Never Means Never

Oil, and to a lesser extent, natural gas prices are suffering from the market’s surprise that “more” oil or gas haven’t been removed from the production profile. North American production being up over one half million barrels is confounding the marketplace. If you've been reading this blog for the last year or more, I've been suggesting that this would happen. The bureaucrats can't, won't and will never change. They also don’t care. I found this interesting quote that provides some understanding of why this happens and some insight into the future direction of the oil and gas bureaucrat. It’s from Henry Kissinger who states.

When enough bureaucratic prestige has been invested in a policy, it is easier to see it fail than to abandon it. 

We also have this “never means never” dilemma facing the raising of our budget. The bureaucrats fight us at every opportunity that they can. Their actions against us are subtle and more oriented to my frustration level than anything else. You see the difficulties in other technology companies having their products implemented in the marketplace. Uber is being aggressively pursued by the New York Mayor. Hillary Clinton has commented that she’s not a fan. The vested interests that are aligned against those with alternative business models have difficult protracted battles ahead of them. Our ability to raise our budget is something that on most days seems to slip further away. Unlike Uber we can’t be operated as an app on someones phone. We have a much broader scope and scale that needs to be developed in order to provide the solutions that the market needs. We do however provide a substantial value proposition once we've developed those application modules of the Preliminary Specification. And that is the choice, a profitable industry with our solution, or continued financial destruction with the status quo.

The real key to our future and the quality of our product is our user community. We continue to focus on its development over the next few years as we await developments on our budget. The question I guess is how much pain can the oil and gas investor handle. The user community will never commit to us in the volumes necessary until such time as the financial resources are secured. We can however communicate with the larger community and get the word out about what it is that we are doing. Have the people in oil and gas understand the process and methods we are using to solve the issues in the industry. Have them informally prepare themselves for the day when we do finally receive our budget and then they can join the community. This is highly constructive work that we are doing today and the audience that we are reaching is growing and is substantial. Without the Internet this would have taken an immense effort and a reasonable budget to accomplish. Today that is not the case. And we can continue to do this for the foreseeable future and make this all happen. I'm not surprised that I am not the only dissatisfied person in oil and gas, I am however surprised at the enthusiasm of our targeted user community. This is doable.

One thought that I continue to speculate on and maybe the oil and gas investors can think more about. Is regarding the raising of our budget needs. Imagine what would happen to a producer's stock if they funded their share of People, Ideas & Objects budget. What would happen if the investment community put pressure on the board of directors of a producer to forward their share of our costs. Understanding the impact of the Preliminary Specification, the going concern concept and the efficient market hypothesis. Would that producers market capitalization then reflect the value of the producer as if they were operational on the Preliminary Specification on a proforma basis. The theory is put into practice every day. And if the bureaucrats were smart, they could maybe earn an extra year or two of quiet vesting of their pensions while we were busy doing our work. Think about that.

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

The Asset Swagger

In oil and gas assets are things that you collect on your balance sheet. The more that you have the bigger the swagger that you can carry off as you walk down the street. These are the governing principles in oil and gas. Shale properties are pursued by bureaucrats because they are consistent with the governing principles of the industry. They are costly, leading to higher balance sheets. Have steep decline curves, which lead to less and less recognition of any depletion of those assets in subsequent years. They are the perfect asset to pursue.

I'm paraphrasing here but I think this is the general operating procedure and logic being employed by the bureaucrats. It seems to be the only logical reason why we are doing what we are doing. At the end of the year the firm will be so much bigger because we blew so much investor money that they'll be impressed. So the bureaucrat thinks. Now that’s performance.

I have argued here on many occasions my difficulties with the capitalization policies used in oil and gas. The SEC dictates that either full cost or successful efforts define the maximum amount that a producer can record as their assets. Either method bloats the balance sheet by including everything under the sun as an asset on the balance sheet. But what accounting firms and bureaucrats don't seem to understand is that the SEC defines the outer limit. Any reasonable business person would look at the balance sheet of a producer and state that it is overstated, or more appropriately, bloated. When did reasonable lose its application to assets in oil and gas? I think it was around 1978.

