The Preliminary Specification Part CCCXVII (PA Part XXXVII)

Our discussion turns to the Work Order system contained within the Partnership Accounting module of the Preliminary Specification. We have different elements of the Work Order system working within the Partnership Accounting module. One is to ensure that no work is being done within the producer firm or Joint Operating Committee that is not authorized by a Work Order. And the other is the ability to form working groups with other producers, who may or may not be partners, to study and research areas of interest. Both of these elements contain similar objectives of cost control and reporting, however have differing stakeholders.

With respect to the internal reporting you want to make sure that all of your staff are charging their time to an authorized Work Order. A Work Order can source its budget from either an internal departmental account or an AFE and be for any purpose that the originator desires. Each employee needs to ensure that their time is being charged to a Work Order at all times.

The other element of the Work Order system involves multiple producers working together in a project or working group. These are formed to study or research items of interest in the geological or engineering disciplines and are critical to an innovative oil and gas industry. The difficulty in these working groups is the complexity and cumbersome administration in dealing with the accounting for them. This has led to the situation where few working groups are being participating in. The industry needs an abundance of these working groups to increase the knowledge and understanding of the underlying sciences and therefore we need to remove the bureaucracy from impeding their being formed.

People, Ideas & Objects will develop an interface that enables the producers, who may have had no working relationship, to form and contribute any manner of consideration towards a working group. As long as the producer has a budget in which they can allocate resources to the working group the interface will enable the producer to commit to the other producers these resources and the working group can form. The key to the working groups formation is to have the system capture the “what and how” of the agreement when it is formed, and not try to recreate it two months down the road.

What we will use to develop the Work Order system will be the Oracle Fusion Middleware Business Process Management Suite. It will provide us with the ability to work with the user groups to detail all the permutations and combinations of what these working groups might look like. From there we will be able to develop the application to meet the needs of the user groups and make sure that the user interface provides the working group with the ability to capture the deal as it is conceived. This will also involve the use of the Oracle Fusion Applications Financial Management Suite General Ledger, Accounts Payable, and Accounts Receivable which are already part of the Preliminary Specification.

Whether it is an internal or external study, the innovative oil and gas producer needs to participate in increasing their knowledge and understanding of the underlying sciences. We learned that “knowledge begets capability, and capability begets action”. How these working groups are formed is the easy part. It's the bureaucracy that gets in the way. We need to eliminate that bureaucracy with these systems and have the sciences expand.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry. 

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCCXVI (PA Part XXXVI)

It has been the tradition in the oil and gas industry that people who work in the field are charged directly to the Joint Operating Committee or joint account. When people are located in the head offices, such as the geologists and engineers, they are covered by the overhead allowances that the operator is able to charge to the joint account. What is different in the People, Ideas & Objects Preliminary Specification is that we have addressed the long term shortage of the technical resources of the engineers and geologists. We have done this through what we call the pooling of these resources by the participants in the Joint Operating Committee. Requiring that we charge these resources directly to the Joint Operating Committee irrespective of which producer firm the resource originated from. This enables the costs of the operation to be accurately captured, the producer to recover their costs and the resources needed for the property to be sourced from any of the producer firms that has the appropriate geologists or engineers for the task.

In the Partnership Accounting module we will have the ability of any producer within a Joint Operating Committee to charge a resource for the hours they have spent on a task. We have also developed the means in which the Joint Operating Committee can manage these resources once they have been made available. It is here when the Military Command & Control Metaphor (MCCM) comes into play that these resources are adopted when and where they are required. There has to be someone who is designated in command of the work that is being done and the resource can be put to good use immediately. Otherwise some producers would just charge their staff out all the time. Review of the Security & Access Control module will show the extensive use of the Oracle Identity and other products that are used there. These are the base in which we will build the MCCM.

In addition to the Oracle Fusion Application Financial Management Suite General Ledger, Accounts Payable and Accounts Receivable modules we will be using the Oracle Fusion Application Human Capital Management Global H & R Payroll module. There the costs of the resources can be billed out to the joint account at their actual costs. Technically it will need to be worked out how each producer is able to charge the joint account for these costs. However, that does not present too difficult a task when we have the control being handled through the Joint Operating Committee and the MCCM.

