Third Quarter Earnings Performance

Producers started publishing their third quarter financial statements this week, continuing through to early November. Expectations are high that the industry has turned the corner and will be reporting healthy earnings as a result of the 12% increase in the price of oil. OPEC’s production discipline has impressed and it is believed that half of the global surplus of inventories have been eliminated due to their actions. What I find interesting is the relative silence coming out of the producers this past quarter. None of the producers seems to want to mention anything about the industry, market rebalancing or their performance in case the commodity markets tank again.

What we have seen is a lack of investment capital flowing back into the industry. Investors don’t seem convinced that all is well. Recently there was an article entitled “Oil patch gets frugal as investors urge profits over boom.” You can access the article from our twitter feed in the left hand column of this blog. Not long ago producers believed profits were not important. And obviously the profits that are being reported by these companies are not adequate if the investors are expecting more. The deferral of the recognition of the producers costs to as long as 27 years has an effect of scaring investors away. It makes the profits look good, but in reality when the profits are higher than the cash flow of the company, investors generally know that something’s up with the accounting. When you can’t raise equity or debt and your working capital continues to deteriorate quarter after quarter. Something is wrong and a message is being sent to you. If you can’t hear that message or choose to ignore it then you’ll continue to experience that cash crisis for some time.

The investor confidence in the industry over the past year has been fading. After surging from the bottom of the market after the oil price decline in 2014. The oil and gas producers stock performance has been very poor in 2017. All anyone has heard is “market rebalancing” as the solution. That the issue is with OPEC and that North American producers continue to increase rigs and production. There is no way in which you can convince the producers that action is required on their behalf. And we hear, now that oil prices have surged 12%, that plans are being made to increase the rig count of North American producers. Which may be the wise thing to do as it’s the only source of cash.

People, Ideas & Objects attempts to deal with the producers have ceased as of September 26, 2017. They chose not to participate in our deadline to develop the Preliminary Specification. A deadline that we established at least six months ago and promoted heavily. Development of the Preliminary Specification with the decentralized production model’s price maker strategy deals specifically with the overproduction and oversupply issue. Passing of this deadline, which was only the latest over the past decade, proves unquestionably that producers are not interested in the extrinsic value of the industry. Fortunately we have alternative sources of funding for our budget and will be establishing that organization and mechanisms as our priority. This being our Initial Coin Offering (ICO).

Producers will engage the coin holders to have their oil and gas administration and accounting conducted by People, Ideas & Objects, our user community and service providers. Nothing has changed in any of those three organizations. The establishment of a fourth organization, the coin holders, is to secure the realization of the extrinsic value of the oil and gas industry that none of the producers have expressed an interest in. That extrinsic value is the difference in the oil and gas commodity prices which producers feel they’re profitable at today or $50. And the commodity prices that are necessary to be realized for a healthy industry. This differential will be earned by the coin holders as a result of their developing the Preliminary Specification and in turn earning the Permission Rights to access our software and services exclusively. Therefore if oil sells for $150 as a result of implementation of the Preliminary Specification, and as we suggest what the producers costs require. Then the coin holders will share in the $100 differential on a negotiated basis with the producer. I would suggest the coin holder earn 33% of this value which would leave $67 for the producer. What shareholder / investor in an oil and gas producer wants to hear that their producer firm is not participating in that $67 / boe of free money? On a larger scale, over the next 25 years, and based on our value proposition the amount the coin holders would earn would be $8.4 trillion to $15.08 trillion. Free money indeed!

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The Natural Gas Business

There are some interesting developments taking place in the natural gas business. These developments reflect a long history of neglect regarding the management of the business and most importantly the impact of shale. It’ll be ten years in 2018 since the natural gas price collapsed, just before the financial crisis. For some reason “market rebalancing” has not worked in that commodity market either! I’ll go through a brief history of what has happened since that time and the impact that it’s making in the marketplace today, and what it could mean in the very short term.