Assets are not collectables, they are costs that need to flow to the income statement. For a healthy firm and industry, the sooner the better. There is no reason for an industry to be carrying the last two decades of capital expenditures on its balance sheet. The only reason that you would do so is to make the bureaucrats look like they're “performing.” Sure the producers have been reporting profits, but if you never recognize the cost of capital, in a capital intensive industry, you're going to report profits. Note too however, these profits as a result are of the paper variety. If these profits were real, the producers would be flush with cash. Almost no producer has positive working capital. An industry that operates on negative working capital! And they provide no return to their investors, in general. Clearly the overproduction has been endemic for decades fueled by the deception of a profitable industry.

This is a fine critique but what are the alternatives. There are two things that we will be doing in the Preliminary Specification. First is we will be including the cost of capital and actual overhead into the calculations of prices necessary for the Joint Operating Committee to earn a profit. These price calculations will be done on each and every property and well in the industry. They will be accurate and timely. On the basis of these calculations the producers will then be able to determine if the Joint Operating Committee can be produced in the current commodity price environment. If it can produce a profit, then it will produce, otherwise it will be shut-in.

The second element of our policies is that we will employ a different capitalization policy. One that recognizes the costs of exploration and development in a more timely fashion. What is generally considered controllable equipment in the industry, pump jacks, tubing, wellheads, etc will be capitalized. The uncontrollable, and more specifically the intangibles like drilling day work, cementing, logging and fishing will be expensed in the current period. Irrespective of the results of the well. This change in policy will be consistent with the SEC requirements as it does not overstate the assets of the firm.

What these two policies will do is draw down the bloated balance sheets of the producers. Retiring these bloated asset costs and having them recognized for the costs of the business that they are. There would be no more fooling ourselves that producers are profitable. We would need substantially higher prices in order to achieve this profitability. A mechanism, the decentralized production model, is provided in the Preliminary Specification to bring prices to the level where they are covering the costs of the industry. This capitalization policy would also return the capital to the investors who have invested in the industry in good faith over the past decades. That is because the oil and gas industry is a capital intensive industry and oil and gas exploration and development is expensive. Giving the commodities away cheaply as we are doing now is only bankrupting the industry and leading to any number of bad decisions by industry and consumers. This is foolishness and it has to stop.

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

The Vested Pensions Business

We are nearing the end of the beginning of this oil and gas crisis. I have seen many downturns in my 38 years in the business. I remember the decline in oil prices in the 1980’s being the worst. It lasted for a long time and had an affect on people’s thinking about the industry for a generation. This is not a downturn like anything that I have seen before. This is the first crisis that has occurred in oil and gas. One that is particularly difficult because it could have been avoided with action from the current installed bureaucrats. What is clear by their behaviour in the past. Is that they can't, won't and will not do anything to correct the situation. It was their expectation that they would ride out another year telecommuting from their cabins at the lake. It's time to cut and run on these bureaucrats, they will never sort this out. It was clear to them that they had this scam running for another year, at least. The problem is the industry is deteriorating under the bureaucrats feet and it should be obvious to everyone by now that they just don't care. Its pensions, fully vested pensions, that’s the business to be in.

Our solution to the issues in the industry have been summarily rejected by the bureaucrats. It is clear when you read the Preliminary Specification that they are relics of the past century and have been dispatched to the history books in the process of implementing our solution. Which interferes with the business of vested pensions. Our solution requires significant changes to be made to the industry. With the level of distress that I see being generated in the near future. Our changes will be able to be implemented. In a normal environment we would have to compete with the status quo environment. With all hell breaking loose, people will be looking for alternatives. That makes our job much easier than having to compete with people who are comfortable in their lives and competent in their jobs.

