September 1, 2015

These next few months will be interesting for People, Ideas & Objects, our user community and service providers. The ideas and solutions put forward in the Preliminary Specification are consistent with the needs in today’s oil and gas marketplace. That is they are evident to everyone in the industry and financial community. Our time is now. Both from the point of view of having our budget funded and this community proceeding with our developments, and our ability to address the capacity and capabilities of society's energy needs for the mid to long term.

The issue of overproduction might be something that people are willing to give the bureaucrats more time to work through. I suggest their behaviour in the past year regarding oil prices is evidence enough that bureaucrats can't, won't and will not ever do anything to rectify these difficulties. As further evidence we can use the natural gas business and the approach the bureaucrats have taken to correct the overproduction in that side of the business. Nothing. And it has been over five years since prices slipped below the marginal costs. As even further evidence we can look to the situation from 1986 onward. Low prices continued for what seemed like decades due to the inability to shut-in unprofitable production. Bureaucrats just whined about how bad the business was in their annual and quarterly reports for year after year. And muddled through. Impotent, incompetent and unacceptable for the 21st century and the importance that oil and gas provides society.

Another year of this; do nothing, say nothing, it’s not my fault, will only lose that much more money. And that many more producers will declare bankruptcy. We don't have that time and these bureaucrats have done nothing to earn the respect and privilege to continue on in this manner. Action is required to change the industry from the passive “muddle along” strategy to the Preliminary Specifications decentralized production models “price maker” strategy. We have work to do and it needs to get done. The only way that that is going to happen is that our budget gets funded. It’s not what the bureaucrats want, they have fought me for ten years, and now they don't have a say. They've lost the right to be involved and to participate.

One valid criticism of People, Ideas & Objects that we will hear from the bureaucrats is that it’s just a product. And it’s just vaporware at that. Which are both valid points. For the larger part of the past 24 years I have been working on this myself, financed by my own resources, at great personal cost. What do you expect from one individual. The Preliminary Specification is budgeted on the basis of 5,000 man years of development effort in its first commercial release. The oil and gas industry has contributed less than $0.01 towards these developments. Bureaucrats know they are out of power in the world where the Preliminary Specification operates. Seeing the devastation that the industry went through in 1986 I knew that they would not survive another downturn due to low oil and gas prices like the one experienced then. When the technologies became available in 1991 to begin to solve the problems, that’s when I began working to make this solution real.

1986 was only on the oil side. The natural gas side of the business wasn't that big and it wasn't in that difficult of a situation. The U.S. was dealing with what was called a gas bubble, but gas prices were keeping producers above water. The natural gas prices today are so far underwater that they alone are all that is needed to drown the producer. The oil prices are now in the same territory. If producers do not begin to learn to listen to market signals and begin producing based on profitability, which they can only do with the Preliminary Specification, we will be in for a limited future.

I used to watch in awe at the phenomenon of no producer willing to cut production due to low prices. The conclusion I came to is that they can't, won't and will not ever do it. It is a bureaucratic nightmare to do so. And we see this playing out again. The time to fix it is now and these next three months will be critical to our success in delivering a product on a timely basis, or being late in terms of avoiding societal difficulties.

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. 

Parallels to the Former Soviet Union

With commodity prices as low as they are. The discussion in the marketplace has turned to the fact that producers will continue to produce as long as their cash costs are covered. This is the beginning of the destruction of the industry. Cannibalizing the business to pay for the overhead is a strategy of fools. It won't be too long under this scenario that we will find that oil and gas is unable to meet the demands of society, bureaucrats will then shrug their shoulders and say, oh well. This irresponsibility and capitulation by these bureaucrats shows that they are only interested in their own “take.” The laying off of engineers and earth scientists has also begun in earnest. What we saw in 1986 was the bureaucrats began competing with one another in terms of the depth of their cuts to their staff. A “watch this, I can cut even deeper than you” attitude. This trend will become evident in this upcoming quarter as they try to show who is the most prudent, and cash conserving, of the bunch.

