Lowest Level of Performance Attainable

What we see in the commodity prices is the rush of the producers to generate the money they need to pay the bills and the bank. We’re as little as two weeks away from the beginning of the second quarter reports which will show us some interesting trends in the industry. I have asserted here that bureaucrats have annually taken money from shareholders and banks to fuel the business. They then never accounted for those capital and overhead costs because they sit on the balance sheet for ever it would seem. This all under the prescribed method of the SEC. However, due to poor performance we have recently seen the banks and investors cut the bureaucrats off from their sources of cash. This has eliminated these normal operating funds from the industry. The industry was never profitable these past four decades because it never recognized all of its costs. The only cash flow it had was from the banks and investors.

The 2015 fiscal year was a wholesale disaster. Many companies were forced to write their capital assets down which caused them to incur substantial losses. $18 billion here, $23 billion there, the losses were earth shattering. Many experienced losses that were larger than the amount of money that they had raised during the lifetime of the company. Now the second quarter reports will reflect their status and financial condition within the industry. I didn’t see any financings of any material volume or amount. There were a number of property sales that may have enabled some of the producers to raise some cash. But other than that we are going to see an industry, that is reputed to be profitable at $50, not generate any cash and indeed not report any profits. This quarter will show what the industry is capable of doing on a stand alone basis. In an atmosphere where prices were “robust and improving” the bureaucrats should be hustling these reports out the door as quick as they can to prove to the world that they are everything that they say they are.

I don’t think so. What we will see is that these claims of being profitable at $48 are false. Those are the costs of royalties and operations. The cost of capital and overhead also need to be included in those calculations. In addition, the consistent decades long refusal to do an appropriate accounting of the costs by stating that the capital and overhead costs are “sunk costs.” Has left a legacy of bank and bond debt and shareholders that were used to fund those capital and overhead “sunk costs” which needs to be repaid. These legacy costs on top of the actual costs of production reach almost $200 / barrel in terms of the costs and cash commitments that these bureaucrats need in order to keep the lights on and say they are profitable.

Since the late 1970’s I’ve been in the industry and at no time during this time was there ever a focus on profits. It's always been on cash flow. Included in those cash flow numbers are the investments being made by the shareholders, annually, and the debt that the company is incurring. The engineers and geologists think this is the point. They are fooled by the SEC’s ridiculous accounting methodologies that have been in place since the late 1970’s that capitalize everything that is ever spent in an oil and gas company. As a result the geologists and engineers are reporting “profits” under this scenario despite what they did, how they performed or what they spent. You can not discern the success of a producer firm based on the financial statements that it produces. Performance has never been the essential ingredient of the oil and gas producer. The phenomenal oil and gas people are indistinguishable from the idiots.

You can run an industry on this basis for apparently 35 years and things will then begin to fall apart. At least that is how long these forces have taken to cause the destruction of the oil and gas industry. We saw a trend in the late 1980’s and 1990’s where producers just continued their uncontrolled pursuit of more production in the never ending decline of oil prices. This took almost two decades to clear. Now with shale we have a permanent oversupply scenario as a result of the prolific nature of these reservoirs. In both oil and gas. The only thing that stops the bureaucrats from bringing all of that oil and all of that gas on to the marketplace at once is the limited size of the investors pocketbook. There is no production discipline. There wasn’t any discipline in the 1980’s and 1990’s and there certainly isn’t any now.

What we will see in these second quarter reports is the extent of the cash crisis. Some producers will have disposed of assets to pay the bills and keep the lights on. The extent of the cash crisis will be ferocious. There is a large intermediate that completed a $1.3 billion stock offering at the beginning of the year. And sold some properties for a good price to build their cash balances in the first quarter. I was surprised to read that they were in the market again selling some of their Canadian midstream assets. This demand for cash was always fueled by the banks and investors in the past.

