Two Business Models?

In yesterday’s post I noted that there were two business models contained within the Preliminary Specification. The first model is the decentralized production model that we’ve discussed here frequently. It includes the price maker strategy and relies on the reorganization of the oil and gas industry and producers to include the user community and service providers. The second business model of the producer is a second source of revenue that the producer generates based on their engineering and earth science capabilities and resources. Both of these business models are critical to the future profitability of the oil and gas producers. And both require substantial changes to the mindset of those people who work within the industry.

Briefly the decentralized production model enables producers to shut-in any unprofitable production and therefore increase their profitability by only producing profitable properties. No longer will their profitable properties be diluted by their unprofitable ones. We do this by reallocating the accounting and administrative resources of the producers into service providers who specialize on one process and use the entire oil and gas industry as their client base. Specialization and the division of labors finest hour. That way when a property is shut-in no information is generated or transferred through our task and transfer system to the service provider to process. Therefore no activities will be invoked by the service providers and no invoice will be presented to that Joint Operating Committee while it’s shut-in. Creating a null operation, no profit but also no loss. Enabling the producer to maximize their profitability, save their reserves for a time when they can be produced profitably, not have to carry the additional costs of subsequent years losses on those reserves and remove the marginal production from the commodity markets, raising commodity prices to the level necessary to cover the total cost of oil and gas exploration and production on a reasonable accounting basis.

The industry is currently configured to have operators and non-operators of Joint Operating Committees. This requires the producer to have the capabilities and capacities necessary to deal with any and all contingencies across their asset base. Therefore, within the producer, there is a surplus capacity built-in to deal with these contingencies. Creating an unused and unusable surplus capacity across the industry. As the sciences continue to expand the demands to increase specialization and expand the division of labor will be necessary. Particularly if the industry is going to expand its production throughput to attain energy independence on the continent. At some point, in the very near future, the diversity and depth of these demands on producers capabilities will further erode their profitability. No producer will be able to afford the full cost of the highly specialized earth science and engineering capability. Therefore we believe, each producer will need to specialize in specific areas and rely on other producers to fill in, either through the Joint Operating Committee, or as another producer, to augment the capabilities that are demanded by the property. The Preliminary Specification facilitates this specialization between producers throughout the industry. These features are captured in the Resource Marketplace, Partnership Accounting, Accounting Voucher, Research & Capabilities and Knowledge & Learning modules.

Therefore within the Preliminary Specification we have developed a Work Order system that captures the time and place that the producers resources are deployed to. The Work Order will collect and aggregate the time that was spent for the property and provide the appropriate billing to the appropriate Joint Operating Committee each month. Therefore these resources are generating a source of revenue that is not being captured currently. As the industry begins trading on these individual producers capabilities they can become highly specialized and divide the labor between the producer firms. This will save the industry from further profit erosion and recapture much of the profit that is lost today when each and every producer is building unused and unusable capabilities and capacities within their organizations.

There is one further consideration that must be taken into account. That is the brain trust that is alleged to be retiring from the industry in the next decade. This may create a shortfall in the critical engineering and earth science areas. These shortfalls may be aggravated by the current downturn as few people are entering the earth science and engineering faculties in the universities. This alone may become a critical issue as it will be many years of demand and high wages to generate the demand that initiates people to make the investment of their time in these professions. It is therefore highly probable that the industry does not have the level of these critical competitive resources available to them in the very near future. The bureaucrats may want to leave this until it becomes a critical issue, after all it would be in their best interests, People, Ideas & Objects tend to see things and act differently.

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. 

Vision With Action Can Change the World

The argument is that the scope and scale of People, Ideas & Objects, our user community and service providers is too large or impossible. I’m reminded of the quote by Nelson Mandela “It always seems impossible until it’s done.” And it certainly looks that way when you first grasp the changes that are necessary to the oil and gas industry and producer firms to make the Preliminary Specification operational. Moving from the corporate accounting focus to the Joint Operating Committee demands that everything changes. Nothing and no one is unchanged as a result of the movement of the compliance and governance framework of today’s hierarchies to the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. This change is what provides for the speed, innovativeness and profitability that we desire in the producer firms and industry.