Remember these engineers and earth scientists are highly educated. Probably average ten years of specific oil and gas experience. Are in their mid thirties and are facing a layoff! Not because of anything they did, only because the bureaucrats were too self interested and uncaring about the business to concern themselves with the long term. Remember too that I have been writing about these issues for almost ten years. Plenty of time for the powers that be to have done something. These engineers and earth scientists may be fully committed to the oil and gas industry. Have it flowing in their blood and are willing to cut the bureaucrats some slack. However, the poaching that technology and other industries may do of highly educated and dedicated people, as these other industries pick up, will be one of the key reasons that the capacity and capabilities of the oil and gas industry are permanently degraded.

Under the current scenario we will however have a fully staffed bureaucracy at the controls. And as the prices turn up, as the Saudi’s strategy has become successful and the shale era slides into the history books as the latest .dom, real estate, shale bust, we can sit back and think that with the endowment of those shale resources, with all that value that was unlocked by those brilliant technologies. We didn't have enough sense to make two nickels to rub together. It will be at that time the retirement of this brain trust, I’m talking about the bureaucrats and being sarcastic here, will occur and the complete collapse of the industry will have taken place. There are always imports from less reliable countries that aren't as advanced as we “enlightened” people are.

This doesn't have to happen. And by no means should it happen. But it is. In the Preliminary Research Report (2004) I noted that there were similarities between the former Soviet Union and the way in which the industry was operating. The Soviets collapsed due to the inability of letting markets decide what to do. The same thing is happening here. The bureaucrats don't do anything. They produce whether or not they should or shouldn’t. No one looks to the price as the determining factor as whether or not they should produce. Who cares what we get for the product, just produce it. It was foolish in 1986 and it is really foolish today. It will lead us to our demise in the same manner that the former Soviet Union faced. Complete collapse.

The Preliminary Specifications decentralized production model implements the price maker strategy on an industry wide basis. Using the profitability of the property as the determination of why a property should be produced or shut-in. A producer can maximize their profits at any level of its production profile due to the nature of all costs becoming variable in the industry under the Preliminary Specification. If the property doesn’t produce, then it incurs no costs, not even overheads. Therefore maximizing the profitability of the producers profitable properties, saving the reserves for the day in which they can be produced profitably and most importantly, removing the marginal production from the commodity marketplace.

Funding the Preliminary Specifications budget is how we will avert the nightmare scenario the bureaucrats are leading us down. The stock market is repricing itself on the expectation that interest rates will be rising over the next few years. This means that all asset classes will have to perform at higher levels, and that can be most easily achieved through lower asset values. This is killing the bureaucrats stock portfolios and their pension plans. They therefore are going to want to hang on for a little longer than they originally planned for. So the total destruction of the industry is pretty much assured if we keep them in control.

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. 

Money and Power, Part III

Members of our user community have the power to ensure that society is provided with the energy resources it needs. This power is obtained through the licensing and control of the Intellectual Property of the Preliminary Specification and its derivative works. With this in hand the user community is able to implement the policies and procedures within the industry to manage it on the basis of providing the producers with the most profitable means of oil and gas operations. They are also able to make the necessary changes to those policies and procedures, and the business model, to ensure that the industry maintains its competitive and profitable stature.  This is not your grandfathers user community. Participation doesn’t denote endless ceremonial attendance at useless mandatory meetings. It means that you are the one with the power to make the industry operate. This is why the bureaucrats love us so much. The manner in which we are structured here renders the bureaucrats power and influence in the industry to the ash heap of history.

The Intellectual Property is comprised of the Preliminary Specification, any of the other information contained on the wiki, and the ten years of research contained on this blog. These are what will be the base of the user communities work. It is the business model. Our budget will fund the user communities determination of what and how each process will need to be in order for it to be developed by our developers. This is the critical detailed work needed to fill in the gaps of how the industry actually operates. How people do their jobs and what they actually do. This work, however, will be unique in that it will be under the basis of the Preliminary Specifications new business model where service providers will be using the software and providing the services to the producers. A fundamentally different way of organizing the industry. Providing producers with unlimited flexibility in their operations.

I am the beneficial owner of the copyright of the Preliminary Specification and all that is contained within the blog and wiki. That provides me with the ability, through licensing, to control the development and ownership of the derivative works. The user community is paid by People, Ideas & Objects for the work that is done during our development, and the service providers will earn revenues that are a replacement of the producers current G&A costs. Two significant revenue streams, and since service providers will be owned by user community participants, a significant business opportunity for those that have contributed to this community.

