The Plan

The plan for the oil and gas industry is to continue in the manner that it is currently “managed.” Why would there be any changes? The bureaucrats can’t, won’t and will not ever change. And that is the only fact that needs to be considered. In the past number of years, in either of the natural gas or oil markets, there have been no behavioral changes in the approach to the business. Without any change in the approach to the business, it will continue to be business as usual. At a time when leadership is needed so desperately in the industry there is none. Not a word, no concern, no leadership and most disturbing, there is no plan.

It might be that I am on the outside looking in, but I don’t think that’s the case. I have been involved in oil and gas since 1977 and this is by far the most dire event in its history. At times either the natural gas or the oil markets have had difficulty. Never both sides being hit at the same time. And the extent of the damage being done is by far the most significant. The illusion of oil and gas producers being well capitalized by them having bloated balance sheets is hiding the fact that the cupboards are bare. There are no residual financial resources in the industry to weather this storm. Producers will be financially destroyed in record time. There is no staying power for the industry past what I think is the May 2016 time frame.

So in summary there’s no leadership, no resources to weather the storm that we are in and no plan to get us out of it. As I noted last week denial seems to have overtaken the industry stem to stern. Maybe when there’s no cash to pay anyone reality will settle in.

People, Ideas & Objects, our user community and our service providers have a plan. We have been promoting it in the industry for many years now and it's one irrefutable fault is that it eliminates the bureaucrats from the oil and gas industry. The plan is, we build the software we call the Preliminary Specification, create the user community and they generate the service providers that will provide the administration and accounting to the industry. Developing software in the 21st century is the necessary first step to enact the changes that we want to occur in our organizations. What we want our software to do is to change the makeup of the prototypical producer to be the C class executives, the earth science and engineering resources, some land and legal, and support staff. The accounting and administrative people are reallocated to the service providers that will focus on a single process and use the entire industry as their client base.

It is this configuration of the industry, and the producers, that enables them to shut-in any unprofitable oil and gas production. A necessary first requirement of the Preliminary Specifications price maker strategy. The service providers then only charge for the work that they receive information on and process during that production month. If the property did not produce, then no administrative or accounting work was done and the Joint Operating Committee is not charged with any of the overhead costs from any of the service providers. Essentially turning all of the producers costs into variable costs based on whether or not the property produced. The effect of this will be that the marginal production is removed from the marketplace and the commodity prices will increase. The profit of the producer will be higher because the profitable production of the producer will no longer be diluted by the unprofitable production. And the reserves of the producer will be saved for a time when they can be produced profitably. It is in this way the industry can deal with the prolific nature of the shale oil and gas reserves.

If producers were able to operate their firms in this manner they would have revenue streams that were at least three times the size they are today. Sure their production profile would be lower, by maybe 10 percent, but the effect on their revenues would enable them to earn profits based on an actual, historical accounting! Bureaucrats don’t want to discuss their performance. That would imply that they need to do work. It's far easier for them just to continue on with what they’ve been doing for the past decades.

It's clear to me that the industry and the producers are going to hit the wall in terms of the difficulties that are ever present. They will not change until they are forced to change. That means they have to run out of cash. That will occur in May 2016 to the large majority of the industry. I don’t know how People, Ideas & Objects will be funded but we’ll pick up the pieces soon thereafter. The writing is on the wall for the bureaucrats. You can run the ship aground. Or give me a call. My money's on seeing you out of the business by May 2016.

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 Producers Price Maker Strategy

There has to be a lot of CFO’s in the oil and gas industry sweating bullets at the moment. From stating that their operations continued to be profitable at $30.00 and comparing that to their year end accounting reports. They have some explaining to do. I guess it comes down to what the meaning of profit is. And that is the point. If you have been saying to a business reporter that your company is profitable at $30.00 then you are saying you are profitable at the SEC prescribed meaning of profit. If that is not what you meant then you should've kept your mouth shut. But that is why you get paid the big bucks. You maintain different risk profiles than the average human.