The ability of each producer to have the just-in-time capabilities to deal with all of their earth science and engineering demands in-house is diminishing. Building individual silos of capabilities was possible when there was an abundance of these resources. Now with a diminishing supply the ability for each producer to maintain their own silo creates unused and unusable industry wide capacity that needs to be unleashed. This is also creating overall shortages of these key resources. With this proposed solution, and with each producer pooling their resources, this unused capacity is freed up and used enabling the overall industry capacity to increase from the same resource base. The impediment to this happening is the ability for the costs to follow the producers commitments, and command & control of the Joint Operating Committee. By using these technologies, in this manner, the innovative oil and gas producers and Joint Operating Committees are able to pool their technical resources and increase the volume of work conducted within the industry.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCXV (PA Part XXXV)

Let's turn now to the comprehensive nature of the accounting that is done in the Partnership Accounting module of the Preliminary Specification. What ever kind of accounting that is done in the Preliminary Specification, whether it be for the producer firm or the Joint Operating Committee, the Partnership Accounting and Accounting Voucher are the two modules that capture everything the accountant user will need. From the General Ledger to the Financial Statements of the producer and Joint Operating Committees everything a user needs, from management accounting to financial accounting will be here.

To provide for this we will be using the Oracle Fusion Application Financial Management Suite of modules as the base of the Preliminary Specification. Included within that are the General Ledger, Accounts Payable and Accounts Receivable modules that will be used extensively. It will be here in the Partnership Accounting module that the People, Ideas & Objects user community will determine the need for the other Oracle Financial Management Suite modules of Payments & Collections, Asset Management and Cash & Expense Management.

It is important to stress the users involvement in determining the input, process management, function and output of this module. As with all of the modules within the Preliminary Specification this is your opportunity to define what it is that you need and want in terms of Information Technology in your firm. This should be looked upon as a once in a lifetime opportunity and there will be little opportunity to join the community once the Preliminary Specification begins. The time to participate is now, if you can see value in the development of the People, Ideas & Objects systems then you should begin the process and start to participate as soon as possible.

Outside of the core Oracle modules we will be doing a significant amount of development that will be key to the oil and gas industry. This will require us to drop down into the Oracle Fusion Middleware layer and access what is a very elaborate Java EE server. This will be used to provide the revenue and royalties systems that will build off of the Material Balance Report. Recall that the Material Balance Report is also being crafted at this layer. Management of the firm and Joint Operating Committees capital and operating costs. And of course the revenues, royalties, capital and operating will all have the capacity to be reported in gross and net values. Users may have extensive ideas as to how they want their data to be displayed, and they may want the traditional formats like the Statement of Operations and Statement of Expenditures. We have also talked about the royalty systems during the discussion in the Petroleum Lease Marketplace module and that discussion would apply to the Partnership Accounting module as well. It would be the determination of the user community if those calculations are done here or there. And the Gas Cost Allowances and how they are potentially unique for each owner in the Joint Operating Committee, and as such make the royalties unique for each producer.

As we will see in the Compliance & Governance module there are extensive capabilities in the Oracle Fusion Applications that enable the Balance Sheet, Income Statement and Statement of Changes in Financial Position automate the process of compliance. Updates to the regulations are done through Oracle and affect the Financial Statements that are submitted to the regulators. Such is the nature of dealing with automated systems. All in all providing the producer an automated system from field data capture to financial statement is a broad scope, and one that should motivate everyone to participate in this worthwhile endeavor.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCXIV (PA Part XXXIV)

Staying on the topic of the Material Balance Report and the technical risk that is associated with that element of the Partnership Accounting module of the Preliminary Specification. We find that the access privileges to give the right people, the right information at the right time would be nightmarish in their scope. I agree, particularly from the point of view of having the participating producers who are members of the Joint Operating Committee reviewing the information contained in the Material Balance Reports. In addition with our zeal to have the industry operate more efficiently we have opened these interfaces to the production and royalty accounting service providers who need access to the Material Balance Report to do their job on behalf of the producers in the Joint Operating Committee. Why can’t we just print out a Statement of Operations for each producer and be done with it?

In answer to that last question, its automation. With so much of the production process subject to amendment, much time and effort is expended in making the corresponding changes in the subsystems that rely on the processes in the Material Balance Report. If the Material Balance Report reflect fact, although it would still be subject to multiple amendments, then the subsystems that operate off of the Material Balance Report could use its information to compile their data. Royalty volumes might change, and the royalty calculations would change as a result. All without user involvement, etc. As long as the Material Balance Report remained in system, partnership and material balance, everything that depends on that data can be relied upon from a volumetric point of view. Any of the volumetric amendments would be populated through the system immediately.