The prototypical producer in the environment where the Preliminary Specification is operational. Will be a stripped down version of its current configuration. Consisting of the C class executives, the earth science and engineering resources, some land, legal and support staff. The administrative and accounting resources of the producer will be reorganized to service providers who are focused on a process or subprocess and will use the entire oil and gas industry as their client base. It will be in this way that we move from the producers administrative and accounting based capabilities to an industry based administrative and accounting based capability. By doing so we render all overhead from these administrative and accounting costs to be variable in nature, as opposed to their fixed nature as they are today.

With the administrative and accounting costs taking on the variable characteristic very little of the producers costs will remain fixed. Rent, lights, power etc for the head office but those will be for a smaller configuration than what they are now. The majority of their current overhead, the people and their associated costs, will be variable in nature in the following manner. With the service providers they will operate based on the activity they receive from the Preliminary Specifications task and transfer network. If a well is on production, then production is reported and the service providers that are required within those processes, revenue accounting, paying royalties, production allocations, etc are involved in those tasks. They will conduct their activities and issue a billing for the administrative and accounting activities they conducted to the Joint Operating Committee. Not the producer. If there was no production, none of the service providers will receive anything from the task and transfer network and therefore no activity will be incurred by the service providers and no billing to the Joint Operating Committee.

The producer will, as a result of this, know with better clarity than they do now, exactly what their profits are for any specific Joint Operating Committee. An allocation of capital, revenues, operating costs, royalties and actual overheads incurred by the service providers will give them a precise accounting. It will be on the basis of this accounting that if the property is not producing a profit. A profit that also considers the costs of capital and actual overheads. Then the property would be shut-in or suspended until such time as the commodity prices would provide profitable operations. While shut-in, nothing will be generated from the property to trigger any of the administrative and accounting service providers to conduct any of their activities in the task and transfer network. Therefore creating a null operation, no profit, but most importantly no loss either. Only the cost of capital is uncovered during times of shut-in production.

As a result of our decentralized production model. The producer saves these reserves for a time when they can be produced profitably. The commodity marketplace supply is reduced by the marginal production, leading to higher prices. And the producers report higher profits on lower production profiles. Profitable properties are not having to make up for unprofitable ones. This industry based organizational structure is what is required to deal with the abundance of the high cost, highly prolific shale based reservoirs. Dumping overproduction onto the marketplace just doesn't seem to be working. Unless, you're in the fully vested pension business that is.

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

Its the Bureaucrats Fault

Needless to say I see the situation in the industry to be rather dire. The capacity for producers to continue on in the manner that they are will be able to be assessed as soon as the second quarter reports have been digested. These will be published in the next two weeks and many will start to show the seriousness of the issues in oil and gas. Bureaucrats were granted a pass a few months ago. During annual report and annual general meeting season they said they had the situation well in hand. This was on the basis of their reports being based on derivative income and no one questioning their capitalization policies. We have learned since then that most of their hedges have been expiring. And just last week Morgan Stanley was questioning why producers were not writing down more of their shale based assets. The situation, as represented just two months ago, may not be in hand in May of 2016. It is therefore time to revisit the decision of leaving the bureaucrats in power from now until May 2016 when we know that things are not as they were represented. Remember misrepresentation is fraud.

But then again maybe the producers will report record profitability this quarter. The point is I think people are watching and the fact that the bureaucrats are doing absolutely nothing about the business of the oil and gas business is very disconcerting. They were going to leave it alone for the remainder of the 2015 calendar year and just earn another years salary, bonus and vesting of their pensions. After all that is all that matters. It is irresponsible what is going on and they should be held accountable for their actions. This is a serious matter. The oil and gas industry is not the candy business. They have a duty to fulfill and this current era of unprofitability will lead to declines in capacity and capabilities.

