Best Business Opportunity, Ever, Part VIII

The competitive advantages of a newly created oil and gas startup are substantial. They include the ability to purchase the industries existing infrastructure of producing properties from the cash poor, failed producers of today. Realize the $25.7 to $45.7 trillion value proposition from using People, Ideas & Objects Preliminary Specification. Participate in the opportunity to further grow their firm based on achieving the overall objective of North American energy independence. Doing this in a manner in which all production will be profitable, based on an actual, detailed accounting of the property. Never before has such an opportunity been presented to those with the capabilities to participate in founding an oil and gas producer or making that investment in the startup. Now is the time to leverage these elements of value and to act to realize this opportunity for the next 25 years.

We should thank the current producers for messing things up so badly. Investors putting money into the current producers would have to be hell bent on losing it as quickly as they can. What upside is provided by an investment in one of these companies. The opportunity to line up with thousands of other investors if there were ever any dividends. Share any upside with so many investors that you end up with next to nothing! This of course assumes that the producer will have the good fortune to have “cash flow” to pay the interest and debt payments that are due. The history of the industry is that capital investments were always treated as a “sunk cost.” Not to be considered in the forward thinking decisions. While at the same time, the other hand was always stretched out taking the money that was raised in the most recent stock offering. They took the money but never wanted to account for it. Now, they have the legacy of billions of shares outstanding and debt so high that it's about to sink the ship. Leaving the only opportunity for the investors is to treat the existing producers as “sunk costs.”

The existing producers need cash. Flooding the marketplace with production is the easiest method to raise the cash that’s needed. The other method is to sell properties. There are a lot of desperate, cash hungry producers out there. The ability to purchase a property off of them at fire sale prices is rather easy. Just check their debt payment schedules and time your offer so that you will close the deal just before the debt payment is due. Guaranteed purchase. Investors are more interested in this due to the fact that the startups have no capital structure. They have no legacy of debt or history of an annual shareholder fleecing. Investors can take a controlling position in the firm and manage it in a way that avoids the difficulties that the industry is in today. Or, in other words, still have a controlling position in the producer in 25 years based on today’s initial investment! A startup oil and gas firm is a highly competitive offering to an investor in comparison to the existing producer.

Doing the same thing expecting different results is a sign of insanity. The startup oil and gas producer will therefore need to be using People, Ideas & Objects Preliminary Specification to operate their firm. Reestablishing the industry on the basis of profits. Real profits, not the fake ones the current producers have been reporting. As a result the startups will be the ones who are able to earn the value proposition that People, Ideas & Objects have identified. This value proposition is calculated to be in the range of $25.7 to $45.7 trillion over the next 25 years. The key element of this value proposition is our price maker strategy. Instead of dumping all of their production onto the commodity markets and watching the prices collapse for 75% of the time. The startups will have detailed and accurate accountings of each property. They will be able to determine which properties are profitable and which are not. Shutting-in the unprofitable properties which will remove the excess production from the commodity markets and the commodity prices will therefore find their marginal cost. The differences in commodity prices between these two methods of production, our price maker strategy vs. chronically overwhelming the marketplace, is the majority of our value proposition. Which is inherently understandable and logical to those who don’t manage a current producer.

Everyone can see the opportunity for North America to become energy independent in both oil and natural gas. Shale provides. There is no way that investors are going to fund a bankrupt industry with producers who don’t have a clue what a capital cost or a profit is. Expecting this industry to increase its throughput at investor's expense is a non starter. Energy independence has to be achieved on the basis of a profitable industry. It’s the only way. It’s really the only way to run an industry but that hasn’t happened in oil and gas for more than four decades. Expecting that the investment community that has supported all of the unprofitable activity in these past four decades, to continue and expand the throughput without profitability is about as ridiculous a notion as there is.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Under The Weather, Part II

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Under The Weather

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Canadian Thanksgiving

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Best Business Opportunity, Ever, Part VII

Startup producers that are forming today will have significant competitive and capital structures in comparison to existing producers. Investments into these startups will ensure that the money that is invested will provide their investors with large, and maybe even controlling interests in the startup firm. Allowing the startup to participate in the market for oil and gas properties as a buyer. We expect, with commodity prices below their operating costs, the demands for cash to cover these operational shortfalls will maintain the market for properties as a buyer’s market for the foreseeable future. This represents what we consider to be the best business opportunity that has ever existed in the oil and gas industry. The time in which to act will therefore soon be upon us.