The licensing of the Intellectual Property works on the basis that I pay for your work which in turn earns me your copyright and I add this to the overall Intellectual Property. The licensing then grants the user community participant with access to all of the Intellectual Property in an unencumbered manner. It is in this way that I am able to use the Intellectual Property to raise the initial budget, and subsequent annual funds needed to support these communities. Without this licensing mechanism the producers would be subject to licensing from a large population of the user community. And members of the user community would be subject to significant cross licensing requirements within the community. An otherwise unworkable situation. In turn user community participants can look forward to building a business on the basis of participating in the user community and managing their own service provider where they provide the People, Ideas & Objects software and their services to their profitable oil and gas producer clients.

The larger point of this blog post regarding licensing is to ensure that the user community has the power to affect change. If change is needed only the user community needs to be addressed. People, Ideas & Objects will only ever send invoices for the costs of development and the user community to the producers. We do not, and never will have any Service Level Agreements. If producers require anything contained in the Preliminary Specification or its derivative works they have only one community in which to talk to. The user community. It is there they will find the people who are able, willing and empowered to make the software and the services work for the dynamic, innovative, accountable and profitable oil and gas producers. People, Ideas & Objects are a dedicated software development capability provided exclusively to the user community.

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. 

Money and Power, Part II

We are working to provide society with the energy it needs to ensure that it fully develops. We are concerned that the issues the oil and gas industry faces will lead to declines in its capacity and capabilities. Leaving people with poor choices in terms of their standard of living. With 5,000 man hours of physical labor contained within each barrel of oil, we do not want to see people being forced to reduce their consumption of energy. This is why we are developing the Preliminary Specification. People, Ideas & Objects, our user community and the service providers are committed to this and are focused on providing the oil and gas producer with the most profitable means of oil and gas operations.

Yesterday we noted the loss in market capitalization of the top 14 producers as a result of the decline in oil prices this past year. That was a little over $700 billion, and if we took into consideration the rest of the industry, and called it a rounding error, that number may well be $1 trillion. I really like the ring when anyone say’s trillion. This is the value that would be returned to the producers if they were to fund our budget and set in motion the means to provide the oil and gas producers with the most profitable means of oil and gas operations. That is a fact, the stock markets take all known information into consideration. This is how Uber has a $50 billion market capitalization. The future holds that promise. And with the Preliminary Specification under development, the oil and gas producers would be able to overcome their issues and provide for profitable operations to their investors. Recovering the previous loss in market capitalization.

Then if you take our value proposition. Which is valued in the area of $45.7 trillion. Note I could easily round this up as well to $50 trillion, but I'll stick with the $45.7 trillion. $50 trillion makes it sound less viable! These are calculated on the basis of the price increases of oil and gas as a result of the price maker strategy of the decentralized production model of the Preliminary Specification. Doubling, and in the case of natural gas at least tripling, the value of the commodity in the marketplace is what is needed on a go forward basis. Taking the present value of that over the next 25 years provides us with the incremental value of $5.7 trillion. The other $40 trillion comes from the fact that the pricing model that we employ includes the costs of capital in each volume produced. Producers are hoarding assets as if they are vintage relics of a bygone time. Hanging on to them until the next millennium. These capital costs need to flow to the income statement, and will do so within three years under People, Ideas & Objects. This will force the industry to recognize the costs of capital on a go forward basis. These costs have been projected to be $20 to $40 trillion in the next 20 years. And it will also remove the capital costs that are currently sitting on the balance sheets of the near bankrupt producers. Forcing the industry to finally account for those costs.

So there you have the deal of this century. We fix the industry and what currently ails it. Provide it with the means to deal with its problems in the future by destroying the bureaucrats “muddle along” strategy. Give the investors back the money they have lost in the reduction of their market capitalization in the past year. And provide a sound and profitable business that generates real earnings for the next 25 years. One that you can invest in profitably. And all that has to happen is that our budget of $4 billion, not trillion, although that would be a deal even if it was trillion, in investment is provided.

