These Are Not the Earnings We're Looking For, Part XIII
This week marks the 27th year that I’ve been working at developing these ERP systems for oil and gas. As far as I’m concerned I can do this forever. What producers should ask themselves is how much longer my productive career will be? Note, I had far more than a decade and a half of work and business experience in oil and gas before I started this. And if People, Ideas & Objects are not around to do this work, what fool would start their probable 30 year trek if what we’ve done here with the Preliminary Specification isn’t good enough. I personally would suggest too, that if this effort is deemed not good enough, that the ability of the industry to use it after I leave the stage is a no brainer. I didn’t do this work to watch someone else build it. Intellectual Property is the basis of this offering, if it’s deemed to be of no value to the industry then it’ll be of no value to the industry, ever. This is not to suggest that because we’ve held on for 27 years that we’re entitled. We’ve solved the current problems in the industry. The disintermediation the industry needs to go through which is being held up by the self serving bureaucrats. Who’ve destroyed the financial, operational and political foundations of the industry. I would also suggest that the big technology providers rolled out of here in the latter part of last century in Oracle’s case, and in 2005 for IBM’s. In both instances the inability for producers to sign on to any software developments was the issue for their exits. After they’ve seen a 27 year effort being refused they can only assume that it’s the same old, same old.
Speaking of self interested bureaucrats, if not for the statutory requirement to issue financial statements and face their shareholders at the annual general meeting once each year. Bureaucrats would live like kings. Reading the financial statements of the producers I have become concerned with what appears to be a trend that is well past the point of getting out of control. Many of the producers are reporting deductions to their revenues for “royalties.” Now everyone knows producers pay royalties in order to earn title to the energy they produce. This would go for Crown or Federal lands, freehold and Gross Overriding Royalties. It is my understanding, and I may need to be educated here, that these royalties are never reported by the producers as they never owned the product. Therefore, and most producers financial statements bear this out, revenues are reported net of any Crown, Federal, freehold or Gross Overriding Royalties. These royalties that are being reported are also in the range of 1 to 2.5 percent, far less than the 20, 25, or even 30% royalty rates assessed by some jurisdictions. Dare I ask is this the new form of bureaucratic compensation? Since the practice seems to be prevalent in Canada, home of the most creative accounting, that would seem to me to be the case.
According to World Oil producers capital structures have become more complex and difficult to deal with. Instead of just the “wildcatter” there are now Hedge Funds and distressed debt owners etc. Making the producers capital structures very difficult to do deals. Also suggesting that assets are not as good as they once were previously believed to be, other than the Permian. Hedge funds are rumoured to be investing heavily in the oil and gas commodities themselves. Oil specifically. Why not, if a producer only mimics the changes in the commodity price, why invest in the stock of the producers? Generating value outside of the rise in commodity prices, such as the Preliminary Specifications value proposition does, is not in the bureaucrats interest. That’s work!
Last year we were promoting that the Best Business Opportunity, Ever was an investment in a newly formed oil and gas company. Our thinking on this has changed in a material way. We can see by way of our estimate that the North American producers have what we believe to be $1.6 trillion in property, plant and equipment on their balance sheets. These “assets” as the bureaucrats would assert, are really the unrecognized capital costs of past production. They also represent the precise accounting of the amount of investment money that has been diverted from the investors to subsidize the consumers of energy. By not recognizing these capital costs of past production the consumers have never paid the full cost of a product that is a result of a capital intensive process. Therefore the need for the investors to earn their investment back in terms of free cash flow can only be achieved by recognizing the $1.6 trillion in property, plant and equipment present on existing producers balance sheets. If these producer firms ceased to operate those capital costs may be irretrievably lost and therefore would not be readily available as further costs in determining the pricing of oil and gas in the Preliminary Specifications decentralized production model’s price maker strategy. And therefore these capital costs would not be able to be retrieved from the consumers justifiably with the “new producers” under the assumption of the Best Business Opportunity, Ever. These “new producers” would appear disproportionately profitable, and the investors would not be able to retrieve their past investments in oil and gas, ever. Therefore the need to deal with the existing producers is a necessity for the investors in order to recover that $1.6 trillion in unrecognized capital costs of past production.