The Preliminary Specification is the codification of the research that was undertaken to determine the “what, how and why” that needs to change to make the Joint Operating Committee functional and operational in the industry. The eleven modules sketch out a workable framework in which two business models are developed for the dynamic, innovative, accountable and profitable oil and gas producer. It is this framework that the user community and service providers will build upon by detailing exactly what they need in the software they’ll use to account for and administer the oil and gas producers. No one will confuse the scope and scale of this effort with the level of difficulty and dedication it will require to resolve. Just as everything in the oil and gas producers changes as a result of using the Joint Operating Committee, no one is immune from the changes in their field of work. Administration, accounting, geology and engineering will all be modified to accommodate the implementation of the Preliminary Specification. The more involved you are from the start of these changes, the better off you’ll be in the long run.

Is all of this necessary? That’s a decision that everyone has to make on their own. My belief is that the current business model of the producers has failed and will ultimately fail catastrophically. There is no opportunity in my opinion to make changes to the current business model that will mitigate these difficulties and bring about the value proposition that we’ve detailed for the Preliminary Specification. We can see the deterioration of the industry to the point where it has and provides no value to anyone other than the bureaucrats. The sum total of the installed base of industry assets is worthless as it demands a cash infusion each and every year to operate. The cost to society so far has been tragic with no remedial actions taken by any producer firm for the past ten years of this downturn. What would compel the industry to act? I don’t believe there’s anything that will instill the need to act. The bureaucrats are fine and they appreciate your concern for their welfare.

Information Technology is disintermediating every industry as we speak. New business models are being introduced that create a new dynamic and greater value proposition for those concerned. Business models which include society as a whole as the stakeholders. Why would oil and gas be immune to these forces. The ability of the producers to hold on in such a desperate situation for such a long period of time is due to the unique nature of the business. As a capital intensive industry it provides a strong return of that capital each and every year. That capital is being diverted, now and in the past, to support a self satisfied bureaucracy. Therefore this situation will continue for some time if the bureaucrats are left to their own devices. They are self interested and unmotivated to kill their golden goose. People, Ideas & Objects have proposed a compelling business case for the transformation of the industry and producer firms. This is not an Information Technology exercise designed to install the latest version of a new operating system or other technology. This is a business focused initiative with a value proposition defined for all of society.

I’m reminded of the quote that I put in the budget for the Preliminary Specification.

Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world. 

Joel A. Barker

What are you doing?

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.

Bit's of Scraps Here and There

I am pleased with the presentation that People, Ideas & Objects is able to make on this blog. We have what has to be the ugliest website on the Internet. Since late 2005 when I began writing about using the Joint Operating Committee as the key organizational construct to solve the producers issues, there has been no major changes to the website in any way. The graphics and style are the same as it was in December 2005. It’s been throughout this period that we’ve not received any support in any form from the producers. On the contrary, I have been treated with the repeated beatings with the baseball bats out by the dumpsters, attempts to circumvent our Intellectual Property and a general lack of respect. Which I hope I’ve been able to return this good will in equal measure and give as good as I get. I’d also like to think that I’ve been able to do some valuable work here in the research and presentation of the Preliminary Specification. Our wiki be the other unappealing website. All in the attempt to resolve the issues that the bureaucrats have made so prevalent in so many people's lives. Therefore I have no plans in which to make any changes to these sites anytime in the future. And truly hope the bureaucrats are as humiliated as I hope them to be. Where their solutions to their issues and opportunities are being resolved without their support on the ugliest websites in the universe.