If I were an oil and gas investor I think I would jump on that. This past century of passive investment has led us to some dismal times in the economy these days. I wonder if business in the 21st century will continue to follow this model of passive investments? It would seem to me that we provide a good example of why the old model should be tossed. There is the potential of another alternative as well. That greed may have infected the bureaucrats who want a bigger cabin and faster boat. And therefore would consider funding our budget themselves on the basis that they could stick around for a little longer, just long enough to get those new toys.

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. 

Money and Power, Part I

In order for the industry to make the changes that are needed. So that we can provide the mid to long term supply of profitable oil and gas that society needs. We will need to have effective tools for People, Ideas & Objects, our user community and service providers. The two critical tools that are necessary are the budget and power necessary to implement the Preliminary Specification. It is these that are at issue with the bureaucracy. Particularly the power which is their current domain and requires that they lose control of it. We take their power through the implementation of our user community and the Intellectual Property that makes up the Preliminary Specification, and all that will be derived from it. Without the Intellectual Property under our control the user community would not have the power to make these changes and be successful.

With the current commodity prices the bureaucrats have a choice. Bankruptcy or fund the Preliminary Specification. I don't expect them to do anything but what we can see is the stock price of the producers continue to degrade. Two Canadian companies of interest are Encana and PennWest. Encana is trading at a little over $6 compared to $90 a few years ago. And PennWest is trading at $0.60 compared to as much as $35. A while ago I published the decline in the top 14 producers stock price from the initial decline in oil prices. Then it was $420 billion. Now it's $711.6 billion, an increase of 69%. In some cases these losses represent more than half of the firm's market cap. Therefore it might be reasonable to assume that we are halfway towards most of them declaring bankruptcy. However, that would be unreasonable because the bureaucrats have been relying on hedges for their oil for the past year. Those hedges have now expired so the bleeding will just now have begun in earnest. Bankruptcies could be imminent.

Seven hundred billion dollars isn't a lot when you just write it out in a sentence. These losses don’t affect the bureaucrats pay, bonus, pension or benefits. The value of their options are diminished of course. But when you're winning on four of the five forms of compensation you don't quibble. People ask me why I abuse the bureaucracy so purposely. First of all it's their fault. None of this has to happen. Second they have fought me at every turn and at every opportunity since I published that the Joint Operating Committee is the key organizational construct of the innovative producer. They can see the writing is on the wall and chose to fight me. It is important for people to understand why the Preliminary Specification hasn’t been adopted in the marketplace. If I wrote about it here, and if I did not clearly identify the bureaucrats as the / my issue, then people would wonder why it’s not working. Clearly it is not working due to the vested interests.

The amount of the losses in market cap that have been experienced by the investors in this industry. Are able to be recovered by funding the budget of People, Ideas & Objects, our user community and the service providers. This has to be the best investment that anyone could ever make. $4 billion down and you get back $711.6 in pure capital value. And that is just the losses that we can identify on the oil side since the price decline. There is the hidden value lost over the past five years on the natural gas side of the business. It might be just as significant. However, it's still August and there are many more weeks of vacation left for the bureaucrats to enjoy at the cabin. So don't bother them, their busy. We'll speak more about our power and the user community tomorrow.

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 Three Horsemen

Members of our user community all share in People, Ideas & Objects concern for the capability of the oil and gas industry to meet society's needs in the mid to long term. The difficulties that the industry are entering into. Those that we detailed yesterday that include an investment community that has been abused by the bureaucrats, the bureaucrats themselves in all probability moving on to greener pastures when it becomes untenable for them and the commodity price declines. The industry's business model is flawed, incapable of addressing these three issues and these issues are more than what it can handle without losing much of its capacity and capabilities for the long term. This puts society and our way of life in jeopardy, and we are committed to ensuring that this does not happen.

We are doing this by providing an alternative business model for the industry to function. One whose focus is to provide the oil and gas producer with the most profitable means of oil and gas operations. By defining and supporting the producers with our software, based on the Preliminary Specification, our software development capability, the user community and our service providers. The Preliminary Specification is different. It avoids the corporate model that is in use in the industry today and uses the industry standard Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks of the oil and gas industry. By moving the compliance and governance frameworks from the hierarchy into alignment with the Joint Operating Committee we are able to achieve this new organizational performance.