Maybe the investors will continue to treat the oil and gas industry as a sunk cost which was the assumption that underlies the Best Business Opportunity, Ever. The decision is for the investors to make. We are seeing a much higher level of activity in the annual general meetings with a number of the more distressed producers facing stiff opposition to their slate of board members and overall direction. Proxies are always a fun way to watch a boxing match where one fighter is paid to take the fall. Bureaucrats never lose. They control the John Q. Public shares and as a result are able to overwhelm the control block with votes from people who never read the financial statements, or vote. And then the circus roles up the tent for another year. What is needed is more active involvement by the boards of these firms and a firmer handle on the disaster that is the oil and gas industry. I’ve been saying that things are bad in the industry. And that the first quarter of 2018 would be no different. I was wrong. The first quarter is far worse than I believed was possible. Action is required in 2018 by funding the budget for the Preliminary Specification, or the ability to turn this around will be lost.
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 profitable 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.
Speaking of self interested bureaucrats, if not for the statutory requirement to issue financial statements and face their shareholders at the annual general meeting once each year. Bureaucrats would live like kings. Reading the financial statements of the producers I have become concerned with what appears to be a trend that is well past the point of getting out of control. Many of the producers are reporting deductions to their revenues for “royalties.” Now everyone knows producers pay royalties in order to earn title to the energy they produce. This would go for Crown or Federal lands, freehold and Gross Overriding Royalties. It is my understanding, and I may need to be educated here, that these royalties are never reported by the producers as they never owned the product. Therefore, and most producers financial statements bear this out, revenues are reported net of any Crown, Federal, freehold or Gross Overriding Royalties. These royalties that are being reported are also in the range of 1 to 2.5 percent, far less than the 20, 25, or even 30% royalty rates assessed by some jurisdictions. Dare I ask is this the new form of bureaucratic compensation? Since the practice seems to be prevalent in Canada, home of the most creative accounting, that would seem to me to be the case.
According to World Oil producers capital structures have become more complex and difficult to deal with. Instead of just the “wildcatter” there are now Hedge Funds and distressed debt owners etc. Making the producers capital structures very difficult to do deals. Also suggesting that assets are not as good as they once were previously believed to be, other than the Permian. Hedge funds are rumoured to be investing heavily in the oil and gas commodities themselves. Oil specifically. Why not, if a producer only mimics the changes in the commodity price, why invest in the stock of the producers? Generating value outside of the rise in commodity prices, such as the Preliminary Specifications value proposition does, is not in the bureaucrats interest. That’s work!
Last year we were promoting that the Best Business Opportunity, Ever was an investment in a newly formed oil and gas company. Our thinking on this has changed in a material way. We can see by way of our estimate that the North American producers have what we believe to be $1.6 trillion in property, plant and equipment on their balance sheets. These “assets” as the bureaucrats would assert, are really the unrecognized capital costs of past production. They also represent the precise accounting of the amount of investment money that has been diverted from the investors to subsidize the consumers of energy. By not recognizing these capital costs of past production the consumers have never paid the full cost of a product that is a result of a capital intensive process. Therefore the need for the investors to earn their investment back in terms of free cash flow can only be achieved by recognizing the $1.6 trillion in property, plant and equipment present on existing producers balance sheets. If these producer firms ceased to operate those capital costs may be irretrievably lost and therefore would not be readily available as further costs in determining the pricing of oil and gas in the Preliminary Specifications decentralized production model’s price maker strategy. And therefore these capital costs would not be able to be retrieved from the consumers justifiably with the “new producers” under the assumption of the Best Business Opportunity, Ever. These “new producers” would appear disproportionately profitable, and the investors would not be able to retrieve their past investments in oil and gas, ever. Therefore the need to deal with the existing producers is a necessity for the investors in order to recover that $1.6 trillion in unrecognized capital costs of past production.
Maybe the investors will continue to treat the oil and gas industry as a sunk cost which was the assumption that underlies the Best Business Opportunity, Ever. The decision is for the investors to make. We are seeing a much higher level of activity in the annual general meetings with a number of the more distressed producers facing stiff opposition to their slate of board members and overall direction. Proxies are always a fun way to watch a boxing match where one fighter is paid to take the fall. Bureaucrats never lose. They control the John Q. Public shares and as a result are able to overwhelm the control block with votes from people who never read the financial statements, or vote. And then the circus roles up the tent for another year. What is needed is more active involvement by the boards of these firms and a firmer handle on the disaster that is the oil and gas industry. I’ve been saying that things are bad in the industry. And that the first quarter of 2018 would be no different. I was wrong. The first quarter is far worse than I believed was possible. Action is required in 2018 by funding the budget for the Preliminary Specification, or the ability to turn this around will be lost.
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 profitable 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.