The 10 year U.S. bond closed at 2.83% on Friday. Waking the markets to the very real possibility of substantially higher interest rates and the repricing of all assets. This has the potential to take the “lofty” out of the oil and gas producers stock prices and bringing them down to reality. Not only would it reprice the stock for the investor, higher interest rates would increase interest costs. Our argument is that producers are heavily indebted as a result of recording every cost as a capital asset. As those assets have grown, so has the appetite to borrow money against those capital assets. Not many producers appear over indebted at this time. However, if you consider the bloated nature of property, plant and equipment you should ask yourself if these organizations can sustain an increase in interest costs.

There were two difficulties in the Initial Coin Offering market that occured last month. These will ultimately delay our ability to source any funding, however over the long term, I believe these to be positive developments that will work to improve this financing vehicle for us. The first was the theft of $530 million U.S. in Japan from coin holders accounts. Thefts have been an issue, particularly during the process of the Initial Coin Offering. Steps are being taken to resolve these issues and remedies should begin to make this less of an occurence in the latter part of 2018.

The second issue was the stepping in of regulators to shutdown an ICO seeking $1 billion under false conditions. $600 million had been raised when the SEC stepped in and is seeking to force the return of the investors money. The following comments were made by the SEC Chairman.

In December, SEC Chairman Jay Clayton had harsh words for ICOs after the agency shut down an offering. Clayton said in a blog post that despite claims of not being subject to regulation, many of the digital coins were in fact securities and thus subject to the agency’s authority.

I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects, he said.

However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.

What is clear is that large amounts of money are now being raised and managed by these coin offerings. Creating a new source of capital for innovative projects. This is consistent with my thinking that coin offerings will grow to be capable of funding People, Ideas & Objects development budget. With the appropriate SEC regulations and bug fixes we will be able to offer our Permission Rights.

If interest rates doubled in the next year, that could put the oil and gas producers in serious jeopardy. Adding a second serious issue to the pile of unaddressed issues. Their capacity to raise equity at today’s high valuations is not generally possible. At a lower valuation, which in this scenario may be half of today’s stock’s price, there will be more investors angry with the performance of the stock and wanting to get out. Raising money may be twice as hard. It might be prudent for the oil and gas producer to consider that the amount of capital sitting in property, plant and equipment is the source of their cash for the foreseeable future. Assuming of course that they can process these bloated balances out profitably through their use of the Preliminary Specifications decentralized production models price maker strategy. Which can be easily done by buying our coin offering, which would provide them with the full value of our value proposition, sounds like a good investment to me.

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 Capacity to Spend and Degrade Deliverability

When natural gas prices crossed the $3.60 barrier last month I thought for sure the producers had it within their power to fix this overproduction problem for good.😏 After all it’s been ten years that these prices have been depressed and the natural gas producers could use some luck and finally get a break! Then on January 30 a drop to $3.14 and all the hopes and dreams of so many bureaucrats evaporated. Only to realize a further 7% drop the next day followed by another 5%. With an increase of two natural gas rigs the market felt that maybe that was too much and took it that, once again, the oil and gas spenders were on the march. The capacity to spend money isn’t that highly valued in the business community. Producers should understand that the real value investors are looking for is the capacity to earn profits. Which is light years more difficult to attain than spending money.

Chesapeake laid off 400 people last week. Which means earnings season is upon us with the first of our sample of 23 companies reporting last Friday. The need to appear active by reducing the headcount always looks good just before a bad earnings report. We’ll have our usual summary of the state of affairs in oil and gas when everyone has issued their financial statements. It’s just that it doesn’t seem to matter as much this time. No one seems to be believing what the producers are saying about their business. Commodity prices rise and the producers are out spending as fast as they can once again. We’ve seen this movie several times now and know how it ends. It will be fatal again for all those that depend on a healthy and profitable oil and gas industry. The only people who never seem to be affected by these downturns or general malaise are the bureaucrats and their Ferrari dealers.