By implementing the Preliminary Specification we address these three issues specifically. Looking at the prototypical producers in the People, Ideas & Objects et al business model. They will be stripped down versions of their current configuration. Consisting of the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder of the administrative and accounting resources are reallocated to service providers who will focus on one process or subprocess and use the entire industry as their client base. It will be in this way that the service providers can use their competitive advantages of specialization and the division of labor, automation and have the computers working for us. The producers will also be able to focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base.

Our service providers will charge the Joint Operating Committee directly for their service fees for any of their services. Therefore the specific service provider who calculates royalties will charge the specific Joint Operating Committee the costs of processing their royalty calculations. Then the producer will receive a detailed set of financial statements for each Joint Operating Committee that includes the revenues, royalties, operating costs, depletion and the actual costs of the overhead necessary to produce the property. If the property is reporting that it is unprofitable the producers can shut it in and reduce their losses on operations. If a producer was producing 100,000 barrels per day with 20,000 of those being unprofitable. They could shut-in those 20,000 barrels and the producers profitability would rise substantially. That is because they would not be incurring the financial losses on the 20,000 barrels, and their overhead would have been reduced from a producer producing 100,000 barrels to a producer producing 80,000 barrels just as their royalties and operating costs have. This is achieved due to the fact that none of the activities in the Joint Operating Committees of a shut-in property will trigger any of the service providers to conduct any of their services for the months that the property is shut-in. Rendering no billings to come from the service providers and a null operation, no profit but also no loss to be incurred and reported by the Joint Operating Committee.

The Preliminary Specifications decentralized production model makes all of the producers costs variable. It will also reduce the amount of commodities in the marketplace, enabling the price maker strategy that we provide. If all producers only produce profitable properties then a reasonable and fair production allocation process has been implemented within the industry. The producer will also have a stable of 20,000 barrels per day in which they can apply their innovative earth science and engineering capabilities to increase their reserves, deliverability or reduce their costs and bring the production back on to profitable production.

This solves the three major issues that the industry faces in the mid to long run. It returns the industry to a business model, based on profitability, that the investors need to see in order for them to return and invest in the industry. It removes and replaces the bureaucrats with their self interested business model and wishes them well in their retirement. And it returns the oil and natural gas commodity marketplaces to the marginal cost necessary to fund the needs of the industry in the mid to long term. This is what we, People, Ideas & Objects, our user community, and service providers are working on. Join us and solve this critical and difficult situation with us.

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. 

Let's Move On, We Have a Job To Do

There should be little doubt in anyone’s mind that oil and gas is in serious jeopardy. We have been writing about the difficulties in the industry for the past number of years and offering our Preliminary Specification as the solution. The time is upon us for the investor class, or the bureaucrats themselves even, to act by funding our budget and proceeding with the changes to implement the Preliminary Specification, the decentralized production model and the price maker strategy. I have never seen or could have imagined the level of difficulties the industry is currently in. This next quarter will be very difficult. Leading to several years of devastation in the industry. Like the failure of the former Soviet Union's socialist ways, we may be seeing the parallel situation playing out in the bureaucracy of oil and gas. Nothing was produced in the USSR because everyone was in bread lines waiting to purchase bread. The situation in oil and gas is the opposite, no one can stop the overproduction because its someone elses fault. 1986 was a bad recession in oil and gas. I can remember the effect it had on the people that were “lucky” and didn't lose their jobs. This lingering effect took many years, and sometimes decades, for people to overcome the impact of the difficulties the industry faced then.

That is our history and what is presented as the way the business is. No one questions if it is valid in 2015. I say its BS and is unacceptable in this day and age that an industry relies on the barbaric tools of laying people off to deal with the business cycle. Particularly when the Preliminary Specification specifically deals with the issues of overproduction. What I suggest we need to do is look beyond our history and the bureaucrats status quo and see what is really happening to the industry as a result of the inactions of the powers that be. There will be bankruptcies. The people in New York who were bullish on oil and gas as little as three months ago are already licking their wounds today. Carlyle Group’s Claren Road Hedge Fund is facing significant redemptions (of up to 48% of the funds value) based on losses from investments in Greece and energy. This fund was valued at $11 billion just a few months ago and is now at $2 billion. October reviews of the producers reserves by the banks that have loaned money will be a nail biting exercise for bankers and producers alike. KKR owned Samson Resources will be filing for bankruptcy in September. Predictions of oil hitting $30 are common, as are the thinking that this will be a long term difficulty. We're not talking about natural gas prices today.