I wanted to reiterate the fact that one of the key differences between the Preliminary Specification and the manner in which the industry is “managed” today. Is that the Preliminary Specification enables the producer to employ the price maker strategy through the decentralized production model. The oil and gas commodities fall into the classification of a price maker. For some reason the bureaucrats operate the industry on the basis that the commodities are price takers. It is this thinking that that the industry is a price taker that allows them to continue to produce despite what the prices are. As price takers, they think, they have no influence on the commodities price.

If we look at the economic definitions of price maker and price taker we find the following.

Price maker

A monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the goods it produces does not have perfect substitutes.

This kind of price maker is also a profit maximizer as it will increase output only as long as its marginal revenue is greater than its marginal costs.

Price taker

An investor whose buying or selling transactions are assumed to have no effect on the market. 

A firm that can alter its rate of production and sales without significantly affecting the market price of its product. 

Our analysis of these terms is based on the following facts. The inability to carry electricity in a bucket or store it anywhere. You can’t lubricate an engine with electricity. Or that positioning a chemical plant next to a hydro dam would provide any value. These prove that oil and gas compete in a monopolistic competitive environment of a price maker. There are no replacements. However the real determining factor is that it is believed that the price of oil has fallen in excess of 70% on the basis of as little as 2% overproduction. This characteristic and attribute disqualifies oil and gas from being a price taker according to the second part of its definition.

Recoverable natural gas reserves are estimated at 2,276 tcf of gas. A number that is beyond the comprehension of most people in the oil and gas business. Certainly well beyond mine. It is this 90 year supply of natural gas that is racing to the market and causing prices to collapse. In Canada there is a 300 year supply. Unprofitable overproduction will continue until the industry has a means of allocating production based on a fair and equitable manner, say on the basis of profitability. Oil prices are slightly different, although the prolific flush production of shale is causing oil's price to decline. There are however not the reserves that provide the many decades of production. The current business model of the producers is to produce oil and gas at spectacular losses at the expense of the investment community. This new shale reality requires a new business model, based on the price maker strategy. And only the Preliminary Specification offered by People, Ideas & Objects provides 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. 

No Vision of our Future

It’s certainly beneficial that the bureaucrats were able to foresee the difficulties in the industry and ensure that the crude oil export ban was lifted in a timely manner. It is these kinds of actions that make the difference in the industry. I wonder where they will focus their energy now? They seem to be caught in the dilemma of the dog catching the car, what does it do with it. Just as they prayed for a cold winter a few years ago, and we did have a rather cold winter that year. The removal of the export ban can be removed from the list of useless, irrelevant distractions for bureaucrats. Strong leadership in times of crisis always gives the people in industry a sense of comfort.

As I stated, my time during the Christmas break was spent preparing for the next four months. It was a time in which I thought that we would be able to convince the investment community to move to fund the Preliminary Specification in the face of such difficult times for the oil and gas industry. A time in which to adopt the plan to build these systems to offset the difficulties in the industry. The times certainly haven’t improved, and I suspect that April and May will be difficult for the producers to get through. But I don’t have any positive feelings regarding the work that I have done with the investment community. Whether it is denial on a wholesale basis throughout the oil and gas industry and the investment groups. Or a fundamental capitulation of any responsibility by everyone involved in this business, it's difficult for me to tell.

It certainly isn’t the investor's problem. If anything they’ve been duped and fundamentally betrayed by the bureaucrats. I just don’t see anyone standing up for the future of the industry. The truth of the matter is that there is overproduction in the industry. Claims that rebalancing would resolve the problem have proven to be false as the deliverability in North America continues to grow. The point that I am making is that all the lies that have been told about what was going on in the industry are now beginning to be seen as lies. The validity of what the bureaucrats say is taken as much into consideration as what people who have no understanding of the business. Maybe that’s the point or the objective of the bureaucrats, for what purpose I couldn’t tell.

Much of what I have said in the past few years about this situation is what has happened. Most specifically the bureaucrats can’t, won’t and will not ever change. And overproduction will continue. Even now with the price of oil in the $29.00 range don’t expect any change in the behavior of the bureaucrats or the production profile of the producers. The news of the day is that overproduction is going to continue for as long as the bureaucrats are in power. Even with the Preliminary Specification staring them in the face they have chosen to do nothing. The fact of the matter is the Preliminary Specification eliminates the bureaucrats from the oil and gas industry. We’ve seen similar actions be taken in other industries as a result of new technologies coming in and offering new methods and ways of doing business. The term is disintermediation.

