Third Friday Off

Thanksgiving!

A Leadership Crisis

People, Ideas & Objects continues to look for the future leaders of the oil and gas industry. Those leaders that the user community vision appeals to, and who would be interested in establishing a service provider organization in the new oil and gas industry. It is this new sub-industry of our users and service providers that we are establishing to provide our developers with the input to what systems they want and need in order to manage and lead their oil and gas clients. This new leadership will be the replacement to the current administrative and accounting resources of the producers. And particularly will be the leadership that is provided to deal with the issues and opportunities of the new oil and gas industry. Their leadership will be exercised through the business model that they have control over, through their involvement in the user community and the manner in which the user community has been established.

That is how we propose to deal with things in the future oil and gas industry. What we have today of course is a crisis of leadership. Muddling along has always been acceptable as the business model of the bureaucrats. Taking long stretches of time between profitable periods is what the industry has had to deal with, so they would say. That is certainly what you would need to say when their is no leadership involved. With the same production profile as last year. And the same production profile in natural gas as six years ago. What exactly are bureaucrats doing or going to do about the situation in the industry. Maybe a better question is what is going to happen to cause a leadership change?

Alternatives need to be proposed. Check. We have that in this community. A viable business model and community that only needs financial resources to proceed. What we do know as well is that bureaucrats never change. It is not within their DNA to be capable of the act. Our proposal will transform the industry into a dynamic, innovative, accountable and profitable industry. That is the basis of how we propose to lead the new oil and gas industry. With our value proposition being $45.7 trillion when fully valued over the next 25 years. You would think that bureaucrats who are in a financial crisis would act. It’s only in the oil and gas industry that you can propose to generate this much value and die of starvation.

Peggy Noonan was writing in the Wall Street Journal the other day about “Uncertain Leadership In Perilous Times.” And what caught my eye was the last part of this quotation.

Exactly what is needed now in terms of America’s defense, what is needed to deal with a possible parade of horribles? What might be needed down the road? There is a possible grim short term, and a possible grim long term. Who is thinking all this through? Are they getting the resources they need?

We saw the difficulties that the industry went through in the 1980’s and 1990’s as a result of low oil and gas prices. Systemic overproduction was a phenomenon that was not identified or addressed. It exacerbated the difficulties of the industry and could have been so easily rectified. A long and difficult period that devastated the financial condition of the industry, destroyed the investors confidence and ruined people’s lives who had invested their careers in oil and gas. I was fortunate to have never been laid off during that time, however, the people who remained were permanently changed into risk averse, timid souls. Not what the industry needed but probably the genesis of why the industry hasn’t taken any action. These timid souls have evolved to become the bureaucrats.

What I want to know is where are the resources that Peggy Noonan is stating “Are they getting the resources they need?” People, Ideas & Objects is running short and the transition to a viable going concern needs this support now. We have a job to do, one that has been clear to most people for almost a year now. And I think we can establish the fact that the bureaucrats will never do anything to support us. I am frustrated by the pace of this transition and my present inability to make this transition real.

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. 

Who's In, Who's Out

I think the big guys, Exxon, Shell, BP and Chevron have decided to sit this one out. They are going to pass on the development of the Preliminary Specification. Which is typical and what should be expected of them. They don’t let the outside world necessarily affect them. They are masters of their own domain. And that is ok from the point of view of our progress. We are focused on the higher level beings who are the ones with the money the producers will come begging for in short order. The investors and bankers that are as overjoyed with the performance of the industry as we are. It is they who we look too to fund the transition from the bureaucratic oil and gas industry to the dynamic, innovative, accountable and profitable one. We speak the same language as those investors and bankers, unlike Exxon, Shell, BP and Chevron.

Has anyone noticed that we’re still producing just as much oil and gas as we did at this time last year? Bureaucrats do not change, it is impossible for them to do so. The typical oil and gas company is configured just like the one that was established in 1932. They use computers today, however, they use computers to feed the people with the work. It should be the other way around. In November 2016 we will see the exact production profile that exists today and the same complaints from the bureaucrats. Another round of layoffs of people’s jobs will be cut for good measure, because we all know that people are the issue.