The performance level in the industry is at the lowest attainable point on an industrial scale. We are talking daycare level of capabilities, not even kindergarten level. Expecting profitable operations to suddenly come from these bureaucrats is the foolish expectation that I would laugh at today. The lie that their profitable at $48 or whatever is going to be exposed as well. What I’m afraid of is that these next three to four weeks may be the most difficult for the innocent victims of the bureaucrats incompetence, the people. Payroll is due, that might be the first indication that things are not right. I’m going to call this next month oil and gas armageddon.

 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 Few Steps Closer

On June 29, 2016 Oracle Corporation announced that their Sparc S7 chip will be provided as part of their cloud computing offerings. This was on my wish list of things we would need from a technical point of view. Now we have that and it will be able to provide us with significant scope and scale that will make People, Ideas & Objects Preliminary Specification capable of achieving the success that we need it to be in the marketplace. This press release from Oracle will provide you with some of the details. The points regarding security would be what I would highlight. What I would also point out is that this would default us to the Solaris operating system, the Z file system and on chip database ROM. The kind of performance that we will need when we have an industry to concern ourselves with.

What is everyone waiting for? Bureaucrats have everything under control, prices are rising and the industry will be on its feet in a few short quarters. There seems to be some doubt about that. People don’t think that “things” are back to normal. No one is dancing in the streets here in Calgary, like they normally do during Stampede. It’s more of a brace yourself for impact kind of feeling. It’s not that I lust for the bad times but these make for positive news here at People, Ideas & Objects, our user community and service providers. The only way to undertake the wholesale changes that we are doing within the Preliminary Specification is on the basis of the absolute failure of the bureaucracy. They have permanently damaged the competitive structure of the industry. The producer organizations can not generate any surplus cash. If they do generate any cash they have bank, bond and shareholders obligations that were incurred over the past two decades. There is absolutely no upside for a new investor. I honestly couldn’t be happier that this project is one step closer as a result of the bureaucrats incompetence.

Never before in People, Ideas & Objects have we been this close to writing code. I can taste it. The investors in oil and gas have decided that they won’t be doing business with the current producers. Their cost structures are uncompetitive. The banks have also been advised by the Fed in the form of new guidelines on how to issue loans to oil and gas producers. The Fed was concerned with the rising level of oil & gas defaults and stated that banks need to change their methods of granting loans to now consider the ability of the producer to pay. It’s not too long that an industry can survive without the support of the investment and banking communities. The need for cash in the oil and gas industry is epic. We will see how desperate it is in the second quarter reports that will be published here in the next six weeks. There is a reason new wells are being drilled. It's a source of new cash and the drilling company doesn’t get paid for 60 - 90 days, if their really lucky.

And when it comes to providing these investors and bankers with a new industry opportunity. People, Ideas & Objects, our user community and service providers reset the competitive structure of the industry. Enabling them to invest today in the industry without the dilution from an existing producers bank and bond debt or shareholder structure. Allowing them to hold 100% of their new oil and gas properties investment title. Investors and bankers can both participate in purchasing properties and field activities. Have the current producers operate these properties for them in the short term, while we develop our system, the user community and service providers that will manage the property for them in the long term.

We are on the cusp of becoming “real.” I don’t know what will push us over but we’ll get there and soon. I would encourage you to continue to work on your user community application. It is a substantial business opportunity in this new sub-industry that we’re creating between the oil & gas and the Information Technology industries. This past year we have seen many significant developments that were necessary for People, Ideas & Objects our Preliminary Specification, the user community and service providers to come into being. Things happened quickly last year. I think that the speed at which we will be able to move from this point forward will surprise everyone. That is why it is important to get working on your application. We are in the right place at the right time. Things will be happening quickly now and promises to be an adventure for those that participate.

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. 