In terms of where we go from here I have always had a plan and a direction as to what I needed to do to get there, and a clear idea as to where I am heading. I’m sorry to say that I do not have any vision at this time as to what is going to happen next in the industry. Overproduction is going to continue for ever with these bureaucrats. Someone has to take the industry away from them. I also don’t think the bureaucrats care enough to keep the place tidy for the next tenants who come in. The investors have lost so much that they are either out of the business, or are seriously contemplating the exits. I didn’t see the extent of this damage coming so quickly. And I seriously don’t know what’s next.

What we can do is continue to push our solution in the marketplace. Our value proposition increases substantially each and every day. There are many people who are committed to seeing this solution in the marketplace. We have much work to do. And maybe instead of knowing where we're headed we can at least be satisfied that we know that we’re doing the right thing.

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. 

We Need the Big Guys

Late last year I mentioned that the integrated producers were actively looking at doing something in the marketspace of which the Preliminary Specification resides. Noting that they are masters of their own domain and will deal with the issues in the industry as they see them. Today I want to address this directly and note that we need them to be a part of the development of the Preliminary Specification. When we allocate our costs based on the deliverability of the North American production. To exclude Exxon, Shell, BP and Chevron from the mix leaves us with an unfillable hole. They would account for approximately half of the funds needed for us to develop our software.

Whatever it is that they are doing. If I should be so bold as to suggest, it won’t work. That is to say it’s not specifically their problem. The overproduction that is causing the price declines are everyone in the industries fault collectively, and no one specifically. If the integrated producers did resolve the problem internally that would not resolve the 2% overproduction that is occurring in the industry. Overproduction would continue to cause the oil and gas prices to remain depressed. One individual company, no matter how well it is managed, will not be able to resolve this problem. Everyone in the industry needs to adopt the discipline of only producing what is profitable. Only then when the industry has production discipline will this problem be solved. Having the integrated producers go it alone in what they may be doing is not going to resolve the commodity price issues on their own.

The ability to produce only what is profitable is going to need a new definition and standardization. Determining what is profitable is a necessary and critical aspect of what and how that production discipline is attained. Our service providers will be working for all of the producers in an objective manner. They will be implementing standardized accounting and administrative policies across the industry. So when it comes to account for the price of oil or gas. And we should note that the administrative and accounting costs for natural gas will be significantly higher than it is for oil. Which is not the case currently with the use of overhead allowances. The capital used in the development of the Joint Operating Committee will be amortized on a reasonable basis to ensure that the industries investors are provided with a good return on their investment, and a return of their investment. This accounting and administration will be consistent and standardized across the industry through our service producers. A necessity in terms of establishing a fair and reasonable means of production allocation, the precursor to production discipline.

Production discipline can only be attained by reorganizing the industry and the individual producers in the manner specified in the Preliminary Specification. Stripping the prototypical oil and gas producer down to the C class executives, their earth science and engineering resources, some land and legal, and some support staff. The remainder of the administrative and accounting people are then allocated to service providers who are focused on an individual process and use the industry as their client base. This configuration enables the producer to shut-in any unprofitable production with the effect of having all of the costs associated with that Joint Operating Committee, including administration and accounting costs, not being incurred while the property is shut-in. The Preliminary Specification does two fundamental things. It makes all of the producers costs variable. And converts the producers administrative and accounting capabilities into the industries administrative and accounting capabilities. Obtaining significant benefits for the individual producer and the industry as a whole. The producer themselves will no longer be involved in the need to develop their administrative and accounting capabilities. Tasks that are consuming the profits of most firms. Having the unprofitable properties shut-in will increase their overall profits by not diluting their profitable properties. Shutting-in unprofitable properties will also remove the marginal production from the commodity marketplace which will increase commodity prices. And the reserves of the producer will be saved for a time when they can be produced profitably.