It is our community of users and their associated firms the service providers, and People, Ideas & Objects software development capability that generates significant monetary differences between our business model and the status quo. Our focus on the user remains our key priority at People, Ideas & Objects. It is the area that we are able to keep our development timelines on track and this project moving forward. If we had our budget secured we would be spending the same time and energy on user community development as we are today. Therefore we are in essence not losing any time in these, what can best be called ambiguous days. I would encourage everyone to read the user community vision and why the user holds such a critical role in the future of the oil and gas industry.

The producers will try to ride this downturn out just as they have done so many times before. Creating losses in this business is just part of the reality of being in the oil and gas industry, so they will say. Where do I invest? Sounds so exciting! Each day the local news has some disheartened individual who has been laid off from the industry and how they’ve had enough. They’re moving on, away from the industry. What these producers don’t seem to understand is that there are alternatives to investing in their firm and there are alternatives to working in oil and gas. Although you might say to the press that you’re making money at $50, your audited financial statements are calling you a liar. But they’ll argue those are sunk costs. And say so in front of the banker and investor that they want to volunteer their money to join that big pile of sunk costs on their balance sheet. This attitude in the face of such a dire financial situation is the delusion at full scale and we are close to that end. You can’t run a business like this in the 21st century. People will move on, jaded by the experience, never to return.

This will be the issue that the industry has to face in the next 10 years. Where to get the capital and who will work for the industry to meet the energy demands of society. People, Ideas & Objects can solve the first part of the difficulties, establishing a business model in which people will invest. The people will return when they see that the industry has the maturity to earn a profit on each producing property each and every year for a good decade, before they’ll even consider working for oil and gas.

And maybe that is the point. The maturity of the industry. You have self interested bureaucrats who lost sight of the purpose and reason for doing what they were doing. And even with the issues staring them in the face, and People, Ideas & Objects barking out a solution, they chose to do nothing. Feathered their nests as the destruction became evident and the problems became too big to solve by their means. And eventually we’ll see them just exit out the backdoor to a retirement where it’s sunny and warm.

People, Ideas & Objects our user community and service providers will provide these oil and gas investors and bankers with a profitable industry through the Preliminary Specification. Where the focus is on providing the producer with the most profitable means of oil and gas operations. It is through our price maker strategy of the decentralized production model that we are able to generate the profits that will enable the producers to fund their own capital investments. Something that a mature industry does. One that doesn’t dilute its shareholders with ever expanding annual share offerings to fund their capital budgets. That is how we will enable the producers to be profitable and earn the funds necessary to maintain their profitable production profile. A completely different attitude and understanding compared to the lunacy and corrupt bureaucracy of today’s 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.

Standing at a Crossroads

That is where we are today in oil and gas. At a crossroads between the past oil and gas industry and the new dynamic, innovative, accountable and profitable industry. I might be selling my book, as they would say, when I say the choice is one or the other. Chose the future and implement the People, Ideas & Objects Preliminary Specification, our user community and service providers. Or stay the course with the status quo bureaucracy. There are many reasons not to want to change to implement such radical surgery to the industry and to each producer. But then there are those commodity prices. I am not of the belief that we have time to debate the point. The industry needs to have a plan that they can show the financial community of how they will operate the industry in a profitable manner. Shale has introduced a new dynamic into the oil and gas industry and as it stands shale is not a commercial venture. And will never be under the current administration, the status quo bureaucracy.

Here we have the situation where the business model has been developed in People, Ideas & Objects. And because it challenges the established bureaucracy in terms of its existence. It remains unresolved in the marketplace. Despite the obliteration of over $700 billion in market capitalization of the top 14 producers, and the potential of trillions of dollars in future oil and gas revenues. The bureaucracy must have its way. I have identified the issue in the marketplace. I have created the solution to that issue in a timely fashion. And you can not imagine the difficulty that I have had in bringing this solution to this point.