Of course what I’ve prescribed in the Preliminary Specification is nothing but painful, hard, difficult work for those involved in the industry. Some might argue that our budget is an impediment to overcome too. I think that our value proposition of $668 billion for 2017 alone, and each of the next 25 years is where the real costs are, in bureaucratic inaction. The bureaucrats may be searching for that 15 minute solution that they believe will resolve their trillion dollar issues. And there is always the possibility that they will find it. I’m not so foolish as to suggest that these issues can be resolved easily or with a fist full of dollars. If this overproduction and oversupply issue is not currently the biggest issue in the history of the oil and gas industry, then I am not aware of what greater peril could be faced by the producers. As a bureaucrat it’s easy, in a capital intensive industry, where your investments are returned to you constantly, to make up the cash flow necessary to keep yourself happy, the lights on and rent paid. There is however so much more that the oil and gas industry has a responsibility to.

We documented the obligations that our $668 billion / year value proposition is responsible for and to whom. The royalty holders, Federal and State income taxes, the service industry representatives who are so critical to the success of the oil and gas industry, and the people who work in oil and gas who are made to suffer unnecessarily under this self interested bureaucratic regime. These stakeholders are all having difficulty financially and otherwise, and unnecessarily so as a result of the inability of the oil and gas producers to act. Producers who spend money as the core of their business strategy have an inward looking perspective where the rest of the industry is of little or no concern. It’s a simple matter of determining what the cash balance is at the beginning of the day and be sure to have that spent by the end of the day. Repeat for each working day. So when the commodity inventories bloat and the prices collapse it’s obvious to everyone that these events have nothing to do with that producer. They are innocent of any involvement or responsibility. When others, such as People, Ideas & Objects makes recommendations such as the Preliminary Specification, it is these internally focused spending machines that work to ensure that no one recognizes that any issue exists and do everything to silence those that upset the status quo.

This situation has been the day to day operation of the oil and gas industry for the past decade. Nothing has been done to resolve any issue whatsoever. Stories and fables have been told as to what the producers were doing to resolve the situation throughout those last ten years. Clearly nothing has been effective. Producers have created the phenomena of “market rebalancing” to reflect the activities they “undertook.” This term reflects their inaction, and desire to let the productive capacity of the industry degrade to the point where it “balances” again. Deliberate destruction. Brilliant! Usually when commodity prices rose during these past ten years my audience on this blog would fade noticeably. Only to return when the commodity prices collapsed again. This time seems to be different in that the commodity prices are up, yet so is my audience. I’ve also noticed in the past that when prices rose the producers stock price rose. And when prices were declining this led to the decline in their stock prices. Now stock prices just go down based on any direction the commodities are moving. It just seems to me that no one is listening to the producers anymore. We’ve seen this movie so many times and there is so much destruction, why are we believing those who choose to do nothing about it?

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. 

Third Friday Off

Oh, and Cash Flow Too

We have been focusing on the implications of the capitalization policies of the oil and gas producers. We know that oil and gas producers, by capitalizing as much as they possibly can, overstate their earnings and the size of capital assets on the balance sheet of the enterprise. We also discussed how the overinvestment in the industry is one of the largest costs that an enterprise can incur. And by far the largest cost that any producer or industry can incur is the deployment of that overinvestment, or the over capacity being deployed in continued production. Causing inventories to swell and pricing power to be lost within that industry. These are the lessons that should have been learned by the oil and gas producers in the past ten years since the financial crisis. A time when the shale gas volumes began to erode the natural gas prices. What other distortions and costs are the results of the systemic accounting distortions the producers report. We’ve spoke about cash flow, however that was a while ago. I think it is worthwhile to review that discussion and reiterate what it is that People, Ideas & Objects believe to be a more appropriate capitalization policy for the oil and gas industry. 

It isn’t doing the oil and gas producer or industry anything productive to have their capital assets accumulate and be recognized in the manner that they are today. On the contrary it is beneficial for them to recognize their costs in a more timely manner to ensure that they are deploying their capital more efficiently. Bloating their balance sheets has enabled the overinvestment and overcapacity to build over time. If the producers were recognizing their costs, which today are predominately capital in nature, on a more timely basis they could avoid these distortions and eliminate these hidden costs that are detrimental to the performance and productivity of the industry. They would also return their capital investments to the firm in the form of cash, assuming they sold their products profitably.