To make these structural changes to the producer and industry, and to make them stick requires that we build the software that defines and supports these organizations. Software plays an enhanced role in society today. To undertake these change in the software first is necessary before the actual changes are undertaken. We have to deliberately move in the direction that we want to as an industry from now on. We are not just aimlessly developing as individual organizations as we have in the past. Spontaneous order, the economic concept that has served us well for over 100 years has ceased to be effective. It has been replaced by the concrete that software turns our organizations into. You can not change an organization today unless you change the software first and foremost. That is one of the critical reasons that the industry needs to adopt the Preliminary Specification and acquire the long term software development capabilities of People, Ideas & Objects. To ensure that the producers can continually meet the dynamic environment of the industry.

It is for these reasons that the integrated producers need People, Ideas & Objects Preliminary Specification, our user community and service providers as much as we need them. They can’t do it alone, just as none of the other producers are able to do it alone.

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. 

Dispelling Myth's

There are many myths about the oil and gas industry being discussed in the marketplace these days. The understanding of what is going on and how the oil and gas producers will respond in certain circumstances is being supported by these myths. I think there will be a day of accountability for those that have been pushing these myths out as answers to the current situation. The myths that I want to respond to are 1) the producers are rebalancing the market. 2) that producers are innovative and therefore dropped the costs of production down to be profitable at the current price. And 3) production will be removed from the marketplace when it becomes unprofitable. These three myths are part of the bureaucratic malaise that has overtaken the industry. The press believes the story as it is consistently told by the bureaucrats. And like all myths, incorrect.

This rebalancing of the marketplace has been going on in natural gas for six years. And if you look at the deliverability of the U.S. natural gas production it is beginning to turn downwards. (This is mostly attributable to deliverability declines in the Marcellus shale region. An area that receives at best $1.20 for its gas.) However, that is after six years and a price decline from $15.00 to $1.75 just before Christmas. As I have always stated “rebalancing is a very blunt tool. However, in the age of shale based reserves we won’t see the return of any profitable natural gas prices based on the behavior of the current producers. There are now over 18 bcf / day of deliverability in what are called DUC’s (drilled but uncompleted wells). This was an attempt by the bureaucrats to drill wells at lower costs, taking advantage of the misery in the service industry during these difficult times. What they didn’t realize is that these wells would be considered as part of the inventory volumes of natural gas that are ready to join the other 74 bcf of daily production. Rebalancing the marketplace is what was attempted in the 1980’s and 1990’s. That took roughly 15 years to be effective. In the era of shale reservoirs it will never be an effective means of dealing with overproduction. As soon as the prices rise those 18 bcf / day will race to the market faster than you can blink. Only the Preliminary Specification provides the industry with the capability to allocate production based on profitability at the Joint Operating Committee. Profitability based on an actual accounting.

The second myth that I mentioned is really two myths in one. The first is that the oil and gas producers are innovative. This is not so much a myth as an absolute farce. Ask anyone who has tried to bring anything of value into this industry and they will tell you of the decades that they’ve spent trying to convince a producer to try and build value for themselves. As exhibit a, I would use myself and my 25 years in this endeavor. Providing a value proposition of $45.7 trillion in exchange for our budget is too much math for the bureaucrats to deal with. Too many zero’s to carry I guess. I can remember the stories in the late 1990’s from the coil tubing people begging producers to try their product. Or just look into the history of Packers Plus to see how frustrating it is to deal with these bureaucrats. All the innovation that occurs in the industry comes from the service industry and is as a result of decades of screaming at bureaucrats. Bureaucrats are not innovative. Bureaucrats sit and do nothing but watch the commodity prices fall. What else could they be doing?

The second aspect of that myth that the bureaucrats innovations are responsible for bringing the costs of oil and gas down from the $75 - $80 / barrel before the price collapse to the $25 / barrel today. Is something these people are going to pay dearly for in May 2016. This is a myth and they will be held responsible for stating that these costs behaved this way. Think of the situation. You drilled, completed and equipped a well in 2013. That is a historical, factual capital cost that has been incurred. Based on the production in 2013 these capital costs including the operating costs, royalties and overhead totalled the $75 - $80. In today’s environment, recall that oil and gas is a capital intensive industry, the only change to the costs would be some operating cost efficiencies and a severe drop in the royalties. Maybe $20 in total.