Taking these financial losses into context, the financial community has long memories. It was those that believed that the industry needed to be built out in the 1990’s that made the investments then. Thinking that their day would come when commodity prices rose in the early 2000’s soon found that the bureaucrats were in the trough feeding first, leaving the scraps to the investors. Now that prices are in a downward cycle, and shale has introduced a new dynamic, these bureaucrats couldn't care less. They have their lakefront cabins and pensions in place. What the investors have discovered about oil and gas is that there never was any room for them at the table, once they had invested their money that is. All they can do now is sit back and admire their oil and gas investments bloated balance sheets, full of assets that represent their investments which have not and may never show a hint of profit.

The point here is that the investment community will be hard pressed to invest in an industry that has been so poorly managed. Thousands of monkeys on typewriters came up with a better plan. Even though the investors had cut off most of the funding in the financial crisis, the bureaucrats found other ways to keep their money mills churning to keep themselves fat and happy. Its not just the commodity price decline that will be the issue that is played out in the industry in the next few years. It is the reputation of those that managed the industry in the past few decades. All the way back to 1986 will be in question, and the answer for the people who will be asking, will not be kind or in the favor of the bureaucrat.

The bigger issue here of course is that the oil and gas industry is the most important industry in the world. It is the energy that fuels our society and how we maintain our civility. It sustains our way of life. With a disgruntled investor group, a complacent bureaucracy that will in all likelihood just quit when they are held to account and a commodity super cycle downswing all at the same time is more than what the industry can handle. We risk the ability to maintain our capacities and capabilities to meet the needs of society and our way of life in the mid to long term as a result of being in this difficult time. We need to be smart about this and overcome our history, our behaviors and begin the development of the industry that will fuel society and our way of life for the remainder of this century. We know, and there is no doubt about this, that the bureaucrats have proven themselves incapable, incompetent and undesirous of doing so. Lets move on, we have a job to do.

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. 

Vacation Has Arrived

"You're Gonna Need a Bigger Boat"

That’s what Police Chief Martin Brody said to his boat captain “Quint” in the 1974 movie Jaws. “You're gonna need a bigger boat.” I use that reference in terms of our budget. If we expect to conduct all of the things that we say we are going to do with just that budget, it won't be enough. We'll need significantly more money than what is currently defined in our budget. I agree with this point of view, and would provide the following information to show that there are other resources that will be available to make these changes effective.

First of all our budget addresses the software development and user community costs during the initial commercial release. Our budget is to build the Preliminary Specification in its initial form. There will be subsequent costs being incurred for software development and the user community in each of the years following the commercial release. In addition there will be costs involved in managing the application that have not been identified or addressed at this point. These costs will be covered through an assessment on the producers each calendar year. These costs will approximate the scale that they are in the initial commercial release. And that is $1 to $1.5 billion / year.

That addresses the needs of the software development and general support of the software. There are many other attributes of the business model of the Preliminary Specification that need to be addressed. The service providers are not included in any of the cost estimates in our budget. Our budget only covers the costs of the user community. The user community participant is the key individual that creates the service provider based on the work that the participant does during the initial phase of the software development. I consider this work to be part-time for the user community participant. The majority of their time will be consumed operating the service provider when we are operational. The service providers revenues are derived from the individual Joint Operating Committees that are charged for the administrative and accounting service charges for the month that they are conducting these services. It is anticipated that these service charges will replace the estimated $40 to $60 billion in annual G&A costs that the oil and gas producers incur today.

The user community participant therefore has two distinct revenue streams. One is from People, Ideas & Objects for the software development specific work that they do. These revenues will continue past the initial phase of software development and will be permanent in the user community participants business. The second source of revenue is from the ownership and operatorship of the service provider that is licensed to implement a specific process in the oil and gas industry. These two revenue streams are complimentary as the work in the service provider defines and supports the process that is part of the work that the user community participant will work to detail in a constant, iterative manner with our developers.