The overwhelming and prolific nature of shale gas created an overproduction and oversupply situation in the North American marketplace. This market was isolated and as a result price declines were limited to that region. The differential that could be realized by exporting natural gas to areas such as Japan made Liquified Natural Gas (LNG) a given. The world soon undertook what can only be seen retrospectively as a boom in construction of LNG facilities. The North American marketplace was expected to realize increased demand from LNG, and as a result, natural gas prices would rise. The alternative scenario to that expectation is what eventually did happen. Natural gas prices around the globe now track closely with those depressed prices in North America. The shale gas reserves have overwhelmed not only North American markets but also global markets. What we have now is the rapid cancellation of any LNG facilities that were under construction or consideration as that market is beginning to show that desperate facility owners are having difficulty attracting customers.

The Marcellus field in Pennsylvania is the largest and most prolific natural gas field in North America. It is currently producing well in excess of 15 bcf / day. More than Canada produced in its heyday. Much of this gas is trapped due to pipeline constraints. Marcellus spot prices last week were $0.81 / mmbtu. To remedy this chronic situation, reversals of pipelines that used to bring in Canadian export gas will enable the Marcellus shale gas to service the region of Ontario and Quebec in Canada. Alleviating the price pressure on the gas in the Marcellus. Or alternatively, as in the case of LNG, would this release the downward price pressure contained in the Marcellus region to the larger North American marketplace? If this should happen how long would it take for the global marketplace to be likewise affected?

After ten years “market rebalancing” has not been able to deal with this situation. What’s even more surprising is that the economic texts have not taken up the concept of “market rebalancing” anywhere that I can see. What markets do is one thing and only one thing. They provide information in the form of price. If you can make money at that price then you produce. If you can’t make money at that price then you don’t produce. Markets don’t act or respond. Mindlessly drilling more wells and producing more into an oversaturated market thinking that “rebalancing” will happen soon is foolhardy. After ten years this has to be self-evident. We have so much gas as a result of shale reservoirs. In Canada the geological survey in the 1950’s stated that we had 150 tcf of gas. Before shale gas that survey stated we had consumed about half. For all the years that the entire country of Canada’s consumption and exports to the United States amounted to about 75 tcf. I don’t know the exact amount that the survey states Canada has now, but it’s around 400 - 450 tcf as a result of shale. The number is irrelevant because the survey in the U.S. estimates they have 2,355 tcf of natural gas. An 86 year supply as of 2015. The point of this is that in the hands of the current producers 2,354 tcf is rushing to market as we speak. And the important point to remember is the bad news doesn’t stop there. The bad news being that the United States holds 17% of all shale based reserves. Therefore the world may soon have 13,853 tcf of gas chasing after the market in the hands of these producers.

Market signals, ie price, must form the production discipline of the oil and gas producers. The only manner in which to gain that discipline is through the implementation of the Preliminary Specifications decentralized production model’s price maker strategy. Otherwise we will continue to see the market on a North American basis erode the global marketplace. Then continued overproduction will lead to a complete and total destruction of the global natural gas market. If you doubt me then come back to this website in ten years. This behavior hasn’t changed in almost a decade. It’s the same behavior being displayed in the oil market for the last three years. Shale has changed the business fundamentally however the way the business is managed can’t, won’t and will not ever change. Creative destruction is the mechanism that invokes these high level changes in industry. People, Ideas & Objects are invoking creative destruction through our efforts. Most specifically in our upcoming Initial Coin Offering (ICO) which will fund the development of the Preliminary Specification and earn the coin holders the Permission Rights to exclusively access the software derived from our efforts. That Is how we’ll rehabilitate these markets and establish a healthy oil and gas industry for the decades to come.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part VI

Change Based Software Development Capability

People, Ideas & Objects focus is on our user community. Providing them with the software development capabilities they need in order for them to support the oil and gas business opportunities and issues in the 21st century. This is not a static one time instance. As the oil and gas business changes, the software that is derived from the Preliminary Specification will accommodate those changes through our software development capability and user community. We are therefore providing a change based software development capability to the North American oil and gas industry. We are not providing “new” technology for technology's sake. With respect to our revenue model, technology has a substantial impact on our product delivery. However it is the business of the oil and gas business, and the changes in that business that drive our user community.