The bureaucrats will never make the necessary changes to deal with the issues in the industry. They never have had the capacity to implement change. Muddling along has been the strategic operating procedure that has worked in every instance before. And maybe it will work again. Or we can develop the systems in the Preliminary Specification, organize the user community and service providers and structure the industry in a manner that deals with these issues today, and whatever issues and opportunities come our way in the future.

The Preliminary Specification provides the producer with the capability to implement the “price maker” strategy. Simply they do not produce any property that can’t be produced profitably. By suspending unprofitable production they save those reserves for a time when the commodity prices are higher and the property can be produced profitably. They reduce marginal production from the commodity marketplace leading to higher commodity prices. They are able to be the most profitable that they can be at lower production profiles. The profitable properties are not having to carry the unprofitable ones. This logic is contrasted to the high cost, low price, overproduction the producers are involved in today.

The bureaucrats can’t change to this simple idea in their current configuration. They employ the high throughput production model which requires full production at all times in order to cover the significant overhead costs. And of course we know where the most significant elements of the overhead costs are, the bureaucrats. So there'll be no more discussion of this point.

We can provide this change by implementing the Preliminary Specification which uses our decentralized production model. We'll discuss the model and our implementation more tomorrow but for today lets point out that the second quarter reports will be out soon. They should be the justification for action. That all is not well in oil and gas. Something needs to be done. And I guess you know what I would recommend.

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

The Issue

The issue in oil and gas is that it is unprofitable. There have been changes in the industry in the past decades that remain unaddressed by the current bureaucracy who operate the industry. These changes, which include the move away from the scarcity of the resource base, to an abundance of the commodities in North America. Require new business models in which the oil and gas industry can operate. The bureaucracy will have none of it, and refuse to make any changes to their existing business model. They are fine with the status quo, as the structure of the industry serves their personal interests. Outside of the personal interests of the bureaucracy, no value is realized by anyone. Profits are the source of an industry's health. Other than paper profits that are derived by never recognizing the capital costs incurred in the exploration and production process. The industry is as unprofitable as an industry could conceivably be. Surviving on other people’s money for the past decade. A never ending downward slide in the quality of the capital that has been sourced by the industry has occurred since 2008. Relying mostly on junk bonds these past few years, this avenue may too be closed to them as the junk bond markets fall into distress as a result of the quality of their investments in oil and gas.

As a result of this lack of profitability governments are short changed on their tax base, investors realize no share in earnings and no upside in their investments, staff are cut and the service sector has their revenues slashed or are faced with cannibalizing their assets. Only the bureaucrats are happy. The changes that are occurring in the industry as a result of the shale discoveries are what makes all the difficulties ever present. The over production as a result of the shale discoveries will continue for as long as there are shale reserves. In natural gas that is best measured in centuries. At the same time the costs of these reserves are amongst the highest of any form of oil and gas resource. High costs, low prices and overproduction would lead most people to adjust their business model. The self interested bureaucrats have no motivation or desire to make any changes. They are fine, thank you.

We discussed the difficulties that the industry was having and how the bureaucrats needed to make the changes by adopting People, Ideas & Objects Preliminary Specification. It contains the decentralized production model that enables the “price maker” strategy for the oil and gas industry. Producers will suspend production that can not be produced profitably. A simple idea but one that can not be implemented in the current bureaucrats business model. What is needed is the budget to build the Preliminary Specification and for development of the user community. And at the same time have our service providers develop alongside of these. This change would solve the problems, for that there is consensus. There is consensus that this change will eliminate the need and the desire for the bureaucracy as well. Hence why no money has been forwarded to People, Ideas & Objects.

Information Technology is providing the means for many changes in many industries. The disintermediation of many industries has occurred, is ongoing and eventually will affect all industries. Oil and gas is not immune. However, I would suggest that the oil and gas instance is acute as a result of the unaddressed changes that have recently shaped the industry. It is a financial basket case. It will not survive for long in the manner that it is being operated. It is also the most important industry in terms of our advanced societies survival. A robust and healthy, or profitable oil and gas industry is necessary for the continuation of our species.