If People, Ideas & Objects method of capitalization was implemented the overcapacity and the loss of pricing power, in terms of costs, would disappear and as a result the performance and productivity throughout the industry would increase. Our policies would include a review of the producers capital to determine which expenditures were made for the purpose of maintaining the production profile and which expenditures were made to expand the production profile. Designating those that maintain the production profile as operations irrespective of the type of expenditure, drilling, completion or equipping. We would also review the type of expenditures that were made. The intangibles would be expensed in the current period for all drilling and completion. Only those physical assets with serial numbers and secondary markets would be classified as capital assets. This is a fundamental rethinking of the capitalization of the oil and gas producer. One in which few expenditures ever hit the balance sheet and most costs flow directly to the income statement in the current period. With the price maker strategy an accurate costing of the product is attainable to ensure that the costs of oil and gas exploration and production are accurately passed onto the consumer. And capital is returned to the producer for reuse in the form of cash.

Cash flow under the current bureaucrats methodology is therefore substantially overstated. If everything is capitalized then nothing is deducted in the current period of operations and therefore cash flow is high. The valuation of the oil and gas producer will therefore be high as well as a result of the markets assessing them at approximately six times cash flow. Therefore this change in the capitalization policies would have a detrimental effect to the valuation of the oil and gas producer. That is it would be detrimental if the change in capitalization wasn’t made with the implementation of the price maker strategy at the same time. The price maker strategy would ensure that all production everywhere and always is profitable which would imply that “appropriate” cash flow was maintained.

The point of this exercise is to ensure that the producer is recognizing their costs and passing those to the consumer on a timely basis. This does one thing very clearly. It shifts the burden for these costs from the oil and gas investor to the oil and gas consumer. It will be the consumer that is paying the full cost of the oil and gas they consume. There will be no more subsidy to the consumer as a result of the capital investment made by the investors sitting on the balance sheets of the producers for decades hiding the actual cost of oil and gas from the consumer. Turning over the capital of a producer today is measured in the number of ice ages they’ve passed through. Which is ridiculous. The need to have this capital returned as quickly as possible is a key to the dynamic, innovative, accountable and profitable oil and gas producer. No other industry has their hand out for more capital to be spent every year. Usually there is an IPO and further distributions as a result of some business combination or merger and acquisitions. Carrying and backfilling the producers cash needs each and every year is a fools game that was facilitated by the oil and gas bureaucrats deception. Which they did by issuing specious balance sheets, growing profits and cash flow statements that we can now see in retrospect never existed in reality. Now the only deception is the bureaucrats thinking they can still run the same scam for a few more years before they retire. I could be wrong but I don’t think investors are falling for it.

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. 

Another Teachable Moment

One of the most costly aspects of business that an enterprise can incur is the cost of surplus capacity. It is the cost of capital that has been unproductively deployed. The only thing more costly than surplus capacity is if the enterprise continues to employ that surplus capacity and incurs inventory bloat leading to price declines. Luckily we have this problem in oil and gas for the past four decades and therefore this becomes what they call a teachable moment. This assumes that any bureaucrats are reading this blog which is highly improbable. Let's assume for a moment that oil and gas production needs to be scaled back by 15% in order to maintain the prices that are profitable and the market finds its equilibrium at those prices. A 15% reduction in all of the costs of the industry is not going to happen. The capital cost, which is the point regarding surplus capacity, is substantial and was unnecessarily incurred as the market doesn’t exist for that 15% surplus capacity of oil and gas. That shut-in production in terms of its capital cost is the cost that the producers have to carry as a result of overbuilding their capacities. The situation we have today, which in a capital intensive industry is particularly acute.