There is no respect for the ideas put forward by People, Ideas & Objects in the mind of the bureaucrats. They just don’t care enough about the oil and gas business to give a damn. Remember what I continually say about them hightailing out of here when the heat gets too much to handle. Anyway they’re more than capable of doing everything on their own without the assistance of any outside help. And this is the trend that we see in all industries where the bureaucrats start copper mines in order to have the copper available for the computer chips they’ll manufacture for their employees computers that they also manufacture. The fact is the bureaucrats can’t run the oil and gas business as it stands in 2015. This is evident in the current financial status and future of the industry. It is time for someone to step aside, their ways and means expired in the last century. I think it was 1962. I remember seeing the flash just after sunset.

We need to focus on what we are able to do within the organizations that we establish. An oil and gas producer with the competitive advantages of their earth science and engineering capabilities, and land and asset base have a large domain to cover. Providing the oil and gas producer with the most profitable means of oil and gas operations is also a broad scope. However review of the Preliminary Specification shows that we are establishing a sub-industry to deal with the scope and scale of the competitive advantages that we are undertaking. No producer today would set out to differentiate their offering on the basis of a more effective administrative and accounting capability! It is therefore the wise thing for them to offload from their domain of capabilities and leave the administration and accounting to someone who can compete based on an enhanced competitive advantage. One such as specialization, the division of labor, automation, having the computers work for us and innovation based on administrative and accounting expertise. Add to this the software development capabilities of People, Ideas & Objects and you have a dynamic capability in the business model of the oil and gas industry. So that when things change, the industry will change. No more muddling along waiting for things to inevitably change to a positive situation.

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 Walking Dead

Time is wasting. Industry has little time in which to present a plan to its investors and bankers on how it will proceed with a viable business model. Everyone can see that this situation is not workable. Are we just going to muddle along for year after year in this malaise? No, we are not. We are going to continue until such time as the cash runs out. At the rate of cash burn today, and the limited resources of the industry, all but the integrateds will be out of business in six months. Action therefore is needed to be taken within the next six months to do one of two things. Come up with a plan. After all McKinsey doesn’t have one. The chance that you can develop a viable plan in six months, what took me 25 years, is next to impossible. Or you need to subscribe, quickly, to the Preliminary Specification, our user community and service providers. Then, one way or the other, you will be able to present a viable plan to the investors and bankers on how the industry will get itself out of this mess and rebuilt as a viable going concern. If the bureaucrats didn’t believe that the Preliminary Specification was a viable plan, then why did they hire McKinsey to copy it?

The full $6 billion for software development is required upfront. So much harmony and trust has been built up between the bureaucrats and People, Ideas & Objects over the past ten years. That I’m not going to undertake the development of this system without the funds upfront. I don’t need bureaucrats being distracted by some shiney object halfway through and cutting our funding. Or doing that just to show it’s unworkable. I’d be a fool to proceed on that basis. If I rely on the producer's goodwill that they will provide the money down the road, they also may not be there. Therefore the full budget is necessary to be provided before any software development work is done.

It used to be that I thought if a company took a hit to their stock from a single “event.” Where the impact of that “event” on the company's stock was in the range of greater than 50% of the market capitalization. Then that company was the walking dead. The ability to recover would require that the “event” be identified as being a significant occurrence to the history of the firm. And dramatic remedial steps taken to rehabilitate the company. I have only seen Apple return from this type of “event.” Oil and gas producers are in the situation where approximately 75% of them have achieved this milestone. What we therefore have is an industry that is the walking dead. I can’t recall this occurring in any industry outside of a financial crisis. This “event” is evidence that the industry is operationally incapable and there is no faith in the management of the industry.

We can sit around and debate the controversial aspects of my words but the industry doesn’t have that time. It needs to act by funding our budget. And slowly earn their credibility with the investment and banking community by purging those responsible for this crisis.

Or maybe I’m being too melodramatic. A distinct possibility. It takes a lot of effort to motivate a bureaucrat to act. Usually the self interest of their financial position is what works. However they know the writing's on the wall, and it has been on the wall for many years, and they are the odd man out in this 21st century way of working. They have put up the good fight against People, Ideas & Objects. Thrown the resources and value of the oil and gas industry into the garbage can for their own self interest over these past ten years. Expecting them to respond to this “event” is not going to happen. Their expectation was to exit when the heat became unbearable, that's what bureaucrats do. Cut and run. I hope I’m not the only one waiting for someone else to act.