If we secured our budget today, we have many years of work ahead of us. Don't expect “instant” miracles from us. We have a significant undertaking to accomplish and that takes time. More time than the industry has money? Probably. It will be a difficult transition.

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

User Community Business Opportunity Part III

Members of the user community are business professionals in the oil and gas industry. Operating primarily in the domains of administration and accounting. You and your team from the service provider that you own and operate will provide the oil and gas industry with the management of their process that is your exclusive domain. Although there is no direct competition for the process you manage. There is significant indirect competition from all of the other members of the user community and the service providers that they own and control. The competition comes in the form of the means of automation, the manner in which work is divided between computers and people, how the division of labor is implemented in the service provider and the level of specialization they are able to achieve in the processes they manage. This is the competitive environment that you will compete in. You won't be faced with someone who shows up one day, taking your ideas, and establishing a similar service at half the price. The “me to” types of competitors are unable to provide any value or profitability to the oil and gas producers. Their focus is on the cost of the service and the oil and gas producers will not become more competitive based on the lower costs of the user community and service providers.

The simple fact that we won't license anyone to operate in your domain or in the process that you manage is the way that you can be assured that your focus remains on the competition at the higher level attributes that I mentioned. And without a license the people that may want to infringe on your territory will be unable to access the software needed to manage the process on behalf of the oil and gas producers. With the decentralized production model, the industry configuration of the user community and service providers enables the price maker strategy for the producers. This is the source of the majority of the value that is earned by the producers. There is also significant potential value to be earned through the user community and service providers applying their toolkit of a software development capability, further automation of the process, specialization and the division of labor. To have this focus distracted by having to compete in the short term on the price of the service, because someone wandered into your domain, can't, won't and will not happen with the licensing of the Intellectual Property that is the basis of this community.

One of the things that we are doing by establishing this community is we are in essence setting up a sub-industry. A sub-industry that resides between the technological industry and the oil and gas industry itself. Specialization and the division of labor evolve by way of filling gaps. There is a gap between the technology firms and the oil and gas producers. They don't speak each others language or understand one another's needs. SAP thinks producers should get closer to their customers. After 38 years in oil and gas I don't think I've ever met a customer of an oil and gas producer. Its this type of disconnect that we are resolving by establishing People, Ideas & Objects, our software development capability, the user community and service providers to fill the gap between oil and gas producers with the technological firms. We are focused on providing the oil and gas producers with the most profitable means of oil and gas operations. Which means we are business professionals first and foremost.

There is therefore a secondary requirement that the user community and service providers need to have as part of their toolkit. They need to understand the technologies that they are using at a very high level. It is highly probable that the user community participant will be, at times, entering the code base to make changes. This probably won’t go beyond XML however, to edit XML you need to understand the rest. Now nothing will immediately be changed as a result of the user community participants code changes. All changes by everyone will have to be processed by a committer on the People, Ideas & Objects software development team. There will be a process in place. In order to have this capability, of editing XML, the user community participant is going to have to know XML, Java and relational theory as well as most of the people who work in the technologically based companies. Oracle is a big part of our solution and they own most of these technologies. Therefore to collaborate with them is a necessary part of your role as well. To relay what the business needs are in the technology.

That is why we have asked that the user community participant have the background in technology that we are asking. If you don't have the understanding of those technologies there is time at this point to get them. Many universities offer courses in these areas and I highly recommend that people take the time to learn these technologies. I think know it will be a necessity when we get to where we're going.

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

User Community Business Opportunity Part II

People who are interested in becoming participants in our user community need to assess the risks that we described in yesterday’s post. Those risks include the high probability that People, Ideas & Objects may not obtain its funding. In order to assess this probability a potential user should make an assessment of the situation in oil and gas today. Are the producers earning the profits that they report? And is the situation of chronic and systemic overproduction sustainable? What will be the outcome of a continuation down this road? The people who may be interested in the Preliminary Specification as an alternative need to read the document to determine whether it is a viable solution. And if it is, assess if it is the means in which to resolve the industries difficulties. Are the calculations of the value proposition between the two different business models as stark as the $45.7 trillion reflects?