Traditional ERP vendors in the oil and gas marketspace have “sold” a solution to the oil and gas producers and then support that application through an annual service contract. Our competitors are selling a product that does not consider changes to the business environment. Contrast that to the People, Ideas & Objects Revenue Model that is dynamic in that we are focused primarily on the changes in the business environment. It is these changes that are the source of our revenue stream. Without changes to the software, there would be no developments and no fees would be assessed in that year by People, Ideas & Objects.

It is a fundamentally different point of view. The traditional ERP vendor is constrained by their code and their customers. Any changes to the code need to be populated to the variety of customers who use their software. Therefore there is resistance to change by the vendor. The more code the software vendor has the more complex the changes will be. And the more customers the vendors have, the more costs and conflicts that arise. People, Ideas & Objects will be using Oracle's cloud computing infrastructure where changes can be populated to the user base quickly and efficiently. We are oriented to the changes in the oil and gas producers business environment through the demands of our user community. It is these changes that drive our revenue. The contrast between the traditional ERP vendor and our change based software development capability could not be greater.

The scope and scale of our applications are to provide a software development capability to the oil and gas industry, service providers and service industries. One that enables the industry to make the changes necessary when the business opportunities and issues arise. We believe that proceeding through the 21st century without a team of committed and capable software developers will unnecessarily constrain the oil and gas industry within the Preliminary Specifications definition. Evolution of that model is necessary in order to eliminate the possibility of systemic and chronic issues such as the current overproduction and oversupply issue is today.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part V

People, Ideas & Objects Capitalization

Another element of our Revenue Model is the means in which People, Ideas & Objects is capitalized. Traditionally software developers are stand-alone organizations with their own banking, regulatory and venture capital influences. People, Ideas & Objects is taking a project management perspective in providing this software solution to the marketplace. The differences in our capital structure are significant, with our Revenue Model being a critical element in defining and supporting these differences. Some of the key deliverables of this organizational structure is my personal compensation as detailed in our budget. Another is the ability to maintain our focus on the needs of our user community. I believe the situation in oil and gas today is the most significant issue that the industry has faced in its history. The monetary value of our solution to the oil and gas industry is substantial. On the other hand the oil and gas industry, from an ERP marketplace, is very small and raises a number of difficulties in terms of realizing any value from our efforts. It is therefore through this structure that my compensation for resolving this valuable and critical issue is realized. Our budget is immaterial to the value that can be created by the producers implementing the Preliminary Specification. Far more money is lost each month due to oil and gas overproduction and oversupply. The scope and scale of our application is very large. We need to eliminate and deal with any constraints that would otherwise occur with a compromised capital structure within People, Ideas & Objects.

The element of concern and unacceptable compromise is having our user based developments defined and supported by our various communities. And particularly our user community. To then have various venture capitalists, or other groups who are involved in a traditional capital structure, influence whether or not that software was built to that specification. This would be too large of a compromise to be viable. Therefore People, Ideas & Objects is funded by its Revenue Model and focused on its users; making it more of a project management type of venture. To be clear the scope and scale of People, Ideas & Objects is well beyond what venture capital groups would be willing to fund. Complicating our capital structure only complicates and compromises the deliverability of our software and services. To suggest that People, Ideas & Objects can be structured without the traditional involvement of investment capital might be naive for me to consider. However I do know, that it would be naive to suggest that the systems as described in the Preliminary Specification could be built with the traditional influences of a capital structure. Therefore, with that in mind and to ensure that the Preliminary Specification captures the full scope and scale of the technical and geographical concerns of the North American oil and gas industry we can ensure that the user community basis of our software developments remain our priority.

We have discussed the risks of becoming blind sleepwalking agents of whomever will feed us. An issue of concern when we’re discussing systems development. People, Ideas & Objects Revenue Model shows these risks are real and require a new approach to funding our software developments. It serves no one's interests, People, Ideas & Objects, the user community, service providers, producers or service industry to proceed without dealing with this issue. It is best to identify these conflicts and compromising situations now, while the influences are manageable. Financial participation is how our communities are supported and hence are able to avoid the trap of becoming blind sleepwalking agents of whoever feeds them. People, Ideas & Objects are user focused developments. The choices that a software development project can prioritize are many. Users are one, technical efficiency another and there are many other possibilities. For users to support the oil and gas industries needs and to focus on a producer's competitive advantages of their land and asset base, their earth science and engineering capabilities. Users need to have the software tools, capabilities and means of production, (the financial resources to build those tools) within their control.