I’m probably the worse person in the world to determine the timing of all these changes. Too invested in change. But at what point do we act? Just as the frog is sitting in the slowly heating skillet, it’s in industry's best interest to jump sooner rather than later.

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. 

Shale is Viable

One of the falsehoods that the bureaucrats have been hiding behind is their bloated balance sheets of the producer firms. People, Ideas & Objects have been hammering on the oversized balance sheets for a number of years and have taken significant flak from the bureaucrats, with the requisite number of giggles. If I lined up all the bureaucrats that laughed at me in the past ten years I could walk across the pacific. What they are finding here today, in this wonderful financial environment that they’ve created, is that their balance sheets, the things they thought were so magnificent and significant, are really quite useless. And in most cases, with the large asset write downs that some producers are getting out of the way before the big rush at year end, turning out to be the proof that the past decade has been a complete waste of time and money in terms of their administrations. Who would've thought something like this would have happened? Giggle.

The phenomenon of the bloated balance sheets has shown that the bureaucrats have obtained the same characteristics of each and every twelve year old girl. They can spend money. If you take the “profits” that they may have reported in the past ten years and look at the size of the write downs that are to be taken for fiscal 2015 they come to a handsome negative number. If you take the current working capital of the industry, outside of the integrated producers, you have a handsome negative number. This does not mean that the past ten years have been for nothing. There are the many handsome cabins and boats that the bureaucrats have. And an assortment of other luxuries. The fact of the matter is the losses that are being realized on the current production, I am talking about the gross margins of the business, another handsome number that is negative, there is nothing of value that is or has been generated in this business.

What good did bloated balance sheets ever provide any producer? Evidence of the ability to spend money. Check. The evaluation of the bureaucrats performance is what accounting is all about. In oil and gas it has become fashionable not to consider “your sunk costs.” It is this thinking that has lead to the overproduction problem. If everyone is evaluated only on the gross margin of the business then everyone is going to rush in to invest. Overinvestment and overspending lead to overproduction. In the past ten years no one has considered the costs of the capital that went into exploration and development because those were “sunk costs.” Making an evaluation on this basis is what a fool would do. What the producers did on top of this foolish behaviour is they capitalized everything that moved. Generally 80% of the overhead of the producers General & Administrative costs are also capitalized. PennWest even tried to capitalize its royalties. Which shows the systemic desire to capitalize as much as possible.

The appropriate position or attitude would be / is to remove these capital costs from the balance sheet and have them hit the income statement as quickly as possible. Evaluate the performance of the management on a reasonable, going concern basis. That way the performance can be evaluated appropriately and the future decisions made on the basis of actual performance. Oil and gas producers have been reporting bloated profits because they never accounted for the cost of capital by leaving all of these costs on the balance sheets. The limit to the amount that they could record as assets was, and is, the sum total of all of their reserves times the current oil and gas price. Which is the sum total of all future revenues! Ludicrous. As it stands today with the write downs that are being realized in the industry. The balance sheets will still be bloated because they will still represent the sum of all of the reserves times the current oil and gas prices. Ludicrous, or did I say that. The fact of the matter is the sum total of the value of the entire industry is south of zero. It loses money therefore you’d have to pay to get rid of it.

If producers realized the costs of the capital assets on a reasonable performance basis, these capital costs would be replaced on the balance sheet by other asset types. Asset types that include cash, accounts receivable, short term investments and other working capital items. That is because they would have had to sell their products for a profit, which generates cash. All that the industry has done in the past ten years is subsidize the consumer of oil and gas by fleecing the investor.

This hasn’t been a business since the 1970’s when the SEC approved Full Cost accounting. This is the net result of that decision, financial armageddon and systemic overproduction. In defence of the SEC they define the outer limits of what is acceptable. The auditors should have said that it is unnecessary for the entire industry to push the outer edge every year. Pick and choose your own culprit from these three groups.

