It's a Software Bug

The dire situation in oil and gas, I believe, is attributable to what will come to be known as a 21st century software bug. Organizations are defined and supported but most importantly constrained by the software that they use. The ERP software that is used in oil and gas is quite obviously unable to deal with the overproduction and oversupply issues. The bureaucrats also know that if they change their ERP software they will lose their lofty positions and personal cash cows. Disintermediation is occurring in all industries. Therefore the continuation of this issue will exist until such time as the Preliminary Specification with its price maker strategy is enabled within the oil and gas industry. Until then we will have only the bureaucrats basking in what little cash is produced by the industry. Everyone else will have to continue with their own personal tragedies.

Bureaucrats love to think about the big picture issues of electric cars and their impact, greenhouse gases, the impact of stored electricity ya da ya da... However to get them to concentrate on the business at hand, the business of the oil and gas business, forget it. It doesn’t excite them, it’s too much like work, besides there’s always more investors that need to be fleeced. The bureaucrats personal situation has never been better. All of their personal assets are performing well and their income has remained unscathed by the downturn in the industry. For them it has been and will continue to be the best of times. Crisis, what crisis?

Therefore the capacity and willingness to change is nonexistent in the marketplace today. That is the reality and it stands in direct contrast to our September 4, 2017 start date. I don’t have to be crazy to do this job, but I do find it to be a strategic competitive advantage. For those of us who are not experiencing the pleasant days that our friends the bureaucrats are enjoying. We know that the industry is not currently and never has enjoyed good cash flow, earnings or financial flexibility over the past four decades. The culture of the industry is to account for its tragic and substandard performance as a winning culture. That engineering in a non-commercial and unprofitable environment is the objective. This is certainly the case that I see in the industry today. And if we don’t change that, I feel that the investors and bankers, if they haven’t already, will turn their back on this industry until we can prove to them otherwise. And as a result of that lack of investment capital we will atrophy and lose much of our capacity and capabilities in the process.

The solution that People, Ideas & Objects and our user community have with the Preliminary Specification is we begin to hold the industry accountable and provide the environment for the dynamic, innovative, accountable and profitable oil and gas producer to develop. This will not occur on the basis of the ERP software that exists in the marketplace today. If they had the capacity and capabilities to make these changes it may be reasonable that they would have done so by now. The industry is in desperate need of it. The only thing that our competitors have provided the producer organizations is an unchanging environment, the status quo, approximately equivalent to cementing and sealing their organizations with their software. If a producer did want to make the change, the software would continue to force the producer to regress back to the way the software was designed. What I’m calling a 21st century software bug.

In addition to the Preliminary Specification, our user community and the price maker strategy. The producers are going to need to have a defined software development capability that can ensure that the industry doesn’t get trapped in a similar situation with the Preliminary Specification. The need for our software to be able to make the appropriate and necessary changes as the industry develops. This is how People, Ideas & Objects and our user community have configured our offering. We are change based software developers. Our Revenue Model and user community vision show how the industry and producer are able to continue to develop our software and not be constrained by the current definition of the Preliminary Specification in the future.

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.

Our Plan, Part XXII

Discussion with the producers always leaves one with the confidence that everything will be handled and is under control. Producers have reduced their operating costs as a result of the recent downturn. And that provides them with the knowledge that cash will flow and profitability will soar. It also represents a fundamental lack of business understanding and is the modern equivalent of running your business out of your left front pocket. Cash comes in during the day, cash goes out during the day, I have more cash at the end of the day, therefore I have cash flow and profitability. In a world where chronic, systemic overproduction and oversupply in oil and gas is the issue, the great minds of the producers focus on cost control over their operating costs! This is changing deck chairs on the Titanic.

What may not be too obvious at this point is that the overproduction and oversupply issue is what the Preliminary Specification was designed to correct. The collective overproduction by the producers just doesn’t stop. They say they have discipline, this time, but here we are four months into a production sharing agreement and the prices are about to fall as a result of higher shale volumes. It’s the same issue that was present in the 1980’s and 1990’s. The one that motivated me to start developing this solution. And it is the same issue that has fundamentally destroyed the natural gas commodity marketplace and is about to do so to the oil commodity market.

In order to solve this problem it is necessary for everyone in the industry to change “what” they do, and “how” they do it. Reading your particular section of the Preliminary Specification isn’t going to provide you with the understanding necessary to function in this new environment. You need to read the entire Preliminary Specification in order to fully comprehend all of the changes that are happening in the industry. That way the work that you do, and will do in the future, can fit into what is happening in the remainder of the industry.