So how does a bureaucrat move from $75 - $80 costs to $25. There are a variety of names for it but I will use the term that I feel is the most common “recycle costs.” Recycle costs are calculated when you take the current price of oil is $33 and to produce a profit at that price your cost would need to be $25. Therefore the producers costs on a go forward basis are $25. Subject of course to some innovations in terms of the capabilities of the producer. That is recycle costs, the myth.

The last myth we listed was that as soon as production is deemed unprofitable it will be shut-in and removed from the marketplace. First, with the phenomenon of recycle costs there will never be any loses as those costs are always lower than the prices. Second the deliverability continues to increase. And more bankruptcies will be announced in 2016 then at any other time in the history of the industry.

This mindset is the one that is operating in the industry today. If you don’t believe me, take a look at the price of oil and natural gas. There is no adult supervision going on. It is bureaucratic, self interested, thoughtlessness at the highest level. These people will need to be preparing their stories and their financial statements for the 2015 annual report and general meetings. These myths are present in the marketplace today. How will they deal with the reality of their actions in 2015, their lack of plans to deal with it and the dispelling of these myths. It’s going to be a good year for People, Ideas & Objects, our user community and service providers. If you think I’m being too harsh, that I might get funded faster by being nice. The truth has to come out about what’s been going on here. How to fix it. And who is going to fix it. Being nice to the people who created this much destruction, after the treatment that they provided to me over the past decades, particularly when they could've saved themselves by building the Preliminary Specification. Is beyond my level of compassion. They need to account for their behaviors, actions and decisions.

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 Nile is a River in Egypt

In terms of the five stages of grief; there are denial, anger, bargaining, depression and acceptance. People who have paid the costs of the bureaucrats inaction, those that have been laid off, are no doubt forced to be in the acceptance phase. The bureaucrats themselves, and most particularly the investors who have funded the bureaucrats nonsense for the past decade, are all in deep stages of denial. Talking to them is almost useless. They will fixate on an element of the discussion that is irrelevant and use that to wander away aimlessly from the conversation. Anything to get away from the facts on the ground. As I stated yesterday, there is a general consensus now that the overproduction by the producers is the source of the difficulties in the oil and gas industry. There are no boogie men. The point here is the Preliminary Specification with its price maker strategy is the solution to this problem. And that needs to be accepted, which happens to be the fifth and final phase of grief.

The good news in this discussion, from the point of view of People, Ideas & Objects, our user community and the service providers, is that we will soon move onto the anger phase. A lot of anger and grief will be expressed over the fact that trillions of dollars have been flushed unnecessarily by these bureaucrats inaction. This is why I hypothesis that bureaucrats will be hightailing it out of the industry faster than you can say, “but wait a minute!” The damage that’s been done affects everyone in the industry, except the bureaucrats, and everyone is going to be as mad as hell. It’s not an environment that I think any bureaucrat is going to want to be sitting around listening to, with the eventual outcome being they’re shown the door anyways. Why not just skip the whole process and leave now. The good part of this hypothesis is that there won’t be any mass layoffs because that would be redundant. If you're a bureaucrat, just get out of town before the sheriff finds you.

Denial is what humans use to soften the pain of the loss. In theory then we could be in denial for decades as there is no way out of the overproduction issues other than the Preliminary Specifications price maker strategy. This is a commercial environment, however and it is here that the resources of the industry have been taxed the heaviest. The cupboards are bare. The industry never had any working capital to speak of, even in its best days. It chose to deceive everyone with bloated balance sheets. The net effect of these bloated balance sheets is that the investors were subsidizing the energy consumers and the industry never really made any money. It was a money pit. A drain on the investment capital of the banks, junk bond markets and investors. Now, instead of having any resources to deal with the storm they’ve created, producers stand naked, frozen, directly in the tornado’s path. Nowhere to run and nowhere to hide.

Creative destruction is the term for this phenomenon. The destruction will be complete. From the industries ashes will be the Preliminary Specification, our user community and the service providers that you and I develop here in the next few years. It shouldn’t have to be this way, but that is the way that our capitalist system changes. Out with the old and in with the new. And you can be a critical part of that new industry. If for whatever reason you accept the changes that I have detailed here. Then consider yourself in a leadership position with respect to where the industry will be in the years to come. The opportunity to take that leadership position and strategically position yourself with a role in the development of the Preliminary Specification and formation of a service provider is the opportunity that is open to you today. Placing yourself in the structure of the industry for the next generation.