To address the access privileges issue we should turn to the People, Ideas & Objects Technical Vision. There are four technologies that make up the Technical Vision and they include Java, IPv6, Asynchronous Process Management and Wireless Networks. What these technologies provide, specifically Java and IPv6, is unlimited addressing of unique named spaces. So although the number of variables in terms of Joint Operating Committees and the number of people that will have access to them will grow to a tremendous size, all of the systems will be capable of handling the unique nature of each individual requirement. In other words the base capacity of the technologies can handle the demands.

What we have also learned is that the information contained within a Joint Operating Committee is not of the confidential nature to any one producer. The reserves, accounting, strategy formulation and internal discussions of the producer firm are held within the firm and are not party to the Joint Operating Committee. The only information that is held in the Joint Operating Committee is of a semi-private nature that is shared amongst the partnership. Information such as production, costs, well file and other data that is usually available from public sources as well. Therefore, having the producer firms, and the service providers accessing the Material Balance Report does not expose any one of the producers to any material risk of any highly confidential information.

Turning to the Oracle Fusion Middleware stack we look at the Business Process Management Suite to help us understand how the Material Balance Report can be built. How we can take a unit of production through the various gathering and functional units on to the ultimate point of sale. Having the balancing of each functional unit consider that unit of production and the activities associated with it. Noting for the producer or the owner of the gas plant the costs and revenues of processing and gathering, and the disposition of the product to the contract it is sold under. Each of these processes and activities triggering actions within the General Ledger and creating an invoice and sales records for both the producer, the plant owners and the holder of the gas contract. Automation of the process based on reliable volumetric facts.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCXIII (PA Part XXXIII)

Yesterday we discussed how the Material Balance Report would be built using the Oracle Fusion Middleware layer of the Oracle stack of technologies. The Material Balance Report in the Partnership Accounting module ties together so many of the internal processes of the producer firm and Joint Operating Committee. The production and royalty accounting, sales contracts, nominations, to name just a few, all of which have to match the throughput of the facility or the point of production, and all have to match to other systems within the firm or Joint Operating Committee. Any change in one system will have to be dealt with by designating some other action to bring the system back into balance. The Material Balance Report is a key part of how the production and operations of the oil and gas industry manages their production and product delivery. And to achieve this, it assumes that the industry is willing to actively participate in the development of People, Ideas & Objects Preliminary Specification.

Technically this is one of the more difficult areas of the Preliminary Specification in terms of risk. It would also be one of the areas where value would be gained by having the production properly accounted for in an automated fashion. Should this be done? That depends on the user community and their determination through the remaining part of the Preliminary Specification. A large part of that community is the producer community itself. If the producers see value in this then they will have to be the ones that push through and make the Preliminary Specification real. I can only write about what is possible. And the Material Balance Report as I have expressed here is technically possible.

The next twenty years in the oil and gas industry will be the most dramatic we have ever seen. The demand for energy will ensure that prices remain high. And with so many people joining the middle class, should we really be debating who will fund and drive People, Ideas & Objects forward? The financial recession has us locked in a perception that is backward looking and we can’t see the opportunities that will soon be upon us. Does that future involve an Information Technology perspective that is just a cost, or should it be a vision such as the Preliminary Specification as it stands today.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCXII (PA Part XXXII)

It’s the accountant in me that gets excited when I look at the Oracle technologies that will be used in the Partnership Accounting module of the Preliminary Specification. Under the Oracle Fusion Application Financial Management Suite there are the following six modules that are included in the Preliminary Specification. General Ledger, Accounts Payable, Accounts Receivable, Asset Management, Payments & Collections and Cash & Expense Management. It is unknown at this time if the last three modules will provide any value to the oil and gas producer, and therefore will leave it to the larger community to determine whether they remain.

What we need is a solid mission critical, as they used to describe it, general ledger for the innovative oil and gas producer and Joint Operating Committee. Oracle has competed in this arena since the late 1980’s with their own technologies. They have also focused their energies outside of their core database technologies on ERP systems by acquiring a number of the top vendors in the business. When it comes to the business of ERP systems there are SAP and Oracle as the two titans in the industry.