The results of my industry analysis at the beginning of this year showed that each and every producer needs to triple their revenues in order to mitigate the damage that had been done to their firm and deal with the future. Running around cutting more staff to reduce your overhead. Beating up service industry representatives because you can isn’t going to solve this issue. The depth of understanding and thinking here is that when A occurs, do B. When profitability and cash flow are down, cut costs. Completely blind, deaf and dumb to the issues and opportunities that are ever present in the industry. And I have said all along that the reason for this is that we have an entrenched, complacent, lazy and happy bureaucracy who are challenged and disintermediated by People, Ideas & Objects and the user communities Preliminary Specification. Might as well through corrupt scammers in there as well. Acting stupid is just how they justify their actions and seemingly get away with it.

We can begin the process of replacing this convoluted BS by making your application to the user community. That way we can begin the process of rebuilding the industry brick by brick and stick by stick. Based on the Preliminary Specification and making the industry and producers dynamic, innovative, accountable and profitable. From stem to stern. Producing oil and gas in the 21st century should be done on the basis that all of it should be done profitably. And profitable based on a real accounting that recognizes the capital costs of this capital intensive industry. Where producers will have balance sheets that have cash and financial resources that replace the bloated balances of property, plant and equipment that now only represent the capital costs of past production.

Our plan consists of a prosperous oil and gas industry. One that approaches the next 25 years as the best 25 years of the industry's history. A time where the industry achieves profitability in each one of those years. Funding their own capital expenditures, replaces and refurbishes the infrastructure that we see decaying with greater frequency on the daily news, a future in which the investors and bankers, past and present, are treated with respect and their money treated with the appropriate accountability and not used just to fund the discount to the energy consumer. An energy future where responsible people are making the appropriate decisions at the appropriate times and dealing with the opportunities and issues as they arise. An industry that doesn’t blame the Saudi’s or OPEC, a warm winter or just the way things are on their poor performance and lackadaisical “muddle along” strategy and “do nothing” operating procedure. An industry that has respect for those who have committed their careers to the professions in the industry and expect to have more seniority than what casual labor has in the construction industry. An industry that has respect for the work that is done in the service industry and works hand in hand with those innovative and dynamic people who make the industry operate. And yes will actually pay the people who work in the industry and service industry on a timely basis. A place where it is not an honour and privilege to still have a job but a place where you can make a difference. And they say I’m the crazy one, that’s just because I expect more and dare to ask, what’s their plan?

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. 

Our Plan, Part XXI

People, Ideas & Objects have established September 4, 2017 as our development start date for a variety of reasons. The first is we need to act, we are and will be no better than the bureaucrats that we’ve criticized for their inaction over the past decade. We need time to develop our software and I can assure you that the first question that producers will ask when they realize they need the Preliminary Specification is “what have you got.” We’ll need to be well on our way with this plan when that time comes. The impatience of the producers will become one of our issues in developing the software that the industry needs. The second reason for our start date is the looming crisis in oil and gas. There is a lot riding on the belief that oil prices will remain in the $50 range from this point forward, that those prices provide for producer profitability, that OPEC will continue to reduce production to accommodate U.S. based shale producers and natural gas has bottomed out. That the industry has weathered the worst storm ever and is on the comeback trail. The stock prices of the producers are far too high to fairly represent the value that these companies are providing. The bureaucrats have sold a story that everyone, once again, is believing. They need to now deliver that promised profitability in their first quarter reports of 2017 or the faith that they’ve got it under control may be eroded. We’ve been here before with the only difference being that the stakes just get higher with each round.

The only thing stranger than the high values of the producers stock is the promotion these stocks are receiving from the brokerage community. If you watch the movie “The Big Short” you can see that the banks offloaded their junk on an unwitting public just before the crash occurred. Even though it was known that the mortgage market was ripe for collapse people were hoodwinked into buying the bank's positions in these products. I think the same thing is happening here. The promotion of the producers is completely out of left field. It makes no sense to me. Commentary does not fit the producer firm that is being covered. The ability and capability of the producer to survive the next two years is in serious question, in my opinion, and the brokerages are stating that it's the next Apple.

To contrast the ridiculous nature of the commentary we will take the most extreme example available. That is Chesapeake Energy. The commentary is coming from this Financial Times column. Below I’ve separated some of the comments between those that I believe are truthful and those that are not consistent with the truth.