It's Not Collusion

I occasionally run into people who have some understanding of the Preliminary Specification and have determined that the price maker strategy amounts to collusion. I don’t know what the impetus for their thinking is but I find this frustrating. There is ten years of research in the Preliminary Specification. It took me over a year to write, and these people can come up with the conclusion that its collusion after reading the Preamble. Nonetheless the issue of whether the price maker strategy involves collusion or not can be addressed by clearly detailing why it's not. That is the purpose of this post.

The first thing we need to realize is that the oil and gas commodities exhibit characteristics that make them “price makers.” The industry operated by the bureaucrats assumes that these commodities are “price takers.” The differences are defined in the economic literature as follows.

Price maker

A price maker is a monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes. A price maker that is a firm within monopolistic competition produces goods that are differentiated in some way from its competitors' products. 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 cost, so in other words, as long as it's producing a profit.

Price taker

A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. All economic participants are considered to be price-takers in a market of perfect competition, or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market. This holds true for producers and consumers of goods and services and for buyers and sellers in debt and equity markets.

Please note that marginal cost as defined by People, Ideas & Objects is taken over the long term. This perspective is consistent with the definition on Wikipedia and elsewhere that “In practice, this analysis is segregated into short and long-run cases, so that, over the longest run, all costs become marginal.” The issue that People, Ideas & Objects has with the bureaucracy is they preclude the cost of capital and overhead in all of their calculations over all perspectives. Leaving the investors to subsidize the consumers of their energy costs. Please review our Preamble for further clarification.

People, Ideas & Objects sees the oil and gas commodities as price makers in the following manner. You can’t put a petrochemical plant next to a hydro dam. You can’t lubricate your engine with electricity. You can’t carry nuclear power in a bucket or fuel your car with coal. Oil and gas have monopolistic competition in that it does not have substitutes. Water is a price taker.

In terms of price maker and the method that our decentralized production model works is that only oil and gas production that is profitable is produced. Those properties that are unable to produce profitably at the current commodity prices are shut-in until the commodity prices rise, or innovations increase the reserves, lower the costs or increase production. The important point that has to be made. And the point the people that I mentioned at the beginning of this post don’t seem to understand. Is People, Ideas & Objects price maker strategy is based on the individual decisions of each of the producers, based on an actual, factual accounting of the properties profitability. If that is collusion than the entire capitalist system is.

The definition of collusion is provided by Wikipedia. “In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is overt, on the other hand, is known as tacit collusion, and is legal.” All firms will be making the decisions of whether or not to produce at each and every property that they own. Those decisions will be made on the factual, actual accounting that provides the information for that decision. The decision is to make a profit, or if the property is shut-in to incur a null operation. The decision to avoid a loss of financial resources as a result of producing the property at a price that does not cover the marginal costs, in the long term perspective of marginal costs, is a rational business decision, not collusion.

To avoid collusion bureaucrats would have us believe that they are operating the industry within the law today. Losses of catastrophic proportions displacing the financial resources of each and every producer over the long term is normal business for the bureaucrat. To establish their cost structures and legacy commitments of shareholder distributions, bank and bond debt payments that push them outside of any viable future oil and gas price scenario is considered reasonable for the oil and gas bureaucrat, as long as they don’t collude.

What people need to do is to begin reading and thinking about what it is the oil and gas producers are doing. We see the prices starting to motivate some producers to move back into the field for more drilling. We will most certainly test the lows in both of the commodities in a very short period of time. Shale is the issue. The reserves are prolific and the deliverability will overwhelm the market if there is no production discipline within the industry. The only way that production discipline is going to come about is through the adoption of the Preliminary Specification our decentralized production model, based on the price maker strategy.

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. 

Recipe for Disaster

While I was away I noted that the news was interesting from a number of different points of view. First the U.S. now has the largest proven oil reserves in the world. Shale is prolific in terms of its deliverability and the reserves that are held. This is significant news that should put the idea of energy independence in the minds of the energy producers and politicians. Natural gas reserves have been as substantial for many years due to the initial focus on natural gas in the shale areas. There is only one way in which the industry will enable the North American continent to be energy independent. That is if it's profitable and it is efficient. The continent produces all of its own gas, the need to substantially increase our oil production will not occur from the current base of the industry's structure. The only way in which the industry will attain full energy independence is to adopt the Preliminary Specification with its decentralized production model and price maker strategy.