That we don’t notice this cost is as a result of the fact that the surplus capacity is producing at all times. Leading to the overproduction situation that has slaughtered commodity prices. The cost of this is adequately represented in our value proposition which we calculated at only $668 billion for 2017. If the capital employed by the industry is $1,620 billion then 15% is again only $243 billion. One of the most amazing aspects of these two costs is that these have been pointed out to the bureaucrats consistently, with the appropriate solution on this website, for many years now. Probably better than a decade in fact. Yet nothing has been done about the surplus overproduction, the oversupply or the over capacity. What has been done has been a successive series of attempts to deal with the individual who keeps writing about these issues.

We however should give full credit to the bureaucrats for their ability to snow the media with their claim of being innovative throughout 2017. Claiming that they had reduced their costs of capital by innovating on the method of drilling and completion. This stretch of the imagination has to win the grand prize of them all. There is no doubt that the producers were able to generate concensions from the service providers to have their wells drilled cheaper. However to suggest that this was a reason for the reduction in their overall costs is hideous. A producer may have about 5% of their wells in progress in any one year. The other 95% are completed and the costs for those are historical. You can’t do anything about the historical cost of what you paid for your car, and they can’t do anything about the historical cost they paid for a well two or ten years ago. What they did do in order to make it appear they were “innovative” was reduced the amount of depletion per barrel being recognized in 2017. The only thing that surprises me here is the ability of all the producers to sing from the same hymn sheet! The question is, when all the bureaucrats act in the same manner to deceive their shareholders, is that collusion?

And of course the bureaucrats were busy throughout the year cutting the number of pencils, Post-it-Notes and people they used in their organizations. These were the costs that occupied the little minds of the bureaucrats. Meanwhile they let the two largest costs that an organization can ever face let loose on the industry to reap their destruction. It’s almost like they didn’t understand where their money was going or their costs were! I’m sure they’ll figure it out soon. Acting to change the situation will however never be done as that requires action and that is something that hasn’t been seen in the industry for many decades.

Is it still the myth of “market rebalancing,” a phenomenon known only to oil and gas, and no other business, or economist in the world? Or has the oil price increase been attributable to the volume of oil that the Saudis and OPEC removed from the market with their production sharing agreement. I’m certain the bureaucrats would never accept that Middle East interests would have anything to teach them. It’s much like the Preliminary Specification, logic is difficult for them to comprehend. It's also so much easier to just mouth the words “market rebalancing” then deal with their two largest costs.

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. 

Profitable Production is not Collusion

When People, Ideas & Objects introduced the Preliminary Specifications decentralized production models price maker strategy. The oil and gas producers believed we had become the antichrist. Our price maker strategy was the last thing that they would ever consider. I was so surprised at the response that this idea had generated. As a result what we learned from this over the top response was that the price maker strategy was the solution to the issue at hand. If the bureaucrats didn’t believe in managing the supply by only producing profitable production, then they were the cause of the boom and bust cycle in the industry. I have to say that since that time we have come along way from the knee jerk reaction of the bureaucrats. To where the man on the street can see, and has ample evidence that both the commodities of oil and gas are subject to the principles of price makers. That the Saudis and OPEC have taught us a valuable lesson by implementing their production sharing agreement.

We are not implementing any method of collusion between the oil and gas producers to raise prices. We are seeking to find the marginal price by ensuring that all oil and gas production in North America is produced profitably everywhere and always. If it is not profitable then the property will be shut-in until such time as the producer is able to innovate on the costs, the production or reserves and return the property back to profitability and production. While any property is shut-in, as a result of the reorganization of the industry and producer that is undertaken by implementing the Preliminary Specification, it will incur a null operation. No profit, but also no loss. If only producing profitably is collusion then the “market” system is a means in which to collude. A ridiculous assertion and one the bureaucrats should be embarrassed to have considered and still supporting today.