The coin holders who will be funding the development of the Preliminary Specification will not participate in the capitalization of People, Ideas & Objects. They are a separate legal entity dedicated to realizing the value represented in our value proposition, the oil and gas industries extrinsic value. This organization will have its own governance which will be concerned with negotiating the split of the value proposition between the coin holders and industry. It will have that revenue stream which will be an ongoing revenue stream as long as oil and gas is part of our energy supply. And they will have the costs of maintaining People, Ideas & Objects and the user community after the initial development is complete. The Permission Rights are a contractual extension of the overall Intellectual Property surrounding the Preliminary Specification. Enabling the coin holders to control access to the binary applications that are produced from their investment in People, Ideas & Objects.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part IV

The Flow of Funds

In addition to People, Ideas & Objects software development teams funding. There is also our user community that has one of its two sources of funding as a result of its affiliation with People, Ideas & Objects. I now seek to clarify how People, Ideas & Objects revenue model provides the flow of funds within these associated communities. To start we need to clearly identify the different groups that are supported by the coin offering. These groups include (1) People, Ideas & Objects, (2) the user communities. The service providers have been deemed to be a separate and distinct group that would be funded by the producers themselves. I don’t see this changing, however that is up to the coin holders if they should choose to expand their business scope. The size of the service providers revenue stream would be consistent with what is incurred today in the oil and gas industry for accounting and administration. The need for the financial support of these communities is as follows.

People, Ideas & Objects assesses a monthly fee to the coin holders for access to the software applications, software development, cloud computing infrastructure and the user community involved in the development and operation of the software. These fees are assessed based on a cost plus basis consistent with the makeup of our development budget. These fees are then paid by the coin holders as part of their commercial service operation, which in turn enables them to collect their revenues from their clients the oil and gas producers. The coin holders revenues will be based on an agreed settlement between the producers and coin holders. The value that the coin holders provide is the delivery of the producers extrinsic value from the implementation of the Preliminary Specifications price maker strategy. Which is People, Ideas & Objects value proposition and has been estimated at $25.7 to $45.7 trillion over the next 25 years. Coin holders are making the investment in People, Ideas & Objects software development in order to create that value proposition for the producers. Producers have proven that they’re incapable and unwilling to make the investment to earn this value. Coin holders are therefore doing the heavy lifting for the producers in order that producers can achieve some of the value proposition with no effort or upfront investment. It will therefore be the coin holders business model to manage that value proposition and its distribution as part of their overall transition of the industry through the forces of creative destruction. If the coin holders choose to undertake the flow of resources to the service providers, they would accelerate that industry transition.

Funds will then be distributed from People, Ideas & Objects to the users groups themselves for their participation in the development of the software. These user community participants are independent business people. They are the ones that will define and design the systems that are necessary for the oil and industry. This is a revenue generating activity for their organizations. User community participants are also the principles of the service provider organizations providing the accounting and administration services for the oil and gas producers. Therefore they have two distinct sources of revenue.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part III

Whom Are We Building Systems For.

We now apply and extend Professor Jurgen Habermas’ 1960’s theory of different knowledge interests. Building on our discussion of People, Ideas & Objects value proposition, and the development of our Initial Coin Offering as the source of funding for our software development budget. We now delve into the difficult question regarding what we need the Preliminary Specification for. Are we developing systems that manage the commercial operations of an oil and gas producer, service industry and service providers? Yes we are, but that does not address the societal and individual needs of these systems. If we continue to look at just the needs of the producers, then we are leaving many needs unaddressed. Society and individuals are critical elements of a successful oil and gas industry. For example society benefits by having producers and the service industries efficiently interact, develop profitable operations, pay royalties and taxes. Individuals create innovative solutions to the demand they see for their services.

