will never know due to the culture seeking to have the property, plant and equipment account achieve what their reserves value is. CEO’s running around town flashing their balance sheets off as to who “built” theirs bigger and better than the others and how much “cash they put in the ground” that year. These are what the industries objectives and culture have developed into and become. The industry does not have a commercial basis of its measurement in today’s environment. The homogenization of the producers financial statements shows they’re all in serious financial jeopardy, yet they all have spectacular property, plant and equipment balances. 

This discussion essentially seeks to balance the science reflected in the reserves value with the commercial environment that the industry must operate within. What the investors have been telling the producers for five years now. When accounting is seeking to replicate the same scientific outcome, increasing property, plant and equipment as quickly and as high as the reserves value, the commercial objective is lost. “Build balance sheets,” “put cash in the ground” become the guiding objectives that are pursued by the bureaucrats. The Preliminary Specification seeks to make the commercial assessment of the industry based upon each of the Joint Operating Committees. Where their accounting assessments will be done on an independent, standard, objective, variable cost and industry based capability delivered to the Joint Operating Committees by the service providers. Where producers will know and trust the outcome of those assessments and where their costs of capital, in a capital intensive industry, will be reflected in the cost of the commodity sold to the consumer. So the invested capital of the investors can be retrieved by the consumers' use of the commodity and that capital is used again repeatedly to maintain and expand the assets, pay down debt and send dividends back to the investors. What can we say about stuffing the ground with cash? I have to say producer bureaucrats were effective in deferring any early interest in the Preliminary Specification by claiming it was crazy. Turn around is fair play.

Recording of capital assets in oil and gas has been an issue since the SEC passed their regulations in 1978. The cultural distortions that have been generated as a result of those had become obscene, in my opinion, in the 1980s. Today they’ve destroyed the industry. It is not as a result of what the SEC published in 1978 that I would place the blame, it was how they were immediately interpreted throughout the industry. The difficulties grew from what I feel is a misinterpretation of these regulations and how they’ve formed the culture of the industry today. The quote that I find the most clarifying as to what is and should be, is the following from Investopedia.

According to the Securities Exchange and Commission (SEC), oil companies are required to report these reserves to investors through supplemental information to the financial statements.2 It is important to note oil still in the ground is not considered an asset until it is extracted and produced. Once the oil is produced, oil companies generally list what isn't sold as products and merchandise inventory.

I would suggest that bureaucrats may have also misinterpreted this statement when they say in absolute harmony. “We are in compliance with all the regulations.” And they’ll state this unequivocally due to the fact that they’re not claiming the “oil is still in the ground” it’s that “you have to put cash in the ground.” See they’re in compliance when they refer only to the cash! It’s not just the oil that’s slick. Here are the governing SEC regulations for your reading and sleeping enjoyment. 

Prior to the earnings season I suggested that the haunting message that may be coming from the producers audit firm may be the going concern opinion. This may have been some overreach or just prescience on my behalf. Of the few producers of our sample that have reported only two have reported their audited financial statements. The remainder will be issuing their audited statements in April and May as part of their Annual Reports. Of these two, both are Canadian companies, do not file 10Q or 10K reports and I can’t tell if it is exclusively a Canadian issue at this time. But in both audit instances, as with most of the companies in the industry, 2020 realized significant impairments to the property, plant and equipment account. And as a result one of the firms produced a Critical Audit Matter (CAM) and the other a Key Audit Matter (KAM) regarding these writedowns. In both instances the CAM and KAM did not render an audit opinion on the specifics of the issue, but were part of the overall audit opinion that the financial statements represented fairly the financial situation within the producer firms. KAM’s and CAM’s are assessed based on Cash Generating Units (CGU’s) ability to generate cash returns. How do these audit firms account for the change when prior years audits accepted these results? It is uncertain and unclear who triggered the CAM and KAM in these instances. Justifications that these writedowns were triggered due to the effects on the business by the virus or climate change are viable scapegoats as far as I’m concerned. If the cash generating units no longer support the assets recorded value in property, plant and equipment that is more than a virus. As I was apparently premature in raising the issue of over capitalization and its implied, inverse over reporting of profits, which is obviously not a CAM or KAM as reported by the auditors in prior years, maybe I’m just premature in my comment regarding the audit opinion including the dreaded going concern kiss of death. I always asserted that overreporting of assets and profits are what ultimately led to the demise of Bernie Madoff, Bernie Ebbers and Jeffrey Skilling. That is because it’s outright fraud and each was sentenced in excess of 20 years of prison, 150 years for Bernie Madoff. Let’s see how 2021 play’s out.

Understanding that during the summer of 2020 we documented that the overproduction issue has been present in the industry since at least July 1986. The Preliminary Specification has been available since December 2013. The identification of these points in time motivated the only known action from the oil and gas bureaucrats in the past ten years. That action consisted of having the producer firms increasing the coverage of officers and directors insurance. I asserted at that time the actions of these bureaucrats in increasing the insurance coverage implied guilt and culpability. However as we sit here in early 2021 with no resolution, we still see no evident conscience. Could I apply the same logic and assert a guilt and culpability to the audit firms in documenting their Critical Audit Matter and Key Audit Matter of 2020? Especially when they know the timing and accuracy of recording capital assets is a key issue and primary purpose in Accounting? 

What we should all be asking the bureaucrats when they stand up in their Annual General Meetings this spring are the following questions. Why is it that only the personal compensation and risk to the officers and directors motivate any action? Explain to your shareholders why it is that you're not concerned with producers' real profitability for these past 35 years? Why is reorganizing to ensure profitability everywhere and always considered crazy and too radical, yet transitioning to clean energy and zero emissions is not? Why is it that just punching a clock day after day is acceptable? Where is the requisite focus necessary for success within the producer firms beyond “building balance sheets,” “putting cash in the ground” and why has the industry become such a drain on society during their watch? Will this continuous display of weakness by these bureaucrats continue the decades long losing streak that the industry is experiencing? I’d ask what the plan is, but I think any direct admission of guilt by them in a public forum would be contrary to the bureaucrats best interest. The last question would have to go along the lines of; if now is not the time for change and action, when would be?

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.