Some truth

Chesapeake still faces an uncertain future.

When Mr Lawler arrived, he faced a two-fold task: improving performance to make Chesapeake’s operations more profitable, and cleaning up the Augean stable of the balance sheet.

A renewed slump in prices, though, would threaten his plan to cover spending from cash flows by the end of next year, and Moody’s has warned that Chesapeake’s ratings could be downgraded again if it appears unlikely to deliver production growth in 2018.

Some mistruths

Notably, the company’s profitability is higher now with US crude prices at about $50 per barrel than it was at $100 per barrel in 2014.

Mr Lawler suggests that real success at Chesapeake would mean not just keeping the company afloat, but being able to show that “not only did we fix our problems, during the worst commodity price cycle in decades, we also positioned the company to show extremely competitive growth versus some of our peers”.

“The company’s profitability is higher now with US crude prices at about $50 per barrel than it was at $100 per barrel in 2014.” I don’t understand any of this comment. In 2014 Chesapeake reported $1.917 billion in earnings. During 2015 and 2016 Chesapeake reported losses of $19.086 billion. $4.399 billion of that loss in 2016. Chesapeake is 75% natural gas. Oil prices are not material to their profitability. These two statements provide the reader with the false hope that, with current, somewhat higher oil prices, Chesapeake has weathered the worst of the storm. It’s production profile has also declined precipitously over the past two years, from 770,000 boe/day to 575,000 boe/day.

Oil and gas is predominantly held by institutions. They certainly wouldn’t be buying this. If, as I suspect, these institutions are rotating out before the big collapse, so that John Q. Public can be left holding the losses in their recently purchased oil stocks, then the industry will be in for the reckoning that I’ve been writing about. The big, or smart money moving out of the industry is a sign of a loss of faith that there is any plan for the future. Producers can’t, won’t and will not ever change, and there is no plan. Other than drill more wells and lose a lot more money. This is why we need to be prepared and moving forward on September 4, 2017.

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. 

Our Plan, Part XX

A lot of the arguments against the Preliminary Specification and the commentary made here. Is that they’re accounting related arguments and therefore not really relevant to the real world of oil and gas production. I understand that point of view and would assert that it’s a point of view derived from the earth science and engineering perspective of accounting being the efficient and effective paying of bills. Accounting is about performance and our last two blog posts show that there is more than just drilling wells and paying bills to be considered in the oil and gas business. If we contrast our last two posts, with the performance opportunities detailed as a result of the Preliminary Specification, with the desperate situation that the industry is in today, we see that my critics could stand to reconcile these two perspectives. If on an accounting basis I had lost all the money that I had ever raised in the debt and equity markets I too would demean the People, Ideas & Objects arguments.

What I see in the industry are a lot of people who are the walking dead. They may have had the good life in oil and gas a few years ago. But were laid off recently. Now on one income, a small family and a mortgage the size of King Kong their standard and quality of living has eroded to third world status. With interest rates on the rise they have the added risk of becoming beholden to the banks for eternity and in death. The need to move off of this poor standard of expectation of economic performance in oil and gas is now necessary. Why has this third world status ever come to be considered acceptable for the people who had committed their careers to oil and gas? The additional frustration is that there has been a solution to what ails the industry for over three years. It however challenges the status quo and that is not acceptable as far as the handful of bureaucrats that are still benefiting from the industry are concerned.

It bothers me too that we continue to hear the bold faced lies of how costs have been reduced in the industry. Nothing of the sort has or could ever happen. Drilling operators can be raked over the coals and told to sign the deal offered at half the price it was last year, or walk away. This is not a sustainable cost reduction. And don’t let anyone tell you that this is evidence of the producer’s being innovative. Any cost reductions from the current downturn are not attributable to producer innovation. And can only apply to future projects in an abnormal environment. The rest of the producers production has to deal with the historical costs that were incurred to develop those assets. How can a producer, who developed 95% of their production profile over the last 20 years suddenly see the cost of all of that production drop? Producers said their costs were $85 / barrel when oil was over $100. The only difference is that oil is barely over $50. The costs to produce are the same, no one can go back and change the historical accounting costs that they’ve incurred on a property. They’re historical, it's a myth that they could and an outright lie that they have.