This is a difficult assessment that needs to be made by each potential participant in the user community. I am putting out a vision of the industry based on what I think the issues are and how I think they should be solved. I expect that people who are going to participate in this software development, the user community and service provider, need to fully understand what it is we are doing and how we are going to do it. Organizing this will need to have many people on the ground knowing where to turn and how to get to the final destination. There won't be much hand holding, if at all. We will need people who are fully apprised of the direction we are moving and believing that what we are doing is in the best interests of society, the industry, producers, the Joint Operating Committees, the service industry and the people who are involved in oil and gas. Being fully informed and having an opinion as to our future is necessary for each of us to move forward.

This is not your traditional software development. Usually the decision is made to implement SAP, the “experts” come in and spend a few months talking nothing but acronyms, and then someone says we'll need some users. Its at that point the budget is breached and the software is turned on and the user is expected to figure out the new applications in isolation. At People, Ideas & Objects we are spending as much time as we need to develop this user community. Providing them with a comprehensive vision of how the industry should operate through the Preliminary Specification. Empowering them through the licensing of the Intellectual Property throughout the lifecycle of the applications. And ensuring that they are the ones that remain in control of the business models and critical aspects of the applications. This is very different software for a very different industry structure with a very different outcome. Providing the oil and gas producer with the most profitable means of oil and gas operations.

Until we are granted the funds we need to develop this software and support the user community. It is important that we continue to keep those that are interested in the user community as confidential and secure as possible. The bureaucrats would love nothing more than to punish people for their participation here. So they're always on the look out for anyone who would be so unwise as to volunteer their name. It will not be me who speaks their name in any way and for that you can be sure.

People have complained about the onerous process of making application to become a user community participant. Yes it is onerous. That is due to the significance of the role you will be taking in the process of changing the industry. The quality of people that we are looking for. And the difficulty in organizing these developments and the need for this information to help in the logistics of this development. The more we know about you the better we are able to make the appropriate assessments and the better we can place you in the appropriate areas. I know these take time, but time is what we have while we wait for the frustration level of the investors, or whoever will fund us, and give up on the bureaucrats. Contrary to what we are used to doing in oil and gas today, we are focusing on the long term solutions for the industry.

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

User Community Business Opportunity Part I

Our user community preparation continues. We cannot begin development of the Preliminary Specification until we have the user community in place. Since the majority of the participants in the user community will be working part-time throughout our development. And will only commit full time to this project when the need for the service providers begin. Much can and needs to be done before we even get to any of those points. People, Ideas & Objects do not have their budget secured. Nor is the probability high at this point that we will have it secured. This project has a high risk of it forming. Nonetheless the organization of the user community can begin and involve nothing more than putting in place some of the pieces that will be needed when and if the time does come.

People, Ideas & Objects are relying on the user community to be the source of the quality of the software that we develop. We are looking for individual participation in the user community. Those people with the skills, experience, knowledge, ideas and understanding of the oil and gas industry from a hands on point of view. We will not be turning to the Accenture’s, KPMG or Deloitte & Touche’s of the business world to source our users. Our expertise must be derived from the people on the ground. This is a different approach to the way that applications have been developed in oil and gas before. We are building this community to include approximately 3,000 users in order to obtain the broad scope of the Preliminary Specification and achieve the diversity of understanding contained within the industry. Nothing of this size has been approached before.

The user holds a unique role in the ecosystem that will be developed for this software. Working with our developers to determine the wants and needs of the industry and then designing and implementing those within the application. We have budgeted one third of our overall costs to go to the user community. This community is a permanent fixture within the industry and will continue to develop new applications and prepare changes to the existing base. During any year we expect to incur approximately 600 man years of the user communities time in the development of applications. Therefore it would be reasonable to assume that this would average approximately one day each week in terms of time commitment during development from each user community participant.