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. 

A Fundamental Betrayal...

...is what the bureaucrats have orchestrated upon the oil and gas industry and all of those that are involved within it. And they did so for the sole purpose of ensuring that their personal financial benefits were kept intact. After all of the lies, the screaming and pointing of fingers that it’s someone else’s fault. It is now clear to everyone that the North American producer, fueled by shale based reserves, have been overproducing oil and gas in the commodity markets. Do we now trust these bureaucrats to be the ones who will figure out what the real issue is? Do we therefore expect them to resolve the problem? No, our expectation is that the integrity and honesty that they have displayed in this process has been destroyed. It is obvious that they will destroy the industry before they face the reality that they are unwilling to deal with the problems that they are creating for themselves. They are personally conflicted. No one is going to give them the second chance.

There was an alternative in the marketplace that dealt specifically with the overproduction issue that is ever present today. Am I the only one who saw it. No of course not. But I am the only one that has spent the last 25 years working to resolve it. The bureaucrats giggled amongst themselves when I said that the value proposition of the Preliminary Specification was well into the trillions of dollars. Now as a result of their inaction they are responsible for the destruction of trillions of dollars of value. Real destruction of real money. Who’s giggling now. This has been a fundamental betrayal of all of the interests in the oil and gas industry. And a fundamental capitulation of the future of the industry. And the bureaucrats are solely responsible. I have consistently let it be known that I believe the bureaucrats were the problem in overcoming the adoption of the Preliminary Specification. It has been their history since I first published the use of the Joint Operating Committee as the key organizational construct of the innovative producer in August of 2003. They saw the writing on the wall then and they ran me out of town and shut me down. I have been unable to find work in oil and gas since then. Interesting isn’t it. All the work that I was doing just stopped and nothing new was ever offered. That is the price I have paid for trying to solve this problem. Please note as well that we enter our eleventh year of writing on this blog!

It’s down to us. The realization over the Christmas holidays that the overproduction of the North American producers is the problem is now widespread. Soon it will be generally understood that the only solution that exists is People, Ideas & Objects, the user community and our service providers. The bureaucrats, who have no integrity and we can’t trust, have always known what the problem was, as evidenced by their treatment of me. They had every opportunity to resolve it within their own organizations. Why is it that they didn’t resolve it on their own? Its because they can’t, won’t and will not ever change to the type of structure necessary to enable them to resolve it. It eliminates the bureaucrats from the industry.

It’s not only down to us but we have a lot of work to do. In the perfect world industry would have joined me in August of 2003 and began working towards the solution at that time. Then we could have avoided the decline in natural gas prices in 2010 and the decline in oil in 2014. A sum total of several trillion dollars in value. They also could have avoided the more than one trillion dollars in lost value in terms of the oil and gas producers lost market capitalization. But I’m afraid there will be much more. We have many years of work ahead of us. And this is why the bureaucrats were paid the big bucks, they were supposed to be aware of these things and avoid them. Now we’ll just avoid the bureaucrats.

So it is with regret that I stand here in 2016 and have to look at the destruction that is the oil and gas industry. It is something that I know I did everything I could to stop it. And we can resolve it in the mid to long term with the Preliminary Specification, the user community and our service providers. I suggest if you have similar feelings you join me in the user community and we rebuild the industry back to what it should have been before we were so fundamentally betrayed.

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. 

Year End Closing

Where we currently stand to in the oil and gas industry is far from where we need to be. The deterioration of the capacities and capabilities can be felt draining from the industry in the past six months. Things that should be getting done are not even on the list of things to do. This of course is the old business model working as it does. Let the industry deteriorate until such time as shortages are created and then we’ll move to rebuild what was lost with other people’s money, again. The only thing the producers have today are spectacularly large balance sheets. These represent the money from the last time they fleeced the investors. The actions of the investors in the past few years shows that they’ve caught on to the game, and they don’t like it. They might sit this round of financing out. And therefore the producers will decay even further as shale’s flush production continues to overwhelm the commodity markets price mechanisms. The only way out is for producers to select the Preliminary Specifications decentralized production models price maker strategy. That way an industry wide method of production allocation, based on the equitable and fair basis of profitability of each and every Joint Operating Committee, can be used to determine which property produces and which property remains shut-in.

