Maybe the Investors Will be Happy
Bloomberg’s Alix Steel was interviewing Conoco’s Chairman and CEO Ryan Lance on the floor of the New York Stock Exchange. During the interview he stated the following.
I think Mr. Lance is mistaken about the purpose of our business model, the Preliminary Specification, with its price maker strategy. We are not focused on raising prices we are focused on producers earning real profits. If the property can earn a real profit considering all of the actual costs of exploration and production, based on a reasonable accounting then that property will produce. If it can’t generate a real profit then it is shut-in until such time that it can. What is it that the oil and gas industry is doing? Diluting their profitable properties with unprofitable production is a fool's game. If you shut-in your unprofitable properties, your profits would increase. It’s also true that commodity prices would rise however that would then stop the investment community from subsidizing the consumer for their energy needs.
Several years ago investors and bankers abandoned Mr. Lane’s “business model” due to its misguided adventures in destroying their capital and not charging enough for their products. None of the producers have ever made any money if you consider that the capital costs of past production are glaring at everyone in the property, plant and equipment account. In Mr. Lane’s case he’ll be depleting Conoco’s $47 billion in assets over the next 9 years. Why? Are your investors that patient that they can wait for that capital to be returned to the company for reuse? It’s a capital intensive business, doesn’t that impute that capital should be reused again and again or is it as these producers suggest that capital is used just once in the lifetime of the business? And what about Conoco’s $2.4 billion in losses so far in 2017? I know, profits don’t matter in oil and gas. It's how efficiently you inject the sand into the formation during the frac that makes the difference.
Although $1.5 billion in third quarter earnings may be satisfactory to the likes of the oil and gas producers. It’s a poor performance when you consider that property, plant and equipment totals $478 billion for our sample of 23 producers. Though earning 1.25% annual profits on conspicuous accounting would be a big step up from last year. Cash continues to bleed from these producers at a rapid pace. Without the annual injection from investors of free money to spend, and the business not performing as a business, because we’ve determined it to be a consumer subsidy, I’ll accept Mr. Lane’s criticism of the Preliminary Specification. Recall too that producers claimed that they’re profitable at as little as $30 and prayed for $50 oil to return. These profits and the hemorrhaging of cash show that even with the prices that they prayed for, and the deferral of the recognition of their capital costs for decades to property, plant and equipment, the bath tub that is oil and gas continues to drain at a remarkable rate.
The fact of the matter is that any producer will say anything on any specific day. Today it’s profit’s over production, tomorrow they’ll say they're committed to energy independence. There is no plan other than to drill and complete that next well. The entire focus of the organization is on the technical aspects of oil and gas exploration and production. Thinking that the business end of the business will take care of itself. The problem with that is there is a crisis undergoing in the business of the oil and gas business and no one is paying attention or listening to what others might be saying.
We learned last week that crude oil production reached 9.66 million barrels per day. This being the highest point of oil production in the shale era. It’s a good thing that producers are focusing on profits and not production, so they claim, otherwise who knows how high this number would have been. The issue is that there is no control whatsoever over the volume of oil that a producer will produce. It is full production everywhere and always. I’ve completed my review of the third quarter reports of our sample of 23 producers. With a 12% increase in the price of oil much was expected from these producers. I’m afraid that we’re not in the position, as an industry, to continue on in the manner that this industry is proceeding.
These comments from the CEO of Conoco, and comments from others are evidence of one thing, in my opinion. The producers are not enamoured with our free money strategy. That we are proceeding with our developments without their involvements is not something that we could have contemplated earlier or what they would have considered possible. Our coin offering will create one of the producers largest costs in the future of the industry. A cost that is incurred in providing them with “real” profitable operations. Something that they’re unwilling and incapable of accepting as necessary. That the Preliminary Specifications price maker strategy is openly criticized now is good news for us.
What the third quarter reports show is that the trend in which the decline in producers performance and financial health has continued unabated. No remedial action can be seen on any of the producer's behalf regarding any aspect of their organizations. These third quarter reports also provide evidence that their investors still believe that shale is, and never will be commercial. Action on part of the producers is what the investors have been waiting for. People, Ideas & Objects provided an alternative for producers but we have chosen to build our software with our free money strategy. Oil and gas investors were previously only on strike, now they know producers haven’t done anything, and most importantly, now can’t do anything. It sounds to me like action by those investors is necessary and probable.