The second interesting piece of news is that with the moderate increase in oil prices over the past six months. Shale drillers are back drilling again. It’s what they do. They can’t, won’t and will not ever change. The need for cash when the investors and banks have cut you off is at a critical stage. And the only source of cash for the bureaucrats is production. That we have detailed that producers costs and commitments total over $200 / barrel is not the issue. Once again those are “sunk costs.” What we will see as a result of the recent increases in both oil and natural gas prices is a rush of new production that will cause prices to fall back to their lows.

The market psychology will not be favourable for the bureaucrats when that happens. They have little credibility now and if they destroy the prices again then they will have provided the ammunition for their removal from the scene. Those that can, will be looking for alternatives to remove the bureaucracy and find something that’ll work. Something like People, Ideas & Objects Preliminary Specification, our user community and service providers. Did anyone else note that the Saudi’s were keen to note that they were no longer employing their “strategy” that had the effect of “depressing prices.” I think they said that because they don’t like being accused of being the ones responsible for low oil prices. The Saudi’s have now removed themselves from the marketplace as a variable that might lead to lower prices. And that if lower prices were to occur in the future, then the only culprit would be the North American shale based producers.

Natural gas prices have also increased to almost $3.00 on the basis of higher electricity demand. It is believed that current record storage volumes will be mitigated as soon as the winter season, leaving natural gas prices to resume somewhat normal pricing dynamics. This is what passes for rational thinking in the bureaucrats minds. It’s hot outside, demand must be high, all our problems are solved. The issue of overproduction has not been addressed. A method of production discipline has not been instituted in the industry, shale deliverability and reserves continue to grow substantially, nor have any of the investors or bankers demand for cash been addressed. But yes it certainly is hot.

These new U.S. oil reserves, in combination with the natural gas reserves, will never be produced profitably in the hands of these bureaucrats. They don’t care! They are entitled and will continue to operate the industry as they see fit. No one is going to remove them from the scene. Certainly no bank is going to be able to take over the administration of an oil and gas firm because of a loans poor performance. And certainly no bank is going to be able to handle the entire industries administration on that basis. The investors may be gone but the proceeds from the sale of oil and gas will still meet payroll and really what more is there to concern one’s self with?

When we look at what society needs in terms of its energy for the next 25 years we know we will not be able to count on these people for what is required. We should best begin now to learn how to allocate and apportion the diminishing production to the various countries that it’s needed and then send out the ration coupons for the people to use. It all could’ve been so much different. Remember how when the former Soviet Union collapsed. People were all lined up at the bakery waiting for bread. No one was working because they were all hungry. It’s this kind of dismal future that always ends up at the end of an entitled bureaucracy.

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. 

U.S. Independence Day

No posting today.

Please note I am taking the rest of this week off for a working vacation. Will resume posting on July 11, 2016.

Canada Day

No posting today.

Just the Facts

The individual decisions of each oil and gas producer, based on an actual accounting of the profitability of the property, will determine if the property produces. That is how the oil and gas industry needs to deal with the low commodity price situation that it finds itself in. Shale based reserves will always overwhelm the oil and gas commodity market with flush production and deliverability that are driven by its prolific nature. Production discipline based on profitability can only be achieved through the reorganization of the industry and the producer based on the Preliminary Specifications decentralized production model. Enabling the price maker strategy that’ll return the producer and industry to profitability.