When it comes to the technologies that these systems are built upon Oracle, in my opinion, wins out in a very big way. Their new strategy is hardware and software engineered together. And they have the industry leading products to do just that. With Oracle Servers, Oracle Operating Systems, Oracle Database, Java, Oracle Fusion Middleware and Oracle Fusion Applications all being industry leading proprietary technologies. SAP is only able to compete on the application layer. And Oracle’s technologies are new. All of the Fusion products have been written within the last five years as a result of a significant investment in Java and their database technologies.

When we developed the Preliminary Specification we used modularity theory extensively. Both for the organizations involving the firm, the market and the Joint Operating Committee; and the technology as defined in the modular definitions. Oracle has also used modularity theory in the development of their Fusion products. Enabling us to build industry specific functionality that works seamlessly with their technologies. Everything that we need to build from scratch will be built from their Oracle Fusion Middleware layer. Which is exactly the same point where Oracle started in the development of their Oracle Fusion Applications.

So when we begin to write the code for the Material Balance Report we will be standing on the shoulders of giants by using the Oracle Fusion Middleware as the basis of where we start. And we will be using the General Ledger, Accounts Payable and Accounts Receivable, as a minimum to provide the innovative oil and gas producer and Joint Operating Committee, no matter their size, with the mission critical capabilities of the industry leader in all of these product categories.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCCXI (PA Part XXXI)

The most productive use of our time would be to review what we have so far in the Partnership Accounting module of the Preliminary Specification. So let’s start off with what looks like a contradiction in terms of where the functionality for where certain accounting is handled. In “The Preliminary Specification Part CCLXVI (A&S Part XIII)” I stated “Both in the Analytics & Statistics and Performance Evaluation modules each Joint Operating Committee becomes a stand alone reporting entity. Each property should have financial accounting reports that are prepared monthly. These could be generated here in these modules. Having a balance sheet, income statement, and statement of changes prepared for the Joint Operating Committee and for the producers interest would provide real value for those trained in reading financial statements.” Which is valid however, the real source of those reports should be in the Partnership Accounting module where they are standard output for all producers and Joint Operating Committees. The Performance Evaluation and Analytics & Statistics reports would be considered more ad hoc.

It is with that point that we should note that the Partnership Accounting module is the source of all accounting information for both the producer and Joint Operating Committees. This includes General Ledger detail, Trial Balance and anything and everything in between. More is detailed in Part I of Partnership Accounting. It is also the source of the Material Balance Report that it and the Accounting Voucher are involved in preparing. Recall that the Material Balance Report is comprehensive in the People, Ideas & Objects Preliminary Specification. In that it balances all production and facilities material each day and month for all products. It must balance from a material, partnership and system point of view each month within the Accounting Voucher. It relies on the same integrity that the accounting systems debits and credits relies upon. Make a change in one area and it has implications in many other areas that need to be considered before the systems will resume its overall balance.

Pooling of the earth science and engineering resources of the producers need to be chargeable directly to the Joint Operating Committee. This is a replacement for the overhead allowances that are provided for in today’s marketplace. With the shortage of these critical resources pooling of the technical resources in order to make up any shortfalls will be the means in which producers ensure each Joint Operating Committee is adequately resourced. Therefore any and all of the producers within a Joint Operating Committee need to have the capacity to charge their resources to the joint account and recover these costs. In addition, once the Joint Operating Committee is adequately resourced a means in which to govern those resources is necessary and that is provided through the People, Ideas & Objects Military Command & Control Metaphor.

The innovative oil and gas industry needs to increase its overall level of knowledge to become more innovative. We have learned that “knowledge begets capability, and capability begets action”. The ability for producers to participate in working groups with other producers on a ad hoc basis will be one way in which to increase the knowledge of the industry and the producers who participate in these working groups. The ability to form and participate in these groups is difficult due to the complexity of the way they are organized. The Work Order system of the Partnership Accounting module details a method in which these groups can be formed and contributions can be made on a variety of different basis. As long as a producer has budgeted resources in some form then they are able to commit to the working group and participate. The objective of the system is to remove the bureaucracy and nightmare accounting from these so that the Working Group can form and the innovation of the industry can proceed.

And we have talked about some purely accounting related matters here in the Partnership Accounting module. Things like how the accounting cutoffs are handled, currencies and some of the special requirements that some jurisdictions have with respect to accounting months and production months. We also talked about how the system will have only one electronic copy of any document or voucher. Then users will be viewing only the latest in terms of the status of that document.