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.
If you asked me to be a betting man today and I had to average the price over the next five or six years, we’re not making bets on a higher price. I think if you need that higher price to bail out your business model, you’re going to be really disappointed.
I think Mr. Lance is mistaken about the purpose of our business model, the Preliminary Specification, with its price maker strategy. We are not focused on raising prices we are focused on producers earning real profits. If the property can earn a real profit considering all of the actual costs of exploration and production, based on a reasonable accounting then that property will produce. If it can’t generate a real profit then it is shut-in until such time that it can. What is it that the oil and gas industry is doing? Diluting their profitable properties with unprofitable production is a fool's game. If you shut-in your unprofitable properties, your profits would increase. It’s also true that commodity prices would rise however that would then stop the investment community from subsidizing the consumer for their energy needs.
Several years ago investors and bankers abandoned Mr. Lane’s “business model” due to its misguided adventures in destroying their capital and not charging enough for their products. None of the producers have ever made any money if you consider that the capital costs of past production are glaring at everyone in the property, plant and equipment account. In Mr. Lane’s case he’ll be depleting Conoco’s $47 billion in assets over the next 9 years. Why? Are your investors that patient that they can wait for that capital to be returned to the company for reuse? It’s a capital intensive business, doesn’t that impute that capital should be reused again and again or is it as these producers suggest that capital is used just once in the lifetime of the business? And what about Conoco’s $2.4 billion in losses so far in 2017? I know, profits don’t matter in oil and gas. It's how efficiently you inject the sand into the formation during the frac that makes the difference.
Although $1.5 billion in third quarter earnings may be satisfactory to the likes of the oil and gas producers. It’s a poor performance when you consider that property, plant and equipment totals $478 billion for our sample of 23 producers. Though earning 1.25% annual profits on conspicuous accounting would be a big step up from last year. Cash continues to bleed from these producers at a rapid pace. Without the annual injection from investors of free money to spend, and the business not performing as a business, because we’ve determined it to be a consumer subsidy, I’ll accept Mr. Lane’s criticism of the Preliminary Specification. Recall too that producers claimed that they’re profitable at as little as $30 and prayed for $50 oil to return. These profits and the hemorrhaging of cash show that even with the prices that they prayed for, and the deferral of the recognition of their capital costs for decades to property, plant and equipment, the bath tub that is oil and gas continues to drain at a remarkable rate.
The fact of the matter is that any producer will say anything on any specific day. Today it’s profit’s over production, tomorrow they’ll say they're committed to energy independence. There is no plan other than to drill and complete that next well. The entire focus of the organization is on the technical aspects of oil and gas exploration and production. Thinking that the business end of the business will take care of itself. The problem with that is there is a crisis undergoing in the business of the oil and gas business and no one is paying attention or listening to what others might be saying.
We learned last week that crude oil production reached 9.66 million barrels per day. This being the highest point of oil production in the shale era. It’s a good thing that producers are focusing on profits and not production, so they claim, otherwise who knows how high this number would have been. The issue is that there is no control whatsoever over the volume of oil that a producer will produce. It is full production everywhere and always. I’ve completed my review of the third quarter reports of our sample of 23 producers. With a 12% increase in the price of oil much was expected from these producers. I’m afraid that we’re not in the position, as an industry, to continue on in the manner that this industry is proceeding.
These comments from the CEO of Conoco, and comments from others are evidence of one thing, in my opinion. The producers are not enamoured with our free money strategy. That we are proceeding with our developments without their involvements is not something that we could have contemplated earlier or what they would have considered possible. Our coin offering will create one of the producers largest costs in the future of the industry. A cost that is incurred in providing them with “real” profitable operations. Something that they’re unwilling and incapable of accepting as necessary. That the Preliminary Specifications price maker strategy is openly criticized now is good news for us.
What the third quarter reports show is that the trend in which the decline in producers performance and financial health has continued unabated. No remedial action can be seen on any of the producer's behalf regarding any aspect of their organizations. These third quarter reports also provide evidence that their investors still believe that shale is, and never will be commercial. Action on part of the producers is what the investors have been waiting for. People, Ideas & Objects provided an alternative for producers but we have chosen to build our software with our free money strategy. Oil and gas investors were previously only on strike, now they know producers haven’t done anything, and most importantly, now can’t do anything. It sounds to me like action by those investors is necessary and probable.
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.