The remainder of the time the user community participant is going to be active operating the service provider that they own. This will be closely tied to the area of expertise that they have within the People, Ideas & Objects application and the specific process that they have developed. They will provide the producers and Joint Operating Committees within the industry with the software from People, Ideas & Objects and the necessary services to support the process they specialize in. Each service provider will be responsible for a single process or subprocess in the application and will use the entire industry as their client base. This is a fundamentally different approach to the business of oil and gas. Since most of these processes will fall under the administrative and accounting domains, the people that are currently employed in the producers that are conducting those activities will be moved from the producers to being employed by the service providers. The payments made by the producers in terms of payroll and benefits to their former administrative and accounting personnel will now form the revenue base of the service providers.

The user community will be designing the Preliminary Specification processes on the basis of this industry configuration. The use of automation, specialization and the division of labor will be the competitive advantages of each of the service providers. Licenses for the service providers will not overlap from one process to another. Each firm will have the exclusive domain of the process they are licensed for. Some exceptions will apply particularly in the production, revenue and royalty accounting areas. It is this design that will be fundamentally different than what exists today. You may manage a simple process and the volumes of data that you deal with will be large. However that does not make the process management easier. I expect that the level of understanding and sophistication regarding each process will explode in terms of innovation and value add for the producers and Joint Operating Committees. And of course, we do all of this in order to make the decentralized production model the effective business model in the oil and gas industry.

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

500,000 Barrels of Oil Per Day

That’s one half of one million barrels of oil per day. The increase in production of the United States since the decline in oil prices began late last year. I have stated here many times that these bureaucrats can't, won't and will not ever change. And they only prove me right as time goes by. In terms of natural gas production it continues to increase even though prices collapsed five years ago. Shale gas production alone is up over 30 BCF per day since 2010 and the current U.S. production is 72 BCF per day in total. See any trends here? Shale is making oil and gas a business where there is an abundance of supply. However that supply is very expensive and very unprofitable. This new shale environment contrasts the manner in which the existing producers were developed. Then it was an era of low costs and scarcity of the resource. Have you ever seen a Leopard change their spots? Well you won't, and you certainly won't see a producer transform themselves from scarcity to an abundance business model with the current bureaucracy in place. You have to remove and replace them with a new business model that deals with the shale reservoirs. A business model like that of the decentralized production model of the Preliminary Specification.

A little off topic but relevant to the point of the bureaucracies. Does Fed Chairman Janet Yellen remind you of the 1984 analogy in the Apple Super Bowl ad. Droning on and never saying anything pertinent or of value. I have to ask, when is the women going to run into the theater and smash that screen with her hammer. As bad as her performance as Fed Chairman has been is the response of the business community in general. When did we hold a government employee as the key focus of our decisions. Somebody please smash the screen and break this mind numbing nothingness. Its difficult to see the producers lined up in rows in the theater watching Janet Yellen beak off about nothing. But how exactly did we start listening to economists again? It was September 2008 when they were saying the world economy was fine and all was well. That was the time they destroyed their credibility with me and I have ceased to listen to them. It is a dismal science.

If you think that bureaucrats will change and the business will become their focus again there is nothing I can do to convince you otherwise. There is more than enough evidence for everyone and anyone to determine that the oil and gas business is being fundamentally destroyed by the current bureaucrats. They have no plans, ideas or desire to fix what ails the industry. The only inspired activity they have shown in the last ten years is to engage me in battle. Other than that it is a self interested group who are doing nothing but ensuring that they are compensated well, their cabins continue developing, their pensions are vested and they have an escape plan for when it all does fall apart. In terms of the value generated for society little is being produced by the oil and gas industry outside of this and the value that the commodities provide the consumer.