What the Preliminary Specification, our user community and the service providers provide the oil and gas industry today is a go forward basis in which to operate the industry. One that is reasonable and evaluates the performance of the producer in an effective manner. Without the People, Ideas & Objects and our associated communities the oil and gas industry will continue on in this spending exercise with the same discipline as any twelve year old girl. Shale can be profitable, but only with our system in place. The industry therefore has to choose, and quickly, because in six months they will otherwise be out of business. Do they have a sustainable plan to operate the industry on a go forward basis? With the Preliminary Specification, our user community and service providers that’s a definite yes. But they’ll need to decide, and soon. If they don’t have a plan in place in six months, fill in your own blank here...

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. 

Some More Cold Hard Facts

It is the user’s, our service providers and our developers who provide the oil and gas producers with the most profitable means of oil and gas operations. It may be altruistic to state this, however I see it as a clear division of labor. Producers will find and produce oil and gas. And we will make the producers profitable. Without us, there is this, this malaise and bankrupt style of operation that has been going on in natural gas for six years and in oil for the past year. Maybe bureaucrats will figure out what to do. I’m banking on the fact that bureaucrats have never been able to change their stripes, like a Tiger it fails every time. I expect them to hightail it out of their positions when the heat gets too much for them to handle. That is their history, look it up in the history books. Creative destruction is the process that is well under way in oil and gas. If producers don’t have a viable plan in place by the time they run out of money, about six months for most producers, then their toast.

So it's goodbye bureaucrats, hello users and service providers. We’ll be taking over soon, as soon as we build our organizations and applications. Before we can do that however we need to secure our budget. You would think with the state of affairs that we would be able to do that! No, bureaucrats are stubborn people. It's not their money their burning by incurring these losses and it's not their profits that are in jeopardy in the future.

I also expect that when we get to the point where we take over from the bureaucrats. They haven’t trashed the place like some adolescent punk rockers. I expect the place to be clean and neat, the floor swept and mopped, the garbage taken out and the place in as good of shape as is possible. The bureaucrats are failing in their responsibility to appropriately manage the business, that doesn’t mean that they can just trash the place and leave a mess behind for us to clean up.

I’ve heard a number of times now that what the industry needs is a vision of how to deal with the difficulties that it's in. And it has one in the Preliminary Specification. If that is inadequate then you can start the process and end up with a workable model in about 25 years. I wish you luck and hope you enjoy the ride. It truly is an adventure. I think that whoever invented copyright law was a genius of the highest order. But that’s besides the point. In addition to leaving the place in good condition once the bureaucrats leave I expect even more from the producers. Let's assume after all the noise and argument, the People, Ideas & Objects Preliminary Specification fails. I’m sitting on an island in the pacific drinking pina coladas having the time of my life. With the configuration of the budget I can guarantee that. The question that needs to be asked is what will the producers do then. It is this opportunity that they have today, the Preliminary Specification, user community and service providers that the producers need to be involved in. Don’t expect one individual to be the solution to all of the difficulties. I’ve done my hard work, the producers hard work is to come.

And that hard work will be working with our user community participants and detailing what it is you need in your producer organizations now and in the future. Don’t expect someone to walk up and provide you with a custom tailored suit without ever seeing you. The producers direct participation with our user community, the only manner that you have to deal with your needs, is the key to the success of your organization in the future and the success of People, Ideas & Objects Preliminary Specification.

This is the structure of how successful systems are developed, and how successful organizations are managed in the 21st century. The producers have trillions of dollars on the line here. If they expect someone else to deliver the solution to them. A solution that meets their unique organizational needs and delivers that value without their input. Then I have some property in Florida that I’d like to sell you.

The only thing worth owning here in the 21st century is Intellectual Property, or a license to Intellectual Property or working for someone who has Intellectual Property or a license. It’s not enough to own the oil and gas asset anymore. You have to own the oil and gas asset and have access to the software and user community that makes the oil and gas asset profitable. Now and in the future. This is the new reality and the source of the difficulties that I have had in delivering People, Ideas & Objects to the marketplace. The bureaucrats could ignore me before, but now they can’t because they messed it up so bad. Now the search for a vision usually takes what is available in the marketplace. Anybody see any other viable business models floating around?