Until this scenario plays out People, Ideas & Objects and our user community have work to do. The forces of creative destruction in the industry are well in play. We need to commence work now in order to offset the difficulties in the industry. As they depreciate we’ll rise to recover from their failures. Eventually taking over from the ashes of what will be left of the producer firms that exist today. That is how creative destruction has worked in the past and how I expect it to function here. There will be many producers that might make the transition, however picking the winners and losers is a sport that Las Vegas would be more interested in. Our job is to get moving and to make sure that society does not have any difficulty in sourcing their needs of oil and gas.

It will be a cold, literally, hard slap in the face to those alternative energy and climate change people. They will think that the decline in oil and gas is an opportunity to build more wind and solar. I am always amazed at the extent that people can convince themselves of such foolishness. Those who think that they can just switch to wind and solar are fresh out of the looney bin. The oil and gas industry produces so much energy, and so much of it is used in industrial purposes that it would take centuries for wind and solar to catch up, let alone take over. Ever see a chemical plant next to a hydro dam? And you won’t. Society is not hooked on oil and gas. Oil and gas is the blood that makes society run. Let's not kid ourselves into believing in myths and fairytales before it's too late. Your participation in our user community is the mitigating factor and the destruction of this myth.

I will be taking the rest of the year off. I need to prepare for the early part of 2016. Producers will be once again preparing their annual reports for what has been a bad year in a dismal industry. They have no profitable operations anywhere. They have no financial resources and they are desperately short of cash. They need to show their investors and bankers, and most importantly their prospective investors and bankers, a plan on how they’ll turn this situation around. As we know they don’t have one and they’ll be unable to come up with anything in the next few months. What I suspect will happen is we will see the rats jump ship, so to speak. The bureaucrats will seek greener pastures knowing that the difficulties in oil and gas are beyond what they can resolve. After all that is their history and pedigree. Expect the announcements of retirements and resignations to begin once the bonuses have been distributed. That’s right bonuses. I am looking to return on January 11, 2016 and expect that posting may be light for the first four months of next year. This is crunch time for us. We must make this real. A decision has to be made to proceed with the development of the Preliminary Specification. I am looking to the investors and bankers that support the oil and gas producers to make that decision. So for now have a Merry Christmas and Happy New Year and will see you in 2016.

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. 

Users Wanted

Yesterday we went through some of the difficulties people may be faced with regarding the decision to participate in this user community. We understand that it’s not for everyone and we are looking for specific people who are able to make the difference in the new oil and gas industry. If you’ve made the decision to join the user community of People, Ideas & Objects, what’s next. Review of the application process can be found here. We know it’s extensive and will take some time and effort to complete. It is important for us to be able to make our decisions based on the best possible information available to us. Once you’re approved, this information will be available to all users across the community, and as a result, users will be able to find like minded people with similar experience to work with.

The second point we should concern ourselves with is that we are a technology oriented solution. From a specialization and division of labor point of view we are providing a new, sub-industry between the oil and gas and the Information Technology industries. Our user community is being drawn from the oil and gas industry and we have all had dealings with those who are in the Information Technology world. Sometimes it seems that they are speaking a different language and are on a different planet. The sub-industry we are creating needs to be able to understand oil and gas but also needs to understand the Information Technology industry at the level where they can effectively communicate with them on that planet. You won’t be writing or editing software code, but I can assure you that you will be reading it. You will also be leveraging your ideas and needs through the software developers of People, Ideas & Objects and members of the Information Technology community. They will be the tools that you use to provide the oil and gas producers with the most profitable means of oil and gas operations.