It’s difficult for me to understand any desire to continue with the producers that exist today. They are hollowed out carcasses that have experienced a terminal ending to their existence. When a “strong” independent such as Apache reports annual losses of $28.2 billion for 2015. Or when a former darling such as Chesapeake reports annual losses of $19.1 billion. And they continue to both generate significant losses for 2016. We see the functional end to the business model that these firms employ. These firms will continue to function as long as there is the ability to raise some cash to meet payroll. Whether increasing production or selling properties, it doesn’t matter, what the critical focus is to raise cash in whatever manner. The startup however has tactical and strategic advantages that are far more appealing than this cannibalizing and suffering.

Doing the same thing over again and expecting different results is a sign of insanity. What is there to ensure we don’t return to the destruction this industry has been responsible for. We need to ensure that the Preliminary Specification is the basis of the new industry. With its focus on profits so that the industry can grow and prosper. So that people who work in the industry will know that their employment won’t terminate as a result of external events like low commodity prices. Where investors can safely invest based on their understanding of the earth science and engineering capabilities of the producer. And society can be provided with the resources it needs to fulfil its possibilities. None of these things is available from the current lot.

So what happens now. We saw in the second quarter reports the viability of the producers being clearly displayed. The demand for cash is horrendous. An industry in that position will not attract the capital that is needed to keep the lights on. It is a slow painful march towards the inevitable demise of the firm. The sooner we realize we are at the end the better off we’ll be. But history doesn’t work that way. It is, as Winston Churchill stated.

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong – these are the features which constitute the endless repetition of history.

I am not of the opinion that Opec has an agreement in mind. Their strategy has cost them many billions of dollars. The North American producers are at a tipping point, and that is the point that Opec blinks? They are more playing with the market and people’s expectations. The belief that these difficulties have passed is a hard one to overcome. If Opec doesn’t put a deal together, coincidentally around the time that the third quarter reports are issued, maybe then we’ll here that jarring gong. I expect the third quarter reports to represent a significant decline in the health of the industry. No one has ever made any money in oil and gas for over 40 years. The demand for capital was constant and chronic in order to supply it with the cash that it needed. With these last two points I’m of course talking about how the industry was in the “good times.”

This is the point in time in which your personal preparation towards the future will pay significant dividends. Starting a new producer, applying to People, Ideas & Objects user community. There are more business opportunities in oil and gas now than I’ve ever seen in its entire lifetime. It is this point where it becomes evident that it’s over, that we will then proceed with the developments of the Preliminary Specification.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Best Business Opportunity, Ever, Part VI

What we see in the response of the producers to the difficult times we are in. Is the cultural capabilities of the industry. To accommodate the changes to correct the situation would require this cultural inertia to be overcome. Which of course is not possible. If we don’t change what we will find is in four or five years time the same situation will be plaguing the industry and the same complacency will be evident in the producers. The changes needed to deal with overproduction and oversupply are beyond what the current producers are capable of. They can’t, won’t and will not ever change. The only method that has proven itself are the forces of creative destruction. As the old no longer meets the needs of society, the new will be able to generate value in different ways.

In terms of that complacency or acceptance of the way things are, these being ever present in the industry. I am reminded of a quote from Winston Churchill. On May 19, 1943, a full year before the second European front was launched, Churchill told the U.S. Congress regarding the war effort.

No one can tell what new complications and perils might arise in four or five more years of war. And it is in the dragging-out of the war at enormous expense, until the democracies are tired or bored or split, that the main hopes of Germany and Japan must now reside. We must destroy this hope.

People, Ideas & Objects have a lot of work to do. Our budget is based on 5,000 man years of effort to bring the Preliminary Specification to commercial release. All industries and companies now operate solely on the basis of the software that they use. If you want to institute a change in behavior of the industry or producers, first it must be captured in the software that the industry and producers use. We live in a time where the software defines and supports the organization. Change is impossible without changing the software first. So when we talk about change, complacency, the scope and scale of our development efforts. This won’t be done with the flip of a switch and then all is well. We have hard work to do. It should be the expectation that the difficulties in oil and gas will continue until such time as People, Ideas & Objects Preliminary Specification is operational. We can blame the Saudi’s for all of our troubles, however it should be understood that they don’t import any natural gas into North America. And the difficulties in natural gas are going into their seventh year with no prospect of anything changing. It’s not a matter of us getting “tired, bored or split.” It’s much more, shale has fundamentally changed the industry.