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. 

How's the Weather?

I think I’m on record to state that all is well in the general economy and we’ll have smooth sailing from here on. That 2008’s financial crisis shook out the demons that were present and we have a clean slate once the Fed and its cohorts begin to remove their quantitative easing initiatives. Here’s some bad news for the oil and gas bureaucrats in the industry. I’ve changed my mind in terms of the overall general economy. I think that the interventions by the Fed and others have to cease as soon as possible in order to put some reality back into the financial markets, and health into the overall economy. Zero interest rate policies are for crisis, not for the day to day economy. We have gone on too long waiting for the Fed to act to raise interest rates that no one believes they will. And when they do act it will be so small that the effect will be minimal, or they will only do one rate increase and be done. I think I see the effect of all of this quantitative easing starting to create the difficulties that we would expect to see in such a false economy.

What Ben Bernanke did in 2008 and subsequently was needed and brilliant in my opinion. The continuation of that however beyond 2011 has been unnecessary and damaging. I would go on to say that it might be that the Fed has been politically motivated in continuing without raising interest rates for so long. Whichever, the time has passed and we need to get to a normal economic environment as quickly as possible.

The thing that changed my mind is this short video from Bloomberg. We’ve all known about the events that are being discussed in the video however, I didn’t realize the extent, frequency and significance of each of these. Obviously the transition from the current false economy to the one that we need to get to is not going to be as smooth and as natural as we would think. If there is this much turmoil in commodity, equity, bond and currency markets, and it has been building for the past five years, there will be a day of reckoning. I think the day of reckoning will be triggered by the inaction of the Fed to make the necessary changes to increase interest rates. They say that they will be making the change in December, but they have been saying they were making the change for years. And when the time does come they make up an excuse not to act.

The great depression was, in most of the history books, a result of a failure of government. We have had a lot of change in the past seven years. None of it positive in my opinion. The New York Attorney General is said to have launched an investigation into Exxon's climate change practices. Essentially looking to prosecute it for what it knew and what it believed. Students at Yale are protesting free speech and dedicated people are thrown out of their jobs for not acting decisively enough in Missouri. Hope and Change successfully implemented. The failure of the Fed to have acted in the objective manner that is required has been questioned by many people. I can’t be the only one looking at the United States with a curious look on their face. If a failure of government were to occur, in my opinion, the federal government of the United States would be my choice as the prime candidate.

We need to focus on the elements that are important to our future. Ensuring that society is provided with the energy that they demand. The only way to do that is to have a healthy and profitable oil and gas industry. What we have today is at least ten years away from being in the position of contemplating that. Thank your bureaucrat for that. If we have a downturn as a result of the disruptions in the commodity, equity, bond and currency markets. What else is there? It won’t be just the oil and gas industry in need of a fix. We’ll be starting over from an economic base that is at a pretty low level of economic operations. Energy will be how we continue on. There is a lot of pain being experienced in the oil and gas industry today. People are paying the cost for the inaction of the bureaucrats regarding the overproduction of the commodities. As bad as this storm is, and it is the worst storm we have experienced in oil and gas. I think the forecast is for even worse weather.

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. 

Put the Lotion, and the Money, in the Basket

Metaphorically speaking of course. I swear I do not have a big pit in my basement where I hold bureaucrats. The industries bureaucrats are however stuck in a pit of their own making and they will be hard pressed to get themselves out. What a disaster the oil and gas producers have put themselves in. Reading their third quarter reports was eye opening, even for me. All but the large integrated producers have any financial resources of size in order to rely on in 2016. And even at that they will be burning cash faster than pets.com did in their heyday. Those that don’t have integrated operations will be lucky to see 2016. Natural gas prices in October dipped to $2.00 before the end of last month's trading. They are currently in the $2.40’s and the future’s contracts for the winter months don’t break out of the $2.40 range. Oil prices are not much better. Recent reports from the IEA stated that oil would not recover until 2020.