Overall organizations, individuals and society benefit by an increased and expanding division of labor and specialization. In today’s globalized, high technology workplace an expanded division of labor and specialization can be more efficiently created through a permanent industry wide software development capability such as that described by People, Ideas & Objects in its Preliminary Specification. When we concern ourselves with the economic output of the oil and gas industry. To expand that output requires that we organize ourselves based on greater levels of specialization and a further division of labor. The responsibility for increasing output does not fall to society, individuals or organizations in isolation but to all three. Therefore it is reasonable to state that what we need is the Preliminary Specification to address societies, individuals and organizations needs. I do not foresee further development of the division of labor or specialization occurring within the oil and gas industry without the active involvement of systems development. In a somewhat deliberate manner where all groups are represented such as People, Ideas & Objects has.

If we look critically at the division of labor, and eliminate some of the constraints to expanding it further in oil and gas. Constraints like the limitations of working within one firm or one Joint Operating Committee (JOC). If an individual has the capacity to apply their skills to a task for a geographical region that includes 100 producers and 200 JOC’s, the efficiencies could be substantial. The ability to manage a task in this fashion doesn’t exist within industries current organizational context. However this style of reorganization is a key part of the Preliminary Specification and our service providers.

The current downturn in the oil and gas industry has been the most significant and difficult in its history. The Preliminary Specification mitigates these issues by implementing our price maker strategy. Enabling the commodity prices to reach their marginal costs which we estimate to be $151 / boe. The difference between the commodities current price and the prices that are enabled through use of the Preliminary Specification are the extrinsic value of the oil and gas industry and this is also known as People, Ideas & Objects value proposition. In September 2017 we were able to prove to the marketplace that the oil and gas producers are not interested in this extrinsic value as a result of their non-participation in our developments. Funding our budget is too much heavy lifting for them. Therefore we are issuing an Initial Coin Offering (ICO) to fund our software development budget. In exchange for these funds coin holders will have the monetary value represented in the coin. This value will be derived from the Permission Rights to exclusively access People, Ideas & Objects software. With these Permission Rights the coin holder will therefore have the right to negotiate with the oil and gas producers for their access to the software in exchange for a share in the extrinsic value of the industry that the Permission Rights holder is able to generate. With no up front costs or efforts necessary in developing that extrinsic value, the producers would see this as free money. And the coin holders will have a shared revenue stream with the producers, that being the value proposition of People, Ideas & Objects.

To sustain this software development requires that we cease being subjected to the individual decisions of one or more producers. A company that chooses not to proceed with the development or implementation of these technologies can not hold up the greater benefit of all concerned. Essentially I am stating that the decision to support these communities needs to be made where appropriate representation considers the needs of all concerned. Looking at the cost benefit analysis of supporting this software from the point of view of only one producer, misses the benefits to society and individuals. For example the 2017 value proposition or extrinsic value lost of $890 billion requires production discipline be imposed throughout the industry.

Habermas theories deal with the issues of power, influence and most importantly emancipation. But when it comes to using science or computers to change the relations of power in our society, when emancipation is put forth as a knowledge or development interest, then the question of values becomes more controversial. Who is to be emancipated, and from whom? Who is to lose power, and who is to gain? And how can it be the business of scientists or computer professionals to take part in a political struggle for power?

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Revenue Model, Part II

Our Value Proposition

People, Ideas & Objects value proposition is that we provide oil and gas producers with the most profitable means of oil and gas operations. We do this through providing, supporting and defining within the Preliminary Specification a business model that enables the producer to be more profitable than any other available business model. In particular our value proposition is quantified by comparison to the current “corporate” business model currently used by the oil and gas producers. We have calculated our value proposition for the 2017 calendar year at $890 billion for the North American marketplace. We have always stated that over the next 25 years it would range from $25.7 to $45.7 trillion in value. This value is as a result of the differences in the average oil and gas prices that were realized for the 2017 year vs. what we have determined to be the necessary prices producers need to realize a profit. These prices were based on the assumption that the property, plant and equipment account of the producers, as they stand today, would be exhausted in the next 30 months. All the value and the cash resources of the industry are held up in the property, plant and equipment account. If industry were to recognize those costs based on our prescribed method they would resume normal healthy operations at the end of the 30 months. Key to this strategy and the realization of this value is the implementation of the Preliminary Specifications decentralized production model’s price maker strategy which would enable the $151 oil price and $15 natural gas prices. Please review the Preamble to the Preliminary Specification for more information on our price maker strategy.