Those changes to the producer firm and to the industry at large are being undertaken at this time. Creative destruction has destroyed the competitive structure of the North American producer. With costs that include the legacy capital spending, and ignoring of those capital costs of the industry, now reflected in large balances of bank and bond debt, and substantial stock distributions. Feeding the legacy of these historical costs is for foolish investors with the inability to read financial statements. Banks too have changed the basis of new loans. Eliminating the hope of ever raising any new capital from any source. This is the legacy of treating investors as “sunk costs.” They too one day can treat you as a “sunk cost.”

Cash flow numbers that were stated by the producers in the good times, and in the bad, always included the amount that was raised by financing. Stating that you had “cash flow” when in fact you really only had financing are two different things. Profits are what an industry operates on and the concept is completely foreign to the bureaucrats who operate the industry. Creative destruction is removing these individuals and the products of their efforts from the marketplace as we speak. They are the walking dead.

The new oil and gas industry is what People, Ideas & Objects is promoting in our Preliminary Specification. It is how the industry adopts that old time religion of profits and begins anew. It is how the industry can grow to the size that it needs too to meet the needs of the energy consumers. It is how people can be provided with an uninterrupted career development where they can make a difference. It’s how investors can invest in the oil and gas industry with the understanding that choosing the right earth scientists and engineers will make the key difference in their return on investment. That there would not be the case for these long periods of commodity price declines that are so disruptive and destructive to the industry.

I will be taking the`next week off from writing and focusing on some things that have been developing here at People, Ideas & Objects. See you on the 11th of July.

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. 

Bank Regulators Get Wise

Bank regulators in the United States have become concerned with the level of bad loans in the oil and gas industry. As a result they’ve issued new guidelines to banks on a new procedure of how to issue loans to oil and gas producers. What they now recommend is that the loan be granted on the basis of the producers ability to pay, as opposed to the underlying reserves. This is a fundamental shift in the way that banking is done in oil and gas. I could never understand the criteria that banks used to grant loans to oil and gas producers. They’ll never lend any money to other industries or individuals on such a liberal basis as they did in oil and gas. If they did they would have taken an individual's potential lifetime earnings and used that as the basis of the loan. I think what this shows is that the banks were hoodwinked by the SEC’s accounting methodology of essentially capitalizing everything. Enabling a bureaucrat to leverage their spending orgy with excessive levels of debt. Its taken this long for banks to learn their involvement in this fiasco. It was their money, emphasis on was.

On Monday we saw Private Equity slam the door in the face of the producers by using the Joint Operating Committee as their vehicle to invest in the oil and gas industry. Now the banks are being “asked” by way of guidelines from regulators not to loan money on the basis of the reserves of the producers. Both of these funding doors are closing quickly and bureaucrats will be hard pressed to fund any part of their organization. With either debt or equity. The lesson is that the good old days are over for the bureaucrats.

In the Preliminary Specification we have the Financial Marketplace module that sets out a different basis of funding the oil and gas industry. One that deals with using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. Leaving the current corporate model behind. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. Using this in the Financial Marketplace module aligns the compliance and governance frameworks with the financial framework of the Joint Operating Committee. Providing a new and innovative way in which to finance and manage oil and gas properties. One without bureaucrats, and is heavily dependent on the Information Technologies that have become ever present in the past decades in banking. Review of the Financial Marketplace module will provide you with an understanding of the synergies that People, Ideas & Objects, our user community and service providers are developing with the financial aspects of oil and gas.

When reading the Financial Marketplace module you will come away with the understanding of how much larger the transaction volume will be in that module. Just as in the entire Preliminary Specification, the volume of transactions that will occur in our system vs. what would occur with the same production and activity volume today would be exponentially larger. This is for a variety of reasons that can be gleaned from a comprehensive review of the Preliminary Specification. Therefore keeping the bureaucracy is an impossibility. And who would want them anyway. The need to expand them to meet the expanded throughput of transactions would make the world an unsafe place. We have computers now, which is one of the things that we do at People, Ideas & Objects is to make sure that the computers do the work that computers are good at, and make sure the people are doing the work that they are good at. The need for paper pushing bureaucrats doesn’t exist in too many places in the world today. I say we get rid of them here too. Which is what we do and let the people do the leadership, problem solving, decision making, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, innovating. And let's not forget financing.