Energy powers our economy. It is a viable option for the North American continent to achieve energy independence. However not from the current industry configuration. Changes as represented in the shale based reservoirs are fundamentally transforming the business from scarcity to abundance. What bigger change could there be? I saw the mechanisms leading to the oversupply and overproduction evident in the 1980’s and 1990’s low oil prices. A time when oil prices depressed the industry. Where no leadership or action left the industry to suffer for more than a decade. The configuration of the producers today remains the same and is inappropriate for either an industry with or without shale. Shale only makes the issue hypercritical.

Software makes society more complicated. To leave “things” to be resolved by themselves is inappropriate when the organization is defined and supported by the software that is used. To effect change cannot be done without changing the software first. Today ERP systems lock the organization and seal it in concrete. Producers will be unable to change without the defined software development capabilities of People, Ideas & Objects. Oil and gas have ceased to change in ways that provide value. We need to be proactive in our software developments in order to grow and prosper. I have frequently referred to these oil and gas overproduction and oversupply issues to be that of a modern software bug. And that is why starting a new oil and gas producer today is the best business opportunity, ever. Creative destruction is the last and only tool that we have to make the changes that are needed.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Best Business Opportunity, Ever, Part V

Once the Preliminary Specification is operational in the industry it will be the new startups that will reap the benefits from it implementation. Organizing a new oil and gas producer today is by far the best business opportunity, ever. The existing producers have destroyed their competitive and capital structures. They are now unable to compete in the industry and they will not be supported by a plurality of the investment community. Their demands for capital just to produce is beyond the appetite of those that are intelligent investors. Establishing new startups will be able to offer high percentages of their firm without their new investors realizing the massive dilution that the existing producers well established shareholders and over indebtedness provides. And enable the investment community to leverage the demise of the old oil and gas industry through the purchase of properties being sold by those cash poor producers. Creative destruction is the process that has renewed many industries. All that is needed then would be for a way to avoid the same issues that plague the producers today.

The focus of the new startup is on profitable operations. Profitable from the point of view of considering all of the costs of production. Capital costs have traditionally been ignored by the existing producers as a “sunk cost,” and as a result, were never considered in business decisions. These “sunk costs” representing the investment capital they were entrusted with. This is what has caused the overproduction and oversupply that we have today. Investors were led to believe that the industry was profitable based on the gross margins that are quoted by the producers. This accounting sleight of hand is still in play today. The difficulty in accounting for your operations inappropriately is that it eventually leads to difficulties when the investors find out that things were not as they were represented. Then they stop investing, which is where we are today.

The only way that the new startup oil and gas producers will be able to capture that old time religion of profits is by implementing the Preliminary Specification. Where dynamic, innovative, accountable and profitable oil and gas production is the focus. This is done through the eleven modules of the specification that address the specific issues of the industry today. And they provide a dynamic capability to the industry in terms of addressing its future administrative, accounting and operational issues. It eliminates the “muddle along” strategy that is used throughout the current oil and gas industry and replaces it with specific capabilities that resolve those issues. One of the key capabilities that is gained is what we call the price maker strategy.

Our price maker strategy uses the fact that the oil and gas commodities are “price makers” in terms of the impact that they have in the marketplace. Excess production has a material effect on the pricing of the commodities. Instead of producing everything and expecting that the market will “balance” or some other such nonsense. The Preliminary Specification enables the producer to produce only profitable production. Profitable based on an actual, factual, historic and detailed accounting of the facts. Then producers who have properties that are unprofitable simply shut-in the property. Incurring a null operation, no loss but also no profit. Doing this ensures the producers profitable properties are not diluted by any unprofitable properties. Saves those reserves for the time in which they can be produced profitably. Removes the marginal production from the commodity markets. And keeps the cost of the property from having to carry the additional losses that would otherwise have been incurred as an additional cost to be recovered in the future.

Existing producers run away and hide when they hear the term “price maker strategy.” They don’t like to think in business terms. The industry is a science experiment that operates in the sense that everything it does brings more production on stream as soon as possible. When they hear “price maker strategy” they think collusion. If you chose to not produce a property because it is unprofitable that is called common sense. When that decision to not produce is based on the actual, factual, historical and detailed accounting of that property. I am at a loss to determine how that is collusion. What’s really going on is the inability for new ideas to permeate the stale existence that is the oil and gas industry. And the preference being to destroy the industry as opposed to consider these new ideas. Or, that calling it collusion is the only thing they can think of to offset their ridiculous behaviour of producing everything and destroying the industry.