Everyone intuitively understands that if each producer scaled back their production by 5% their revenues would triple. The issue is the producer organizations that have been built today were developed during the period of resource scarcity. When resources are scarce full production is assumed to be necessary at all times. Therefore use of the high throughput production model, where full production is used to offset the high costs of the operation and its overhead, is the logical organizational methodology. However the shale era now consistently presents the commodity markets with that incremental barrel that causes commodity prices to collapse. Therefore a new organizational methodology is needed in which to organize the North American producer. One in which only profitable production is produced. And profitable from the point of view of all of the costs being recognized on a timely basis. Turning over the capital trapped in property, plant and equipment so that the capital resources are not sitting idle waiting for decades to be returned to be redeployed. Investors are unwilling to invest their money and watch it sit in property, plant and equipment for ten to twenty five years when other industries are turning their capital over in as little as six months. Oil and gas producers are not competing for capital, only consuming it.

Bureaucrats are thinking to themselves that an incremental $890 billion in revenues from the Preliminary Specifications changes are ludicrous and excessive. I suggest this is the costs of their operation. What these revenues will attract in terms of incremental costs is a 25% royalty of $222 billion, recognition of the depletion of their bloated balance sheets to the tune of an additional $470 billion for a gross profit of $198 billion, income taxes of $70 billion for a net profit of $128 billion which will begin the retirement of what we believe to be a cumulative deficit, based on our calculations across the industry of $707 billion, down to $579 billion. This would also provide producers with $598 billion in incremental cash flow. Of which they could pay down their disproportionately high levels of debt, fund current year capital expenditures, pay dividends to their investors and rebuild their cash balances.

An additional future cost to the industry will be the share of this value proposition that the Permission Rights holders will receive in order to process the producers production. What has been proven in the past decade of depressed natural gas prices and three years of depressed oil prices. Is that producers do not have an answer and are wholly unconcerned with the issue or the opportunity to remedy it through People, Ideas & Objects offering. We have therefore begun the process of raising our budget through the Initial Coin Offering that will distribute these Permission Rights. Only the Permission Rights holders control the access to the Preliminary Specifications software and therefore will be the only solution for producers to implement the price maker strategy. To realize these higher prices the producers will have to incur the costs that they will need to negotiate with the Permission Rights holders on the production they’ll have processed by them. It is believed with no effort and no upfront costs incurred by the producers they will participate with the Permission Rights holders in this way. It will be otherwise free money to them.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part I

With all the changes at People, Ideas & Objects we need to document them. The first rewrite is of our Revenue Model. I want to take a moment however to note that nothing has changed whatsoever regarding our user community and service providers. People, Ideas & Objects will always be user community based software. That is our priority and focus and nothing will change that. If anything the role of the user community participant is enhanced through the opportunity for them to participate in our ICO and hold the Permission Rights of access to the software they build and service. The second point I need to make is that there are no changes in the Preliminary Specification itself. The model as it was published in December 2013 remains unchanged and is just as valid, if not more, than it was then. Using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer provides us with one key attribute. That being the alignment, as a result of moving the hierarchies compliance and governance frameworks to the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks provides us with the speed, accountability and profitability that we seek in our producer organizations.

This revision to our Revenue Model is due to the failure of our prior Revenue Model which was dependent on oil and gas producers participating in the development of the Preliminary Specification. After more than a decade of attempting to move this initiative forward based on the Preliminary Specifications ability to remediate the producers substantial business issues. Where those business issues have led to a precipitous decline in the financial health and well being of the producers and industry. A decline that People, Ideas & Objects believes will now be terminal for the existing producers. And the decided lack of support we received from them to meet our September 25, 2017 software development start date. We have proven that a new Revenue Model is necessary. Our previous Revenue Model was critical of raising money from investors to fund our developments. This methodology had been abused by the producers to the point that there was never any opportunity whatsoever of raising any equity funding in the oil and gas ERP marketspace. We therefore sought the software development funds from the producers themselves. This proved to be a failure for a variety of reason. Bureaucrats are adequately fed by the cash flows of a capital intensive industry. And as we noted in our Preliminary Research report, organizational changes can only be successfully achieved through the implementation of software first. This knowledge motivated the bureaucrats to avoid being challenged in their franchise by never sponsoring the development of any software.