What producers are quoting are not historical costs but recycle costs. The costs that they’ve been quoted over the phone by suppliers as to what it will cost to complete an operation. These numbers are completely inconsistent with the financial statements of the producers. There the historical costs have to come into play and it is there that we see none of the producers are making any money. And that is on the basis of accounting for the capital over a period of ten to fifteen years!

On a somewhat related note when we begin developments on September 4, 2017 producers can't sit back and point fingers if we fail, they don't have that option, they have to participate in the developments of the Preliminary Specification and be the ones responsible for this project's success. What other options do they have. Coming in and holding People, Ideas & Objects and the user community accountable to the success or failure of this software development are not going to be effective. It will ensure failure. What is needed is a commitment to the success of this initiative by the producers to ensure that they have a future. Otherwise producers don’t have one.

The oil and gas industry will tell you that all is well and the future looks bright. I’m not seeing that, of course that is based on me looking at the financial statements of these producers. Something that I think the engineers and earth scientists don’t understand or appreciate. There is a myopic level of thinking going on in the industry these days. It's more along the lines of see no evil, speak no evil, hear no evil. Anything to avoid dealing with the truth. It's been many years that the industry has been stuck in this malaise. Nothing has been done. And all we ever here is that things are great and the future looks bright. One thing we can count on for certain is that the Saudi’s will continue to reduce their production to nothing so that shale can make up the difference. Delusion reigns supreme.

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. 

Our Plan, Part XIX

Keeping with the topic of performance. The capabilities of People, Ideas & Objects Preliminary Specification from a systems performance point of view might have been an issue in the past. If we were required to purchase all of our hardware and manage it then the producers would have had to define what kind of performance it was that they would expect from us. Build that capability and support that infrastructure. Providing the industry with a fixed cost and a fixed capability. We are a cloud computing user and provider. We are using Oracle’s cloud offerings for both our development environment and our production systems. If we need to provide better performance, then we’ll just need to define those requirements and provide for them. Cloud computing enables us to acquire variable capabilities with fixed costs.

If you haven’t had the opportunity to use a cloud computing offering I would suggest that you sign up for one and try them out. Both Amazon and Google have very good starter programs where the initial upfront costs are discounted. In the case of Google Cloud Platform they provide you with $300 U.S. in initial free use. Which is a lot of power. The capabilities of these systems is realized the first time you use them. What might have taken fifteen hours for your computer to process can be done in a matter of a few minutes for very few dollars. That is the power of cloud computing. Massive power available when it's required and at extremely low costs.

These services will provide real value to the industry when we need to process the month end for the producers. For example it may have taken 72 hours in order to conduct all of the processing on hardware that we would have had to purchased. And with cloud computing capabilities we may be able to turn that around in as little as 30 minutes, or even 30 seconds for essentially the same cost as the 30 minutes.

People, Ideas & Objects have always focused on people doing the things that people are good at and leaving the storage and processing to the computers. The things that people do well are the leadership, issue resolution, decision making, creativity, collaboration, research, idea generation, design, planning, thinking, negotiating, compromising, innovating and financing to name a few. By allowing people to do the work that we’re best oriented to then we will be more productive and I would think happier than we are with the work that we are doing now. In a related note Michael Milken, the former junk bond king and now head of the Milken Institute had an article in the opinion pages of the Wall Street Journal last week. Entitled “How Technology Liberates Human Capital” he raises an interesting point.

Through People, Ideas & Objects and our user community the oil and gas industry is being disintermediated. The positions and the types of work that will be done in the future, particularly in the accounting and administrative areas, will change significantly. Leading inevitably to some job displacement and outright losses. In the WSJ article Mr. Milken points to a McKinsey Global Institute report “that almost half of paid work can be automated with current technologies.” The knee jerk reaction to this news is one of concern and protection of one's turf. Mr. Milken suggests otherwise and has historical references to back up his opinion. That same McKinsey article notes that only 5% of any specific job could be completely automated.

But the very technologies eliminating jobs can be part of the solution for disrupted workers. To see what pessimists are missing, go back 40 years when powerful financial technology first started being used on Wall Street. The combination of mainframe computers with new types of securities and trading processes increased access to capital, especially for small and medium companies. Pioneers in the cellular telephone industry, for example, previously had a hard time convincing lenders that they could revolutionize how people communicate. There were only a handful of capital providers -- primarily banks and insurers -- that most companies could turn to. 