Why don’t the bureaucrats implement the price maker strategy today and forget about the Preliminary Specification? Simply they can’t. They certainly know what the revenue, royalties, operating and capital costs are for each property. The difficulty is that all of the overhead that is incurred by the company is captured in the corporate overhead accounts. These are subsequently cleared by a large percentage, maybe 80% on average, to capital in the property, plant and equipment account. As a result only overhead allowances are charged to the individual properties. These overhead allowances distort the costs of the properties and no one knows the real costs to administer and account for a property. These distortions occur in two primary ways. Operators of properties are incurring all of the overhead on behalf of the non-operators who only pay their share of the allowances. And natural gas may be 5 - 6 times as difficult to administer and account for than oil.

Overhead allowance enable the properties to show a relatively equal amount of overhead being incurred at each property by each producer. The facts however as to how much overhead is incurred at the property are unknown and under the current systems unknowable. These overhead allowances overstate the profitability of the property and do not recognize the actual costs of operations. The actual costs of overhead are capitalized and appear immaterial, however, when determining what produces and what would be shut-in, the fudging of the numbers at this scale is unacceptable. It leads to the situation, somewhat like today, where every producer claims all their properties are profitable all the time. Hence the policies of capitalizing overhead and interest.

People, Ideas & Objects Preliminary Specification corrects these distortions by reallocating the administrative and accounting resources of the producers into service providers headed up by members of our user community. The service provider will focus on one process and have the entire oil and gas industry as their client base. Using specialization and the division of labor, automation, innovation based on administrative and accounting expertise and having the computers work for us as their competitive advantages. Then if the property produces the service providers will receive that data through our task and transfer network. Complete the work that is needed for that property and then generate an invoice for the services that were provided to the individual Joint Operating Committee. If the property doesn’t produce then no data will be sent through the task and transfer network and as a result no work will be conducted by the service providers and no invoices will be generated. Creating the null operation for shut-in properties. It will be in this way too, that the producers will be able to focus on their unique competitive advantages of their land and asset base, and their earth science and engineering capabilities.

By implementing the Preliminary Specifications decentralized production models price maker strategy across the industry. We eliminate the overproduction that is created through the need to ensure that all of the overhead is covered. The Preliminary Specification converts the producers fixed overhead into the industries variable overhead based on production. And by doing so the producers will no longer have their unprofitable properties dilute their profitable properties. Save their reserves for the time when they can be produced profitably and ensure that they do not have to carry the additional costs of successive years losses to be earned in subsequent years. And the commodity markets will find their marginal price when the unprofitable production is removed from the commodity markets. This is how businesses operate. You don’t see GM overproducing continually. When demand is expected to decrease, they scale back production before their inventories bloat. It is constant throughout business and is not collusion. Oil and gas producers have used this lame excuse long enough, it's time to operate the oil and gas industry as a business and not as the bureaucrats piggy bank. OPEC has taught them a lesson about price maker, it's time for the industry to implement it.

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. 

It Has to be the Users

Since the time we published the Preliminary Specification in December 2013. People, Ideas & Objects have focused on the development of our user community. They are our customers as they’re the ones who will be using the software through their service provider organizations. They will be the ones that are defining and developing the solutions that they need to conduct the administrative and accounting functions for the oil and gas industry. Providing them with the most profitable means of oil and gas operations.

The value of the Preliminary Specification is not just the idea of using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable producer. People, Ideas & Objects subsequently completed ten years of research into what the industry and producer would look like if we adopted the Joint Operating Committee. The outcome of that research is codified in the Preliminary Specification. Therefore user community members are not only getting the benefit of the idea of using the Joint Operating Committee but also the research that went into ensuring the idea was functional, fully tested and usable. Building from the foundation of this idea and research will be the work of the user community that I am expecting will begin sometime in 2018.

It is our user community vision that has control over the Intellectual Property and the derivative works that they prepare. At no time will People, Ideas & Objects developers look to, or take direction from anyone other than the user community. They’re our sole provider of understanding and direction with respect to the applications that we build. Producers will engage with the user community in order to have their issues and opportunities dealt with and developed. It is these two critical components that make up our user community vision. The user community controls the Intellectual Property that make up the applications and People, Ideas & Objects will only look to the user community for any developments. It is in this way that the user community has the power and authority to make the changes in the industry that are, and will be necessary.