Our discussion at this point is not unfamiliar with all other industries in North America and Europe. The implementation of robust ERP systems at this point in time is very poor in my opinion. They are based on technologies that are generations old and were sold on the premise that those technologies would bring tangible gains. There is little to point to in the ERP marketplace that would provide oil and gas producers with evidence that revised ERP systems would be of value to their organizations. Which is always the case when no money or resources are dedicated to an arena. As difficult as the oil and gas marketplace is, it is not inconsistent with other industries.

Lately a significant change has entered the ERP marketplace. Funding to the startup ERP software provider has been available in the form of Initial Coin Offerings (ICO). Based on blockchain technology these offerings are finding a ready market for investor interest in ERP software startups. It is important to note the role of the startup here. They are unconstrained in their approach to the issues that are present in business and the technologies themselves. The term “rip and replace” is becoming the method that ERP change is implemented. Only the unconstrained nature of a software startup can approach the blank slate of issues and opportunities of an industry with the appropriate solution. To implement the change any traditional way takes too much time and energy with the bureaucratic inertia against those changes most likely succeeding in the long run.

These coin issuances provide rights to their holders. In People, Ideas & Objects instance we are attaching Permission Rights to the coin which grant exclusive access rights to our software. These Permission Rights will therefore enable the holder to negotiate, through a governing organization established by them, with the producers for their accounting and administrative processing through the People, Ideas & Objects software. This negotiation will be over a settlement of the extrinsic value of the producers production over today’s base case operation. The producers have proven they are uninterested in developing this extrinsic value for themselves, however, if they are able to earn some of that value through access through the Permission Rights holder then delivery of that shared extrinsic value is at no upfront cost or effort to the producer. The funds from the ICO and the issuance of coins will be to develop the software based on our budget.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Now Have Proof

We return to an environment that is fundamentally different to the one we left before our three week break. Seeking the support of the producers to fund the development of our Preliminary Specification has been futile. This being the latest failure in an oil and gas ERP marketplace that has seen nothing but disasters and false starts. Initially producers were able to play the abundant number of ERP providers off one another and consume the enthusiastic investors in those firms to provide for their needs. That led to a shortage of providers and frankly a poor representation of the technology in the oil and gas market. Oracle attempted a significant development in the 1997 to 2000 time period and left in frustration on the inability to herd enough producers to keep their financial interest. I believe it was 2005 when IBM sold their market leading Qbyte application as they were unable to gain any support from the producers to develop that application any further. I am unaware of any material ERP software developments that have been made in the industry since 1997, and probably much earlier than that.

Our journey has been a different approach to the market. Taking investors money and attempting to provide them with a return is impossible in the small (150 producers) oil and gas ERP marketspace. Producers know that there are few producers who will purchase the product and will wait until the vendor becomes desperate to keep the lights on and offer pennies on the dollar for the product. This approach was unacceptable to me and the need for producers to pay for the software development was a given due to the market’s size. In addition the value of the ERP software was never quantified or qualified by any of its vendors. Vendors approached the industry from the point of view of the latest and greatest technologies offering xyz. The business value was never discussed. With the Preliminary Specification the qualification and quantification of material business value to the producer firms was put forward in our value proposition.