It will be the individual actions of you the potential user community participant that breaks this monotony of destruction in the oil and gas industry. There has to be a group of people with the power and capabilities to make the changes in the industry to eliminate this 1984 scenario. The user community participant has the power to effect change in the industry. Using the tools of the Intellectual Property that is derived from the Preliminary Specification and the software development capabilities of People, Ideas & Objects. As well as your key role in the ownership and development of the service providers who will deliver the software and services to the producers and Joint Operating Committees. It is you the user who can make the industry dynamic, innovative and profitable again. Your participation is needed. If I haven't convinced you yet, pull up YouTube and search for Janet Yellen. Force yourself to watch a half hour of any of her speeches and then read this again. The only thing that I can guarantee you is that the bureaucrats won't, can't and will not change. And production will be up another 500,000 barrels by this time next year.

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

Not a Technologically Focused Solution

Its a difficult thing to state as the head of a software development firm. That we are not a technologically focused solution. There are many of those solutions in the marketplace and the bureaucrats are pleased to be working with those providers, and losing money doing so. We are living in exciting times from an Information Technology point of view. It is the beginning of the Information Technology revolution that we are experiencing in this day and age. There have been many attempts to implement these technologies into the marketplace of oil and gas producers. Most have failed due to a focus on the elements of some technological breakthrough that was going to solve the producers difficulties. All these other applications were attempting to make it so, however the technologies were too immature to undertake the load that they needed to carry. And technology is not part of the solution.

If we are not a technology focused software company then what exactly are we doing in business. People, Ideas & Objects have always focused on the producer firm and most particularly the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. If you read the Preliminary Specification we have included some discussion of the specific Oracle applications we will use to support our modules. This is to give the reader a better understanding of the overall technological architecture of our product. But the Preliminary Specification deals specifically with the issues and opportunities of the Joint Operating Committee and producer. It details the “what if” we did use the Joint Operating Committee as the key organizational construct of the producer. “How” and “What” would the producer, Joint Operating Committee and industry operate? This question is answered in the Preliminary Specification. It is about the ways and means of how people will work in the business and in the industry. It is not about technology.

The second aspect that proves our claim that we are not a technologically focused solution is that our primary focus is, and always will be on the user, or as we call them the user community participant. They are the ones that we have endowed with the power and control over the Intellectual Property that makes up the Preliminary Specification. Anyone who wants or needs to make a change in the software that runs the industry, there is only one group in which they need to see, the user community. Our developers will respond to the user community only. We are deaf, dumb and blind to all others. This commitment to being user community focused runs throughout People, Ideas & Objects. Review of our Revenue Model will show you that the ability and capability of this focus will continue. Our capital structure will not be compromised or redirected away from the user community focus. A difficult requirement which affects our development budget and the manner in which we are structured. This renders the shares of People, Ideas & Objects of little value as they will not be sold. And therefore my compensation comes about as a result of the Intellectual Property royalties that I earn. It is in our genetic code that the capital structure will not circumvent or reprioritize our direction away from the user community focus.

We provide the oil and gas producer with the most profitable means of oil and gas operations. That is the guiding principle of People, Ideas & Objects, our user community participant and the service providers who are involved in the community. This is what we sharpen our pencils for. The industry has to become dynamic, innovative and profitable. In order to do that it must be able to change the organizational methods it operates under. That requires that the industry acquire a software development capability consistent with what People, Ideas & Objects are providing. Our user community and service providers are a big part of that technological offering. However, they are also the other half of the equation. They are the service oriented part of the necessary solution to the success of our software. Technology is not going to resolve these problems. Its going to be the people who have the Information Technologies that are made available to them. And that is what I have done with People, Ideas & Objects. I have secured the Intellectual Property necessary for this ecosystem to operate. I have endowed the user community with the power and control of that Intellectual Property. We are now developing the user community, and as soon as our budget is secured, we will develop the software development capabilities to fulfill our value proposition to the oil and gas industry.

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