Taking an industry with this twisted and convoluted means of logic. Establishing a new producer to compete with this insanity is the opportunity that is available to those that can see the value of implementing the Preliminary Specification. How could you lose with this bunch? And that is why this is the best business opportunity, ever.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Best Business Opportunity, Ever, Part IV

I want to point out another issue that’s present in the oil and gas industry. That being the ability of the producers to focus beyond today’s headlines, or apply themselves in any direction for more than the extreme short term. They have the attention spans of hyperactive infants. Normally you would look to the leadership for the direction that the industry needed to take in order to resolve its issues. The only thing we see is the parade of cheerleading that today’s producers have come to be known for. Their attention spans are normally focused on the price of the commodities and only strike up the band when commodity prices are rising. When prices are falling, which of course is half of the time, they keep quiet and hide under the table.

The third quarter reports will soon be released. Based on the actions of the producers in these past three months they seem to expect that the difficulties as expressed in their second quarter reports of 2016, and 2015’s annual report are history. I suspect that the third quarter reports will be as bad if not worse than those presented in the second quarter. What’s changed? It may be difficult to fully understand the extent of the damage that has been done in the industry. As I’ve indicated both the competitive structure and the capital structure of the existing producers have been fundamentally destroyed, permanently. That means they are no longer cost competitive in terms of producing oil or gas. And the investors, bankers and bondholders are in the position where they will never receive anything of value from these producers, ever. Arguments could be made that the stock prices of these producers are up. I am talking about the business and its total financial failure. If a producer holds out their stock price increases as evidence that they are viable then they exhibit shorter attention spans than I give them credit for. As I stated, there is a difficulty in comprehending the destruction of the competitive and capital structures and that has not yet been fully realized in the marketplace.

I want to add another myth that the oil and gas producer has been deluded by. That being their balance sheets are “strong.” Nothing further from the truth could be the case. It has been our argument that the SEC prescribed full cost and successful efforts accounting methodology allow the producer to capitalize everything under the sun to the property, plant and equipment account on the balance sheet. The spendaholics like this because it makes them look “well capitalized” and their earnings are highly overstated when they never recognize the capital, in a capital intensive business. The question that should be asked is what is the value of the oil and gas industry today. Since it’s not profitable, and it demands cash to be injected into the business in order to produce. That cash drain being substantial. The value of the industry is therefore nothing. It takes the investors, bankers and bondholders cash to keep it alive. And this has been the consistent history of the industry for the past 40 years. A fundamentally failed industry that is incapable of building value. The leadership within the industry have a two hour attention span and see nothing wrong with this. Therefore any reasonable person is going to avoid any involvement in the industry. I think it’s therefore appropriate to take the account of property, plant and equipment and move it directly to the income statement. The assets of the business are not worth anything and should be written off. Evaluate the company on that basis and you’ll quickly come to my point of view.

Anyone who has read the Preliminary Specification can see the means in which our value proposition is generated. Valued in the trillions of dollars by simply choosing to develop the People, Ideas & Objects Preliminary Specification you would think an industry in such desperate condition would jump at the opportunity. You need to understand that the implications of implementing the Preliminary Specification do not help the status quo producers. So we are left with a scene where the closing chapter of the existing oil and gas producers is devastation and destruction. Armageddon came about as a result of poor accounting practices since 1979. Raising a generation of leadership that cannot discern what value is. Creative destruction is the process that we are using, and witnessing, to make the changes in the industry in order to address these issues. The destruction is complete in my estimation. Producers may think my criticism is over the top. However, who could support this level of destruction when the solution, the Preliminary Specification, has been in the market for as long as it has. The Preliminary Specification enables the creative rebuilding of the industry on the basis of it being the best business opportunity, ever.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Best Business Opportunity, Ever, Part III

My response to Opec’s announcement of an agreement that will be resolved before November remains one of belief that these Opec countries are trying to impress upon the North American producers that the commodities they produce are price makers. Nothing material has changed in the situation other than the tactical methods being employed by Opec. They are telling these North American based producers to look in their own back yard for the solution to oversupply and overproduction. In November when the agreement falls apart, then the North American producers will see that when markets see production increases, prices fall. The inverse of this past week.