This changed beginning in the 1970’s when capital markets began a long process of displacing the established financial institutions as the leading sources of funding for corporate growth. Innovative fixed income and equity linked instruments helped create more than 60 million net new jobs in the U.S. over the last third of the 20th century. This proved an important formula: Prosperity comes when financial technologies multiply the sum of human capital, social capital and real assets. 

This liberation of human capital is what is the promise that our future holds. Instead of being preoccupied with the tedious and mostly irrelevant we as people can focus on the value added components of our society and do the work that we are best oriented to do. Leaving the tedious and irrelevant to the computers. That is the promise and the opportunity that stands in front of us. The performance that we can generate as a result of the user community and the service providers reconfigured in the way defined in the Preliminary Specification can open these benefits to the industry.

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. 

Easter Monday

Good Friday

Our Plan, Part XVIII

People, Ideas & Objects and our user community want to establish a new basis of performance in the oil and gas industry. A level of performance that has everyone in society participating profitably. We have to provide the rest of the industry, the people who work in the producer firms, the service industry and others the opportunity to also participate profitably. Energy is a valuable resource, should we be consuming it and losing money? We owe our future to at least produce our oil and gas profitably, always. Today only bureaucrats are satisfied with the compensation of their performance. In Calgary we see exotic car dealerships opening every other day. Ferrari’s and Lambo’s are heard throughout the city, throughout the week. Now I am not against Ferrari’s and Lambo’s or the trappings of wealth. I too hope to have a stable of fine cars on the day that I die. The point that I’m making is that the oil and gas industry should be expected to perform better than just providing the trappings of power for a handful of bureaucrats.

The current situation in oil and gas is that cashflow is king. And I have been told that, and that profits don’t matter one thousand times. However, and most particularly in a capital intensive industry, cash flow is predominantly the business returning the capital that has been invested into it. This is by way of depletion of property, plant and equipment. Now the investors and banks money that is invested in oil and gas is judiciously and effectively invested in productive assets. There is no question about that and there never has been. The point that I’m making is the cash flow from these investments is the return of the invested capital. That hypothetically, as a result of earning profits the cash flow numbers of a producer should provide the ability to fund future capital expenditures, pay investors dividends and pay down debt. Today, oil and gas cashflow is the source that keeps the exotic car dealerships doors open, and continuing to open, during the worst downturn in the history of the business. So although the money that is raised is effectively invested in property, plant and equipment, the returns from those investments support the bureaucrats car collections. The industry has devolved to generate cash flow that barely supports production and overhead costs. And I would not suggest that this is a scam, that is, it doesn’t qualify as one directly, it being mostly an indirect diversion of cash from the properly made investments. Calling it a direct scam would be inconsistent with those that wear white shoes and drive Cadillac’s. Oil and gas producers are more subtle and sophisticated.

We need to challenge our producers to achieve a level of performance based on the money that is invested in the producer and the proper accounting of those dollars. Where the accounting assessment has some basis in reality and the producers can be assessed against each other in terms of their performance. Where the oil and gas producers are clearly differentiated from the lost causes. Not like the situation today where the chance event of a Libyan field outage or a Syrian missile strike provides the investor with their only upside opportunities. Oil and gas should be a business, not a lottery where only the bureaucrats win.

Just got word I’ll be participating in another session with the baseball bats today at 3:00 PM. If bureaucrats are so unhappy with this situation why don’t they fix it? The performance of the industry has been a fraud for a long time. If the producer firm was generating real profitable operations they would have substantial cash flows as a result of the capital that has been invested being generated back to the producer in rapid fashion for reinvestment. This being due to the fact that it’s a capital intensive business. The judicial and appropriate management of the cash flow is what has been missing. Although the flows have been high, they have never been high enough to pay back the capital that has been invested, or ever achieve any real basis of profitability for the producers. And that is why each producer is choking on vast sums of property, plant and equipment. There was never enough cash flow or earnings to write those assets down. And they were permitted to let these balances bloat ever higher with the unrecognized capital costs of past production.

It's time for a new basis of performance in the industry. One based on reality. One where the investors and bankers money is treated with respect. That is if they ever come back. I don’t think they will until such time as profitable operations are established. Producers have two things working against them at this time. Their stock prices are stratospheric. And the amount of debt outstanding is large with large numbers of shareholders outstanding. If I had $100 million to invest in an intermediate producer I’m never going to see that money. Not only because they don’t have the old time religion of profits. $100 million wouldn’t buy any kind of position in the firm. And that long line up of investors starts after the long line up of creditors. All I see is the risk that the stock prices will collapse. All that money invested and you're nobody. Maybe if you're lucky though, you might get a ride in a Ferrari.