Who would be conducting most of the accounting for the producer and Joint Operating Committee would be different in the People, Ideas & Objects system. Through the application of specialization and the division of labor the accounting needs will be completed mostly by service providers. Production accounting service providers who are resident within a gas plant area and service all the producers who use that gas plant. Revenue and royalty accounting service providers who specialize in specific royalty jurisdictions exclusively, etc. This would also extend to the production and exploration administration areas. All of these costs would be charged directly to the Joint Operating Committee as the designation of operator is a concept that is relegated to history in the People, Ideas & Objects system.

It is that direct charging of the administrative costs to the Joint Operating Committee that enables us to move from the “High Throughput Production” model to the “Decentralized Production” model. The “Decentralized Production” model provides us with the ability to match the production and overhead costs to the revenues of the property. Therefore, when the property is shut-in, there would be no overhead incurred and the property would not incur any operating losses. It is through the “Decentralized Production” model that the producers would be able to establish a market floor for the oil and gas prices they would receive.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCX (FM Part XXX)

Once the producer has made the decision to invest in a property it is at that time they agree to participate in a Joint Operating Committee. Depending on how that JOC is structured will determine how the investment is managed from that point forward. If the producer has significant influence in the voting rights then they will be able to assert their ways otherwise they will have to work within the framework of the structure that is set up. That operational decision making framework is one of seven framework in the Joint Operating Committees which also includes the legal, financial, cultural, communication, strategic and innovation frameworks. Alignment of these frameworks to the compliance and governance of the firm is achieved through the eleven module People, Ideas & Objects Preliminary Specification. This alignment provides a speed, innovativeness and accountability that is not otherwise achievable in the current bureaucracies.

In an ideal world, the initial investment of the producer can be leveraged with debt. As we have already discussed this debt can be undertaken with a general assignment of the property itself. Therefore further aligning the equity and debt holders within the frameworks that we mentioned. So what does that mean. Making the reasonable assumption that all of the participants within a Joint Operating Committee are there to earn a reasonable return. Everyone has the same objective. Financial reward drives consensus. Everyone at the table has made the same percentage share investment, and with debt encumbering the property and only the property the scope of the decisions are within the domain of the property. In this ideal situation the resulting speed and focus of the decision making is consistent with an innovative oil and gas industry.

Not all investments will be able to be undertaken with bank debt or revenue from the property. Some will have to be sent back through the decision making process of being evaluated by the producer in the “Capital Allocation Interface” of the Financial Marketplace module. However, due to their low risk profiles they usually have a higher probability of being invested in. There is also the fact that the performance of the property is enhanced by the leveraging of the property by the debt. The return and risk profile that was used to evaluate the property in terms of investment worthiness by the producer did not assume any debt would be taken on. The debt is assumed once the property is successful and is producing. The debt is leveraging the return that the producer used in making their decision to proceed with the investment in the property. Therefore with much higher returns the property most certainly will be evaluated for further investment. At which time this new investment will be turned over to the Joint Operating Committee to manage further.

Tomorrow we will start with our fifth pass through the Partnership Accounting module.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCIX (FM Part XXIX)

In previous posts we had discussed how the innovative producer would need to balance their speed and performance with control over some decision making processes to ensure they maintained the appropriate investment balance within their organization. This post will discuss in more detail how the Financial Marketplace module of the Preliminary Specification provides these sometimes contrasting objectives.

The speed and performance come about as a result of the demands from the capital markets. Investors want to deploy their capital at the critical moment when the results are about to be achieved. Such is the way of their business. Having their capital turnover quicker is a means to making it more effective. The innovative producers that are able to replicate this turnover within their organization will gain market recognition for their speed and performance. Let's call this the gas pedal. Speed is good but not at the expense of performance. Drilling a series of dry wells quickly doesn’t impress anyone. It is easy to understand what a reasonable approach involves when it comes to making this tradeoff.

There also needs to be a means to control what the firm is involved in in terms of investment criteria. This can be managed through the “Capital Allocation Interface” of the Financial Marketplace module. All investments are assessed based on their expected returns and providing for certain risk profiles. It is imperative that the firm evaluate every opportunity and critically review the results to ensure their investment selections are appropriate and within the framework of what the producer is able to carry out. Let's call this the brake.