You can therefore see that there are other resources that are available to make the transition to the environment detailed in the Preliminary Specification. The user community participant, I assume, will also be interested in making investments of time and money in the development of their service providers. These will be done on their own accord. Our user community has been defined as a population of 3,000 individuals. With the full time needs of 600 man years per year being used by our development team. It would be difficult at this time to estimate the number of processes and activities that the service providers will be licensed to conduct on behalf of the industry. However 3,000 seems like a low number. Therefore based on simple mathematics and averages the annual revenues of a service provider would range in the area of $13.3 million to $20 million each. Remember we are replacing the administrative and accounting resources of the individual producers to create the administrative and accounting resources of the industry. These revenues are annual and would provide the user community participant with the majority of their earnings and their capital gains.

Its a different environment that we are creating here. That is a certainty. With these changes in place we are able to provide the decentralized production model to the profitable oil and gas producers. That will be the reason or justification for doing this. Turning the oil and gas industry into a price maker is the opportunity, these are the resources that we have to make that happen and the producers, with trillions of extra revenues in their pockets, will be grateful for it.

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

Motivation

How long can an industry continue without addressing an issue as serious as its profitability. We have seen natural gas producers such as Encana lose 90% of their market capitalization in just five short years. We are now less than one year into the decline of oil prices. It will therefore be as little as four more years until the value of the industry be will all but wiped out. The bureaucrats have been put on notice. Continuation down this road will be unsatisfactory. Waiting for prices to recover, or the muddling along strategy no longer works. Natural gas has shown that shale makes this an era of abundance. A business model that deals with this abundance is therefore needed in order to rid the industry of its price taker strategy and implement the price maker strategy of the decentralized production model of the Preliminary Specification. Everyone now knows this. How much longer will the bureaucrats hold on to their losing ways? And what will be the mechanism that is used to raise the budget for the Preliminary Specification in order to make these changes?

It is the competitive spirit that keeps the producers overproducing in the marketplace. The rush to secure acreage in the shale areas. The need to drill out that acreage in order to earn it. The need to produce in order to pay for the continuation of the financial treadmill. There is nothing wrong with this treadmill other than it's currently unprofitable. If only the producers would hold back their unprofitable production so that prices would cover the marginal costs. You first, says one producer to the other. There has to be a substantial and positive reason in which the producer would curtail production. Otherwise they're just shooting themselves in the foot.

With the decentralized production model the motivation for the producer to withhold production is to attain the most profitable means of oil and gas operations. Then only their profitable properties are produced and these are not offset by the losses of the unprofitable properties. Any shut-in properties report a null operation, no revenues, royalties, operating costs or overhead in the months they are shut-in. At the same time the reserves of these shut-in properties are saved for a time when they can be produced profitably. And the withholding of the marginal production removes it from the commodity marketplace. Increasing the commodities prices, and rendering your profitable properties that much more profitable. This is the motivation of the producer to make the necessary change to the Preliminary Specification.

Our calculations show that for the North American marketplace. For both oil and gas over the next 25 years. The present value of these changes is $5.7 trillion in incremental revenues. Plenty of motivation for the producers to consider the costs of our budget. However our claim is for $45.7 trillion in incremental value. That is because it is our opinion that oil and gas producers are vintage collectors of their assets on their balance sheets. Once an asset reaches a producer's balance sheet, it seems to stay their for eternity. Recognizing the costs of capital in the calculations of oil and gas prices, which we will do in terms of determining the profitability of a property. We'll therefore return the capital to the shareholders who are being so badly abused in this business. It will also generate the cash flows necessary to keep the service industry on an even keel. Not having to abuse the throttle of industry activity between its extremes of full and off. Allowing the service industry to develop in a natural manner. And for the people who work in the industry. They will be able to invest in their careers and not be subject to layoffs like untrained and unskilled laborers would be.

Planning is a management activity and responsibility. I have been promoting the Preliminary Specification and decentralized production model for many years now. The bureaucrats don't manage. They see a problem, they therefore lay people off. You can do that from the summer cabin. Its irresponsible and incompetent. They have to go.

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.