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 Are the Change

Things are happening quickly now. The faith that our existing producers will be the ones that lead us for the next 25 years doesn’t exist. Change is being forced upon them by those that were betrayed most by the bureaucrats. The oil and gas investor. I’m not soliciting sympathy for them, they wear the big boy pants and can deal with their own difficulties. What we need to concern ourselves with is the long term commercial viability of the oil and gas industry. That consumers have an abundant supply of oil and gas to ensure that we are able to achieve the highest possible levels of our standard of living. This can only happen with a prosperous and profitable oil and gas industry.

The speed in which things will happen now will be exhilarating. Change, when it starts, doesn’t wait for the unprepared. As a potential user community member I trust that you’ve been working to make the necessary changes in your life and have been working on making your application to the user community. We are looking for a large number, approximately 3,000 people, in order to make the Preliminary Specification all that it can be. And to ensure that the user community members are subsequently able to develop the service provider organizations that will provide our software and their services to this new oil and gas industry.

One area that I will stress in the application process is the understanding of the Preliminary Specification. If someone comes to me and I ask them questions about the Preliminary Specification and they are unable to answer them. This may preclude them from joining the user community. I know it's a long, boring and difficult read. It’s important that we’re all singing from the same hymn sheet. The dynamic of the changes introduced by using the Joint Operating Committee are substantial. These must be intimately understood by everyone. Although you will be working in the area where your strengths are, knowing how that fits in the larger picture is necessary.

When we move to using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. We see that everything in the industry is changed. That is the reason for the Preliminary Specifications scope and scale. Even I was surprised when Private Equity adopted the use of the Joint Operating Committee to facilitate the transition in ownership of the industry. Well of course it would be. It’s common sense once someone say’s it for the first time. That’s the world that we’re heading into. The full scope of the changes that we’re able to implement are not fully appreciated at this point. And that is why People, Ideas & Objects Preliminary Specification has to be user community based software developments. Having 3,000 people participate in the development will ensure that we capture many of these dynamic changes that are the common sense use of the Joint Operating Committee in the oil and gas industry. This demands that each user community member to have studied the Preliminary Specification extensively.

If you haven’t started your application for user community participation I would suggest you begin soon. Being prepared will be your best strategy as we move through this fundamental change in the industry. And understand the nature of the role the user community will be occupying in oil and gas. This will be part of the process in terms of what will be expected of you and your application to the user community.

Given where we’re at today, and where we’re headed, the journey promises to be one of the most interesting in the history of the oil and gas industry. We have a lot of things to do and there is only one outcome as a result of all of this. Thanks to our friends the bureaucrats we must succeed and do it in a timely manner.

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. 

Brilliant!

I have seen the future of the oil and gas industry. And that future begins today. I’m using the Must-Read label of this blog so that users can aggregate these types of posts, this entry will be part of that. The following is the strategy and tactics that’ll be employed by the existing oil and gas producers, and the ones that will be formed to remove and replace the existing oil and gas firms and their bureaucracies. I have been working on the implementation of our technologies and the means in which we do this difficult task. These strategy and tactics clarify how we will enable the transition in ownership of the industry from the producers who are constrained by the bureaucrats, to the dynamic, innovative, accountable and profitable oil and gas producers.

The news that triggered this blog post came out in the middle of last week. It was from Ernst & Young and is entitled “Capitalizing on opportunities: Private equity investments in oil and gas.” Which state that Private Equity firms have almost $1 trillion in investment that they’re prepared to invest in oil and gas. In a derivative article from WorldOil we have “Private equity set to unleash trillion dollar warchest, EY survey finds.” It is in this article that we find the key piece of evidence in which we can base the future of the oil and gas industries tactics and strategy. They note;

Deal Structures

Due to the debt burden of many PE-backed oil and gas companies, creative capital structures are on the rise. Of the 71% of respondents exploring new capital structures, 62% cite joint ventures (JVs) and drillcos and 59% cite contingent pricing as the most popular options.