The race is therefore on to produce enough to pay the bills. Ever watch the show Breaking Bad where Jesse falls off the wagon and ends up in a drug house. This is where we are as an industry. Where is Walter White when we need him and Mike Ehrmantraut to rescue us? The behaviour is set. The ability, capability and desire to change does not exist with these bureaucrats. Just like Jesse they’re just looking for their next fix. After six years of being hooked on the junk in the natural gas business, and a year of being hooked on the junk in the oil business, do you think you’ll be able to get them into rehab? Maybe I should come up with an inspirational hollywood reference that is appropriate here. Unfortunately no one has ever thought of a story this sad before.

The money that I want the bureaucrats to put in the basket, which of course comes from the movie the Silence of the Lambs, is none other than our budget. It is in that way that we can build the systems necessary for the remake of the industry based on the Preliminary Specification. Which includes the price maker strategy. It is difficult to believe that no one has determined the industry is a price maker before People, Ideas & Objects. Junkies are pretty useless in terms of any productive expectations. A reading of any economics text will show that the industries commodities exhibit monopolistic competition. Show me a replacement to any use of oil or gas. And the large price swings based on small changes in the market availability of oil and gas is the real evidence that proves that it is a price maker based business. Just don’t tell the junkies.

If we accept that as a fact then we can implement the decentralized production model of the Preliminary Specification and ensure that none of the production in North America is ever produced that is not profitable. And profitable based on an accurate accounting. Not on the SEC’s basis of accounting that defines the outer limit of what is acceptable. On the basis of a reasonable way in which to operate the business as a going concern. I know, what a concept.

To do this, all we need to do is provide for the budget, build the software and reorganize the industry. Reorganize it with the prototypical producer being reduced to the C class executives, the earth science and engineering resources, some land, legal and support staff. The rest of the accounting and administrative resources would be reallocated to service providers who are focused on an individual process and will use the entire industry as their client base. It is in this way that, based on the performance accounting at the Joint Operating Committee, the determination if the property can be produced profitably is made. And if it is profitable it produces. If it isn’t profitable it goes into the producers shut-in inventory to be part of their innovative efforts to increase the reserves, expand the production or reduce the costs and return it to profitable production. Also note that putting the property into the shut-in inventory does not incur any administrative or accounting charges from the service providers. That is because without any production activity, there is no action taken and no billing produced by any of the service providers. Doing this will ensure that the producer will be far more profitable even with a lower production profile. We have made all of the producers costs variable. The unprofitable reserves will be saved for a time when they can be produced profitably. And the commodity markets will find their marginal costs as the excess production is removed from the marketplace.

It's common sense really. However this and the other attributes of the Preliminary Specification took me 25 years to bring it to this level. One important aspect of the work that I did is that it is covered by copyright laws, that are pretty much global. Meaning, that as hard as the bureaucrats try to take these ideas, and avoid me, the more they make life miserable for themselves. That’s right folks, they’ve been busted again. This time it's McKinsey, once again. This time out of London so that they are probably unaware of the activities in their Boston office so many years ago. Anyway you should be able to read the article here if you hurry. Other than that it is pleasing to know that the bureaucrats like these ideas so much that they would hire someone, again, to try and take them.

But it just doesn’t work that way anymore. This has continued without consequence to the industry to this point. This must be stopped. Those that have been innocently duped by the bureaucrats have been notified and subsequent action taken. This is appropriate however there have been no financial consequences to the producers who continue to operate in this manner. Effective as of this date I have revised the budget to reflect that the costs of our budget will move from 50%, which is what it was in it its original published amount. And will now be valued at 33.3% with the Intellectual Property Royalty moving to 33.3% and our net earnings now being 33.3%. This has the effect of increasing our costs to the producers from the original $4 billion to the current $6 billion. Thank you. The thing is I could set the royalty and earnings at whatever level I want. Lets hope we don’t have to go there. The bureaucrats will scream blue bloody murder, or maybe just call me crazy, I don’t know and I don’t really care. Just pay the bill.

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.