And let’s be clear, most if not all the producers have these processes operating within their organizations. And not within the financial domain. What is proposed here in the Financial Marketplace module is controversial because of its administration of these processes within the financial jurisdiction of the organization. One in which this falls under the responsibility of the Chief Financial Officer and is administered in the Financial Marketplace module. It is my opinion, that the CFO will continue to move away from the financial to a more technical background. Having a geologist or engineer as the CFO will become the norm in the future. The CFO will have the technical accounting aspects provided to them by their accounting firm, the service providers and the staff that they employ. Their ability to discern which projects to proceed with will be as a result of the collaborations conducted within the speed, performance and control decision processes and their participation in the senior management or C class executive meetings. However, having these decision processes managed by a CFO who is an accountant would be the same as giving the keys to your Ferrari to a teenager, what positive outcome would you be expecting.

To manage these processes we turn to the Oracle Middleware layer and specifically the Oracle Business Process Management Suite. We need to take these from the spreadsheet and ad hoc nature that they are currently managed under and put them through a defined and rigorous process that meets the organization's needs. From the C class executives to the people who are grinding out the calculations. The decision process needs to be defined and managed by the software within the organization. It also needs to be highly collaborative with the decision making process well documented. It will be in this way that a firm can then learn from what its doing wrong, maybe most importantly. But also from what it is doing right. Right down to the detail of who came up with the idea and who pushed it through. And then you’ll begin to be able to answer who it is that is responsible for that last big success in your firm.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCCVIII (FM Part XXVIII)

Let’s get to the real issue that has to be dealt within the Financial Marketplace module of the Preliminary Specification. The cash. With each Joint Operating Committee being funded and operated through its own bank the cash of the producers will be scattered through a variety of accounts that are held within the various Joint Operating Committees they have an interest in. Or will they. Through this post we will trace the cash that is generated through the properties and the various operations that occur in the day-to-day of an oil and gas operation. What we will find is that from a cash balance point of view, the balances that the producer holds will be fundamentally unchanged between the People, Ideas & Objects method of conducting business and the way in which it is done in the majority today.

What happens today is the net proceeds from the operation of the property are determined, each working interest share of those proceeds are calculated, and depending on if the property is generating or consuming cash a check or invoice is sent. The difference in the People, Ideas & Objects system is that in the case where the property is generating cash instead of issuing a check, the balance will be transferred. In the case of where the property was consuming cash it would still send an invoice, and there would have to be some operating advance provided for the Joint Operating Committee to deal with the short falls while these invoices were being processed by the producer firms. In times when there are capital expenditures cash calls will offset the demand for cash.

One of the other key differences in the People, Ideas & Objects application modules is that the Joint Operating Committee is open to contributions from all of the participants. Producers are pooling their resources in order to fulfill the requirements of the property and that demands that everyone participate in some form or fashion. Each month these contributions are equalized in the process of determining the net cash payable or receivable and will be accounted for in the joint venture billing in that manner. These equalized amounts will affect the cash balance in terms of the size of the payment and a producer could be compensated for the two components through the joint venture billing process. One would be the net proceeds of the property. And the second aspect would be the amount of their contribution in excess of their working interest.

We have specified the Oracle Fusion Application Financial Management Suite as part of the Preliminary Specification in previous modules. For purposes of these cash management activities we will of course again be using the Suite for these purposes. I would caution readers that the manner in which these accounts are cleared have not been worked out. That is the purpose of the Preliminary Specification. These are still early days and it is problems such as these that need to be resolved with the $100 million budget. Today, the optimal method of dealing with clearing the balances in the joint account is through clearing accounts in the general ledger. There is no reason that we can’t modify that concept to allow for the contributions of all of the producers within a Joint Operating Committee to contribute to the joint account, be equalized and then cleared.

From another perspective, the interfaces to the variety of banks and producers accounts for deposits and withdrawals will be an area that will need to be worked through. Although this is not offering a technical issue as all of this is being done today, the volume of transactions will be high in comparison to today’s traffic. Banks are well prepared for this. Producers not so much. Particularly in the area of Compliance & Governance. Having automation of this type and at this level will make many people wince. They can continue with the paper based systems if they choose, the practical solution is that we build these systems with the appropriate internal controls to ensure that the process is managed efficiently and effectively and without the risks associated with this type of activity.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry. 

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.