Michael Rogers, EY global deputy private equity leader, said, "As oil and gas companies try to raise capital and reduce debt amid the lower-for-longer price outlook, exploring new capital structures and strategies has become almost mandatory for investors. PE-backed companies are looking to joint ventures to help them cut costs"

This is how I see the industry operating and the deployment of the People, Ideas & Objects Preliminary Specification, user community and service providers. For the bureaucrats in the existing producers who have permanent uncompetitive costs and capital structures. In the interim you will be called upon to manage these “Joint Ventures.” For our purpose here, we will subsequently call these Joint Operating Committees to bring clarity to the concept. Bureaucrats will manage the Joint Operating Committee as they do in the normal course of business. Private Equity will be a non-operated working interest participant and bureaucrats will operate these properties on their behalf. This relieves Private Equity of the immediate need and responsibility to manage the day to day. Under the current environment bureaucrats will charge the Joint Operating Committees with the Petroleum Accounting Societies overhead allowances. Private Equity’s investment in Joint Operating Committees on this basis can therefore begin today. These investments and operations will continue for the remaining time in which the Preliminary Specification is not operational.

Additionally Private Equity will be able to immediately and directly participate in the purchase of working interests based on properties that are sold from the existing producers. These will form the basis of the Private Equity holdings and will augmented by the new drilling and completions that are done through the Joint Operating Committees that they establish with other producers. It should be noted that during this initial phase of the transition the Preliminary Specifications price maker strategy will not be implemented or operational. Which is a temporary strategic advantage to Private Equity. Their past investments in oil and gas are currently “sunk costs.” Buying properties at top dollar is not in Private Equities interest. Without the price maker strategy, commodities will remain low until People, Ideas & Objects price maker strategies are operational. Facilitating a time in which the “ownership” of the industry is transferred to Private Equity at “reasonable” prices. It is assumed here that the Joint Operating Committees and the purchased properties of Private Equity will be held 100% in terms of the interest in the properties that Private Equity will have title to. There will be no dilution of Private Equities interest by other equity interest holders or debt from this trillion dollar investment in the first phase of the industry transition. Earning 100% of the unencumbered properties title is contrary to what would happen if Private Equity invested in the existing producers.

People, Ideas & Objects budget will be funded by Private Equity. It will be their best investment in terms of our ability to deliver our value proposition to them. It will also provide them with the administrative and accounting capabilities, which will be industry based in the Preliminary Specification, to be conducted for them. There will be no need for them to spend the time and effort necessary to develop the capabilities to administer and conduct any accounting. The existing producers will do that for them in the beginning phase, and People, Ideas & Objects, our user community and service providers will step in with our industry wide administrative and accounting capabilities when we are operational.

People, Ideas & Objects, our user community and service providers are committed to providing oil and gas producers with the most profitable means of oil and gas operations. I was laughed at for years for stating this. Laughed at by the bureaucrats. Their inability to understand that an industry needs to produce profits, real profits is a necessity, which has lead to their downfall and now they are being transitioned out. They’ve only proven that they’re not committed to anything but their own self interests.

One final note about the earth science and engineering resources of the existing producers. Your future is with Private Equity. The competitive advantages of the dynamic, innovative, accountable and profitable oil and gas producer are their earth science and engineering capabilities, and their land and asset base. You are the current custodians of those capabilities and assets and are assumed to be keeping them safe and will do what is necessary to ensure the industries deliverability is all that it can be. The future of your current employer is limited in its viability and Private Equity will be here for the foreseeable future. Govern yourself accordingly.

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.