Our’s has not been a blow out the budget on marketing dollars campaign. This is a long term game and I have been at this in one form or another since May 1991. The Preliminary Specification has its origins in my Master’s thesis which I published in August 2003 and May 2004. This blog has been written consistently since that time in an effort to raise awareness of the issues and opportunities that I see in the oil and gas market space and our solution. The environment where the Preliminary Specification began to be seen as necessary was soon after the financial crisis. With the decline in natural gas prices as a result of shale based reservoirs, the current business environment has proven that production discipline is needed to be adopted within the industry. In 2014 shale began the destruction of the oil marketplace as well. Since that time we have seen nothing but a dialog of “market rebalancing” from the producers as the solution to the problem. Optimism that oil prices were beginning to increase was gaining once again in September of 2017. Three weeks later we are seeing a new consensus building where the problems regarding overproduction and oversupply will be “around much longer.” This cycle of elation and depression has become shorter with each predictable iteration. The only conclusion that is reasonable from this is that the bureaucrats within the industry do not care about the business. Bureaucrats will always be adequately fed from cash flow in a capital intensive industry. Therefore what exactly is the issue?

We established reasonable deadlines for producers to participate in the development of the Preliminary Specification. This deadline passed on September 25, 2017 and our effort joins a long line of failures in the marketplace. Bureaucrats can’t, won’t and will not ever make the necessary changes to their business to fix these issues. Something that we can say that we’ve now proven. The deterioration of the industry from this point is a given. Validating our value proposition which is estimated in the $25.7 to $45.7 trillion range. It is this value, the extrinsic value of the industry, the amount in which the Preliminary Specification provides the industry, that will form one cornerstone of the value of our Initial Coin Offering (ICO) that we are now preparing as the financial means in which to build the Preliminary Specification. Additional value is gained through the granting of Permission Rights to the ICO holder to the exclusive processing of oil and gas accounting and administration through the Preliminary Specifications software. We suggest that initially the Permission Rights holder would negotiate with existing producers to have their production processed through their Permission Rights as a business offering. Earning a negotiated percentage of the extrinsic value of the producers production being processed through the software. Today producers have proven to be uninterested in this extrinsic value and it is available to those who are willing to develop it. Since at least July 19, 2011 we have stated it's not enough to own the oil and gas asset, you must also have access to the software that makes the oil and gas asset profitable. Permission Rights holders will have that exclusive right of access.

The future of the industry as it stands today is very short term with no prosperous horizons. I believe that eventually the Permission Rights holder will take ownership of the individual Joint Operating Committees for the production they process through our software. Fulfilling the creative destruction principle that our economy depends upon. As it stands today I hold all of the Permission Rights that will be distributed through the Coins. These will be issued to fund our budget, probably on a pay as you go basis. Our ICO is probably a year away and before that we need to raise money to organize the ICO and other aspects of the changes that we are implementing here today. I believe this could be done by contract to sell some of the coins in a pre-market sale.

People, Ideas & Objects have been patient and we have done our job. We have proven the Preliminary Specification is a viable working model in the industry. It addresses the current issues and opportunities in the marketplace. And provides the means in which to provide for the future issues and opportunities. We have proven that the bureaucrats are constrained, conflicted and complacent. To the point where the industries destruction has become permanent and the existing producers will not be able to proceed or succeed. Investors and bankers have given up. The people who are working in the industry, I consistently hear, are giving up too. With no future what is there? The time for producers to have acted has past and these changes to our position are what we are proceeding with. As I mentioned in September, I don’t think we can do anything for the existing producers. It would be too little and too late. Leading up to a functional failure on our behalf. It’s time for the process of new ownership of the industry to begin with the issuance of our Permission Rights through our ICO.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund 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 Quarter 2017 Statistics

At the end of the the third quarter of 2017 our sample of 23 producers recorded the following performance. Oil prices were up 12% during the quarter, natural gas prices were down 1%. The market capitalization of the producers we follow in our sample rose by 9% over the past quarter. For the past year oil prices rose 9% and natural gas prices fell 1%. However, the market capitalization of our sample producers over the past year have declined by 13%.

I have always asserted that investors would be better off investing in the commodity markets as opposed to the producers themselves. If the producers were only mocking the moves in the price of the commodities there would be less risk involved if you were to invest in the commodity markets. This theory is proven valid once again as the commodity markets investment performed significantly better than an investment in the producers. This is a pathetic performance. Management should always outperform the commodity markets and built value above their price increases. Both in rising and falling commodity markets. This may be evidence of the effectiveness of the story that “market rebalancing” is just around the corner. Sitting around doing nothing while the business is being destroyed is never a good strategy.

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.