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. 

Our Plan, Part XVII

When it comes to funding People, Ideas & Object and our user communities budget. There will be the laggard oil and gas companies that are, for whatever reason, unable to participate and carry their share of our budget. The same could be said for startup oil and gas producers. This should not be an impediment to progressing with software developments on September 4, 2017. It should also not be a situation where People, Ideas & Objects and the user community do not realize the full extent of their revenues.

Oil and gas producers have significant value that is not being captured by today’s organizations. This value is seeping out of the industry into the energy consumers pockets by way of low commodity prices. At the same time investors who have provided the financial resources for the capital in the industry are waiting for the day when they may see a return on that investment. This is all within the producer's control if they began using the Preliminary Specifications decentralized production model with its price maker strategy. With so much value to be gained by the oil and gas producers why is it always someone else that has to pay for the producers benefit. And as such I am unwilling to discount our budget for the makeup of any of the producers in the industry. Other producers who are set to gain, and gain consistently, should contribute more in order to compensate for the laggards and startups.

Last Thursday the World Energy Council published their 2017 report. Stating the following regarding North America.

While natural gas and oil continue to trade near historic lows (albeit creeping higher in the last year), energy infrastructure investments require long-term confidence in pricing. There remains a degree of doubt that the stability in commodity pricing will continue for the duration of those investments. The abundance of natural gas in the United States and Canada, however, has assuaged fears about energy security and commodity price risk based on foreign policy. 

Talent acquisition and retention will continue to be a focus for our industry in 2017. Like many industries that are transforming, the demand for top talent is critical as new opportunities and technologies continue to reshape the energy industry. Combined with generational turnover, energy leaders will continue to monitor this risk and be concerned about how to build the right teams required to achieve the transformational goals they have set for their organisations and the industry as a whole. 

Market design continues to be one of the critical uncertainties in the FELs [Future Energy Leaders] agendas with a lesser impact than the prior year but with a higher impact than the global monitor. In the FEL’s vision, to embrace new frontiers, FELs urge the need to adopt new business models by means of modern technology and innovation, implementation of the right policies and greater collaboration and engagement with customers. 

“Welcome to the party pal,” John McClain.

I find it interesting that these people have tied the low commodity prices with concern for the ability of the industry to provide a financial return to its investors. All throughout the time I’ve been doing this I’ve constantly been told by industry “leaders” that profits don’t matter, its cash flow. And I’ve argued that the accounting treatment of storing past production costs as property, plant and equipment on the balance sheet is a scam. In the World Energy Council’s report itself they state that half the costs of the energy infrastructure is attributable to oil and gas. Think about that for a minute and also understand that that infrastructure is aging rapidly and needs to be replaced or refurbished in the next 25 years. Where, or which investors will be scammed for that money?

The seriousness of this issue is captured by the World Energy Council. They state that commodity prices are the critical issue that the industry faces. The Preliminary Specification and our user community enable the price maker strategy that will allow the producers to return to profitable operations. To real profitable operations. Storing costs on the balance sheet is a fool's game played by fool’s. It doesn’t make you a better producer to have outsized balances of property, plant and equipment. It may, in this new environment that we are heading into, show that you don’t know what you're doing. Chevron is the worst culprit here. They have more than a quarter of a trillion dollars in property, plant and equipment, or 13 years worth of depletion. Why? How does this make them a better company? This only represents the amount that they’ve subsidized consumers for their energy costs. By not charging enough. If they treated those capital costs appropriately they would have written these costs off by this point. And in Chevron’s case, with only $145 billion in shareholders equity, that would have created massive losses for the past four decades. And hence why the producers use the accounting treatment that they do. The situation now is how do they reduce those balances of property, plant and equipment? And as an investor how should I assess a company's performance when they never made any money?

The scope of the problem is far worse than what the World Energy Council intimates in their report. We have a long and difficult road to travel in oil and gas. It’s not going to be good times. Only an extension of the bad times that we’ve experienced over the past few years. That is until we can fix this problem on an industry wide basis by implementing the Preliminary Specification, these difficulties will be the constant state of affairs. We can listen to the bureaucrats who assure us that it’s all under control, or realize in the mid to long run, changes need to be made.

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. 