There is time, and I would suggest that everyone, whether through formal education or self study, be capable of achieving the above requirement in the Java and database environments. We are Oracle Fusion Middleware and Oracle Fusion Application users as the base of the People, Ideas & Objects application. These are the technologies that will form much of the work that you will do. If you have avoided the technologies up until now, or have a strong aptitude in the Information Technology area, it doesn’t matter. Your key value to the oil and gas producer is the understanding of their business. Your creativity and capabilities in determining what and how you can do what you can do in the future, when you have a software development capability available at all times, will be so much more effective if you fully understand the technologies capabilities and limitations. There is much that we can deliver to the oil and gas producer in terms of value from an oil and gas point of view. And there is much that we can deliver to the oil and gas producer from a technology point of view. This can only be attained by having a “hybrid” user community that can bridge the two industries that we sit between.

I think that I am on record as stating that these technological requirements would be attained with six or seven university level courses in Java and database technologies. This would give you the level of understanding that would make you proficient in that world from the point of view of understanding the tools that will be at your disposal. Having the software development capabilities of People, Ideas & Objects and Oracle technologies at hand, with the user community vision, empowers you to achieve our success over each of the next 25 years. It is that time frame that we should consider that these systems will be under constant iterative development and will continue to evolve to provide the oil and gas industry with the ability to meet society's needs for energy.

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. 

Courage

A defining characteristic of People, Ideas & Objects user community is going to have to be its courage. This is not something that is usually expected in the domains of oil and gas administration and accounting. However what we are doing demands that we have the courage to overcome the difficulties that we face in the process of changing the industry to one that is dynamic, innovative, accountable and profitable. No one can think that this will be easy, it will be the most difficult work that most have undertaken in their careers. And it will not necessarily stop once we have developed and released our software into the marketplace. The user community is a long term solution to the bureaucracy and will be the replacement to that means of administrative and accounting capability. We can expect more than a few fights from the bureaucrats and a general lack of support from them as well.

When I speak of courage in this instance I would define it in its purest form as the “conscious self-sacrifice on behalf of something greater than one’s own self-interest.” Let's be clear, I am looking for leadership to be an element of the user community. Leaders who lack the courage to lead are not leaders. And there are other common virtues of courage other than leadership. These include honesty, integrity, confidence, compassion and humility. I am setting a high standard in terms of the individuals who are members of the user community due to the role that they will undertake that is so critical to our success and the success of the oil and gas industry. Our demand for courage from our user community and service providers may be unique in the environment that the bureaucracy has created for itself. What I see in the bureaucracy is a group that is committed to being unaccountable and as self serving, who will do nothing other than for themselves. I have stood up to them and paid the price, we need to create a climate where accountability and virtue replace this unaccountable and self serving bureaucracy.

General William Tecumseh Sherman defined courage as “a perfect sensibility of the measure of danger and a mental willingness to endure it.” Many have expressed their concern about participation in the user community. Identifying the risks associated to them in joining our user community. Fear is what I am sure everyone is feeling regarding participation. It is an exciting project with significant downside risk to their medium to long term prospects of their careers. But that is the point, without fear there would be no need for courage. There will be many people in the user community who are committed to the success of this project, purely out of fear. If that fear is greater than your courage to approach the difficulties that we share in the future you should stop reading this blog and forget about participation. If however, your desire to resolve these difficulties in industry are greater than your fears than you should move to act on those feelings by joining our user community. It is said that “you can live with pain. You can live with embarrassment. Remorse is an awful companion.” Coulda, shoulda, woulda might be too much remorse to live with in the future. “Don’t let the sensation of fear convince you that you’re too weak to have courage. Fear is the opportunity for courage, not proof of cowardice.” John McCain

What I have done to mitigate your risk is to ensure that we have our budget funded in its entirety before we commence any software developments. This might be unreasonable, however. With a value proposition of $45.7 trillion over the next 25 years, and over $700 billion in the producer's market capitalization losses. If the producers can’t be compelled to save themselves by funding our developments in full, then there is no hope for them. Therefore there will be no financial risk for the members of the user community during our developments. We do not expect any of the user community participants will be engaged on a full time basis during any of our developments. Though we have costed the user community participants time at an average of $190 / hour.

There is much to do before we get to that time and the application process that we have established is rather onerous. We will detail these in tomorrow’s post and give you a better understanding of what might be opportune at this point in time.

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.