What we can not have is the situation that the producers have created in the ERP space today. Where most of the time nothing happens in terms of developments of the software applications and the software vendors that do operate are being led by the small change that falls out of pockets of the producers. These software developers have become effectively blind sleeping walking agents of whomever will feed them. Bureaucrats have learned that software seals their fate and therefore any changes to something like the Preliminary Specification would render them redundant. The bureaucrats can no longer determine the method and means in which the software and developments are undertaken in oil and gas. If the Preliminary Specification has the value proposition we’ve discussed here today, what will it be in the future? How will that value proposition be generated and when? It will be the user community that determines where that additional value is available and generate it throughout the industry through changes in the software that they’ll develop. Which is what our user community vision enables, the power, authority and control to do so. Providing the oil and gas producer with the most profitable means of oil and gas operations is not a fixed destination. We will iterate on the software that we produce based on the ideas and thinking that the user community determines is the best direction of the oil and gas industry. This will be the key role of the user community. Continuous value added profitability for the oil and gas industry.

This is where People, Ideas & Objects Revenue Model comes in to play. The coin holders that we’ll be sourcing our budget from to build the Preliminary Specification will be earning their 33% share of the value proposition through their permission rights. These revenues will support the payment of a variety of costs, of which the cost of the software is one. Included in the cost of the software is the user community. People, Ideas & Objects as the licensee of the Intellectual Property will collect these funds and distribute the user communities share.

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. 

2018 Is Our Year

We have now reviewed the situation on the ground in the oil and gas industry. We can expect that nothing will be done about these issues as there is no pain or suffering being realized by the bureaucrats. I think everyone else on the North American continent can see things clearly and are wondering why nothing is being done. For me this time stands in stark contrast to the period when I was proposing we develop systems to address these issues and the oil prices were well over $100 and natural gas was north of $13. That is the time that the producers were laughing heartily at what was then being said. I see it as progress that they’re not laughing anymore. Late last year we moved along from ever expecting any action from the producers and proposed a plan that would see People, Ideas & Objects obtain funding and develop the Preliminary Specification. The full details of our plan, our argument regarding the industry and what we believe to be the best business opportunity are provided at those urls to this blog.

Our plan consists of a prosperous oil and gas industry. One in which we develop and implement the Preliminary Specification which provides the most profitable means of oil and gas operations. 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's not an honour and privilege to still have a job but a place where you can make a difference. I expect more from the industry by proposing our plan, and dare to ask, what’s their plan?

2018 stands in stark contrast to our history. People, Ideas & Objects, our user community and service providers have never been in the situation when oil prices have recovered somewhat and people know that the North American producer does not have the situation in hand. During upswings in the commodity prices people have had the tendency to forget about us and assume that things would be returning to normal. There is no normal anymore. All the excuses have been tried and none are being offered today. There are no plans in which to deal with the future of the oil and gas industry outside of People, Ideas & Objects, our user community and service providers Preliminary Specification. After almost a decade of decline in natural gas and enough years in the downturn of the oil business. People are ready for action and ready to commit to what it will take to make the changes spelled out in our plan. 2018 is the year in which we move forward with this software development.

This means the time for action for user community participation begins in 2018. Preparation of your application for submission some time this year would be the ideal timing. It is ideal in terms of the timing for the oil and gas industry. People, Ideas & Objects are user community based software developments. Nothing will be done without our user community in place driving our development. User community software developments are the only way to develop useable, quality software. Development of our user community will be the commencement of our development and anything done in this arena brings us closer to our release date. It is our priority, our focus and the impediment to our delivery. The sooner we are able to organize ourselves the quicker our software will be built. Review of the application process and our user community vision are the two places in which people interested in these developments should start.

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.