Our Plan, Part XVI

The scope and scale of People, Ideas & Objects and our user communities Preliminary Specification is as broad as could possibly be considered. When we move to the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable producer everything changes. Therefore the Preliminary Specification has had to design solutions for the necessary changes as a result of moving to that organizational construct. Why are we moving to the Joint Operating Committee? To achieve the alignment of the hierarchies compliance and governance frameworks with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. When we do this we achieve a speed, innovativeness, accountability and profitability in our producer firms.

It would be my suggestion that when computers were being introduced in the 1960’s into oil and gas. The question became what will we do with them? Accounting became one of the natural uses for computers. Then taxes and the regulatory environment that exists to ensure overall compliance of the producer joined in. As people began their work with computers in oil and gas, the Joint Operating Committee faded into obscurity in terms of the accounting approach. Use of SAP today doesn’t even recognize the purpose behind having partners. The Joint Operating Committee is not in existence in any of the administrative or accounting applications that I’ve used in oil and gas. By adopting the Joint Operating Committee the Preliminary Specification requires that we approach the scope and scale of our application in the manner that we are.

Let's assume for a moment that I’ve convinced you that a move to the Joint Operating Committee is the necessary requirement to put the administrative and accounting functions in line with the rest of the oil and gas producer. This implies that the development of software to meet the needs of the industry is necessary. People, Ideas & Objects are promoting the Preliminary Specification as an inherent part of our Intellectual Property. Other ERP software vendors, therefore, need to come up with their own organizational construct to deal with the issues and opportunities that that software provider wanted to resolve. If an oil and gas producer is looking at the market for oil and gas ERP systems they know they’re going to have to review a certain number of specific items regarding each software provider, and I would hope that they would consider People, Ideas & Objects and our user community as part of their review.

The first item a producer is going to want to see is the underlying technologies and the base of the offering. There really are only two solutions in the market, Oracle and SAP. In oil and gas SAP has the majority of the oil and gas producers operating on their technology. Notice how it hasn’t had the positive effect in helping them profitably. Nonetheless People, Ideas & Objects are using Java, Oracle Database 12c and Oracle Fusion Middleware and Applications as the base of our application. These are the more robust technologies available in the marketplace with Oracle being a leader in their ownership of Java, the database and the recent writing of Fusion Middleware and Applications in Java from the ground up. Check for People, Ideas & Objects.

Next the producer is going to have to evaluate the ERP provider on the basis of their overall vision of the ERP systems offering. People, Ideas & Objects conducted the ten years of research that was necessary to determine what was required to use the Joint Operating Committee. The Preliminary Specification is the codification of that research and expression of that vision. I am not aware of any other vendor in the ERP marketspace that is selling any vision of a system that deals with the overproduction and oversupply issues. Nor do I know of any vendor offering a system that deals with the unique nature of the oil and gas industry. Most if not all of the others are all selling their products on the basis of a technology whiz bang feature that will make your eyeballs melt. If that were perceived to be a good thing. Check People, Ideas & Objects.

Next on the checklist of boxes to check is the user community involvement in the applications further development to meet the oil and gas industries requirements. It is here where People, Ideas & Objects have a substantial competitive advantage. Once the Preliminary Specification was published in final form in December of 2013 we commenced developments of our user community. Our user community vision and commitment is unparalleled and is represented in the three years that we’ve consistently developed our user community. Others may suggest that they’re user community based, however the timelines in which it takes to develop the user community will not be in their court. People have to see a consistent and constant commitment in act and deed before they will commit to participate in a user community. Check for People, Ideas & Objects.

These are the strengths of the Preliminary Specification in the oil and gas ERP marketplace. Producers might believe that they can more easily develop a solution for themselves that meets their needs and that our industry wide scope and scale is too broad. I disagree. If they can approach the development of software that deals with the administrative and accounting requirements of their organization. Cobble that together with their minimal budgeted resources. Minimal from the point of view they’re one producer with one budget. Think of how easily I could do the same job on behalf of the industry with our aggregated budget of all the producers. Check for People, Ideas & Objects.

The last question that we have to ask is what is the producers back-up plan? And of course that is the tired and well used, do nothing, alternative. It wouldn’t be a “muddle along” strategy without “do nothing” tagging along with it. My question is, how is it that an industry that is considered, and promotes itself as innovative, can also pride itself on its muddle along strategy and do nothing approach? What we see is nothing. There is no action for years and even decades. It's all part of the business to lose money for nine or more of the next ten years. Check for internally generated software.

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.