The capital structure of the producer firms in North America no longer exists. It has been destroyed through bad policies and management over the past four decades. The only thing that would enable the North American producer to continue as a viable going concern would be the allocation of a trillion dollars to recapitalize these zombies. If you expect that we will achieve energy independence from this group of producers then People, Ideas & Objects have nothing for you. If you critically review any financial statement of any North American based producer the financial difficulties of each and everyone are unresolvable. Expecting a mouse to run like a horse is foolhardy, you’ll only be disappointed. Decisions need to be made. Do we pursue the best business opportunity, ever, or recapitalize these defunct organizations with additional capital for them to squander? People, Ideas & Objects are recommending that we proceed with the best business opportunity ever by starting with the development of the Preliminary Specification.

We have stated that the opportunity to establish a new oil and gas producer. One that avoids the debt and capital structure of the existing producers is the best business opportunity, ever. Providing profitability and growth in the production of oil and gas that these new startups would be able to generate is one aspect of the opportunity. Another is the upswing available to them as a result of North America achieving energy independence. People, Ideas & Objects value proposition of implementing the Preliminary Specification and following through with this opportunity is $25.7 to $45.7 trillion over the next 25 years. That is the vision that we are proposing here at People, Ideas & Objects. A new oil and gas industry, based on profitability and growth, that achieves energy independence. We are creating this new industry from scratch so to speak. Using the process of creative destruction to deal with the issues in the industry and establish a new foundation of profitable growth.

To help to define this opportunity more clearly it is necessary to dispel a number of myths that the current oil and gas producers are operating under. I have argued that the current industry is nothing more than excellent engineering and a science experiment. The business aspect of how the industry does what it does doesn’t exist. That the level of understanding of business by the producers is indeed very low and that accusations by them that our price maker strategy is collusion is the strongest evidence of this. The myths that we need to dispel today are that the producers costs have come down since the decline in energy prices. Another myth that operates throughout the industry is that the oil and gas commodity markets will clear themselves leading to higher prices.

With respect to the first myth we can state unequivocally that historical costs are fixed. There is no way in the world, if a producer has spent $15 million on a well, that any process can be undertaken to reduce that cost. Oil and gas is a capital intensive business. The cost of capital is the highest cost that is incurred by the producer. Having producing wells, from an operational standpoint, are not where the costs are incurred in the industry. Operating costs may have come down somewhat, and royalties are variable so there are those aspects of the cost are decreasing. But the historical fixed costs remain $15 million. If the producer is stating that they can now drill that well for $14 million then they are correct in asserting that their future costs are coming down. But to assert that their costs of production is decreasing in line with prices is kindly classified here as a myth. Some may find it to hold elements of misrepresentation. The industry operates on the mythical “recycle cost” which is not based on historical fact. To determine recycle costs to produce at today’s prices they would therefore need a recycle cost that falls under the prices realized. And so that is declared. That is how the industry is reducing its costs. By declaring that their “recycle costs” are lower than the prices realized in the market.

The next myth that we need to dispel is the idea that the “market” will clear itself. Producers have convinced themselves not to do anything in the face of declining commodity prices. That doing anything would first of all involve work and thinking. And secondly “markets” are magic things like dragons and wizards. Just wait for the “market” to reflect what you desire. This passive attitude has lead to what we call “willful destruction” and is the source of the industries financial destruction. The price system is how markets work. If you’re competitive and profitable at the price the market is offering then you produce. If the prices are unable to provide for a profitable operation you need to shut-in that production to conserve the firm's overall profitability, save the reserves for the time in which they can be produced profitably, remove the marginal production from the commodity markets and reduce the costs of your reserves by not adding the additional losses onto those reserves to be recovered in the future. That is how a market works. It is the price system, it's not a fairy tale. Markets don’t clear themselves unless people take action. What we have is producers continuing to produce irrespective of the financial consequences and refusing to act in their own best interests because the “market will clear.”

The deception that producers management kid themselves with is that their historical fixed costs continue to decrease and that they are therefore profitable at the current prices, and that eventually markets will clear. Can you see the circular logic that underlies their thinking? They continue to state they’re profitable but then produce financial statements reflecting they’re losing more money than they have ever had their hands on. So how does this make the best business opportunity ever? When you go into business you want to have your competitors logic and thinking this twisted.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Third Friday Off

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