Our 12th Module, Part X

The U.S. dollar is expected to be the monetary means in which the oil and gas producers are operated. Our use of blockchain within the Preliminary Specification is to secure transactions within the distributed ledger technologies that are available. Coins or tokens are not the purpose of implementing blockchain as a replacement to cash as this provides no value and there is no compelling reason to challenge the use of U.S. or Canadian currencies. Within the Financial Marketplace module the shift to the Joint Operating Committee benefits from the use of the blockchain technologies. Having an immutable ledger of the transactions within the Joint Operating Committee provides an assurance that only authorized transactions are completed. When there are what is expected to be 3,000 individual service providers providing the administrative and accounting services to each of the potential several hundred thousand Joint Operating Committees. Only those authorized public / private keys of the service providers and Joint Operating Committees will be used to write to the specific Preliminary Specifications blockchains. Eliminating the opportunity for other non authorized organizations from billing the Joint Operating Committees as part of a larger fraud.

The level of automation that is introduced throughout the Preliminary Specification is one of the many features of our product. People, Ideas & Objects software development capability, our user community and service providers seek to enhance automation, specialization, the division of labor, quality, innovation and having the computers working for us throughout the oil and gas, and service industries. Seeking to secure the Preliminary Specifications data within the blockchain itself enables us to ensure that the data that is captured is the precise data that is needed. Saving the time of redundant checking. Securing that data and reporting that data to the appropriate producers, Joint Operating Committees and users. Once this data is as it should be we can then automate the processes that are possible. Not only the automation that is mentioned in the Preliminary Specification, but that which will be developed and included by the user community during initial development and the subsequent iterations prepared by the user community and the application of our software development capability. If we have a reliance on the immutable and unimpeachable quality of the data and are secure in its origins and integrity then the automation can alleviate us humans from the menial tasks we are somewhat consumed by today of checking data, entering data and processing data. Activities that are best left to computers which would then provide us with the time to approach the higher level tasks of leadership, problem solving, decision making, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromising, innovating, sensing emotions and financing. A specialization and division of labor between people and computers for the 21st century.

The Financial Marketplace module will be where this vision hits the proverbial road of reality. That is the cash balance. Automation of the checking, verification, validation and audit processes on the data but also on the automation itself is necessary. This is where a level of sophistication and understanding of the entire Preliminary Specification is necessary in order to make the appropriate changes to the industry and producer structures so as to ensure that any leakage or opportunities for those without a kind heart are not provided with entrance for their fraudulent ways. In addition to the implementation of internal controls, our budget for the Preliminary Specification includes in the Compliance & Governance module a budget of $114 million for the Public Accounting firms to review these processes on behalf of the oil and gas industry. The purpose of these funds is to ensure compliance, review the code of the Preliminary Specification and provide an understanding that it does not violate any Generally Accepted Accounting Principles. It will also ensure that the producers annual audits that are undertaken by the Public Accountants have as there base this overall systems review as a foundation of their annual audit.

Speed and control are some of the objectives that are included in the Financial Marketplace module of the Preliminary Specification. The ability of a producer to turn capital over quicker is determined to be a competitive advantage over today’s business model. The ability for a producer to therefore be self funding would be realized if they were able to maintain a minimal or even zero balance of property, plant and equipment. The capacity to fund their capital projects must be done quicker and easier, and as a business that should be a given. Shifting the focus to the Joint Operating Committee where the operational decision making, financial and legal frameworks of the Committees nine frameworks exist will also speed up the process. Having the participants of each Joint Operating Committee come to a consensus on the issues and opportunities of the specific property provides a clearer strategy and focus without the constraints of the operator becoming the impediment to progress. At the same time, as the Financial Marketplace mentions, speed is nothing without control. It will be understood, I would assume, that if a property is not profitable, or a subsequent investment takes the property into unprofitable territory then it will be shut-in which will impose a new capital discipline within the producer. Also, with the Financial Marketplace modules ability to enable the banks to deal with only the Joint Operating Committee, the ability to leverage the returns of the producers interest in the property becomes a reality.

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.

Some Updates

If you haven’t been paying attention to the “crypto” market you may have been missing the developments in that area. The Wall Street Journal calls this market “frenzied” and what I’m seeing is the beginning of a wholesale shift away from corporate equities to crypto currencies or tokens as the replacement. This is just in the small business arena at this time, however, that may be as a result of the size of the crypto market’s capacity for funding. There are investment groups shifting all of their new business to crypto and away from equities. The advantage that I see is the tokens provide the liquidity that facilitate an exit for investors at anytime. And enable the innovators to ride out their visions to their ultimate destinations without having them cut short by selling the business when it realizes its initial successful run. Enhancing the speed and availability of capital to the highly innovative areas of the North American economy.

Therefore People, Ideas & Objects will be changing priorities to move our Initial Coin Offering (ICO) into our second priority behind our user communities development. This crypto marketplace is developing quickly with its capacity for financing growing at a remarkable rate. Our demands are too large at this time however there are new blockchains such as Cardano that are under development. With Cardano we can use its treasury function to get a start on development by issuing $100 million in tokens with the rest of our budget coming in as needed. The $100 million will be used for the initial eighteen months in preparation for full development. I’ve set our timing for raising these funds for October 2019. Establishing April 2021 when we would begin full development. If producers feel that our timelines are not in their best interests then they could mitigate this time by funding the Preliminary Specification by participating in our ICO. What I expect will happen throughout this period is the systemic overproduction of oil will collapse its price again and the bureaucrats flee like rats.

What we have to offer through our ICO is the exclusive rights to use the software built from the Preliminary Specification. With these exclusive rights held by our coin holders they are the people that the oil and gas producers will need to negotiate for their access to the People, Ideas & Objects software which includes the decentralized production models price maker strategy. We have proposed that the producers fee to the coin holder be one third of the net incremental value that the Preliminary Specification provides in comparison to the pricing model in use by the current producers. For the month of March 2018 our pricing for oil is $141.20, natural gas would therefore be $23.53 and the amount payable per boe to the coin holder would be $13.20 which is included in those quoted prices. I have calculated North American oil and gas production at 33.9 million boe / day. If producers are unhappy with those prices then they should have spent less. If they are unhappy with the value leaking to the coin holders they should think instead of their investors money they’re wasting today. These high oil and gas prices reflect the excessive buildup of property, plant and equipment that is stored on the producers balance sheets. Clearing these amounts is what these prices will achieve.

The Wall Street Journal also reported last week that producers spent $1.13 for every $1.00 they brought in during the first quarter. Clearly what the Wall Street Journal doesn’t understand is that if you never recognize the $0.80 in capital costs of that $1.13 then you’re profitable and your cash flow is high. If they think this spending is outsized they should have seen when producers had investors and bankers backing them. These bureaucrats spent like no one could ever have imagined. A minor imbalance of $0.13 in the first quarter of 2018 is not significant, what is difficult for the producers is that they now have no cash and no working capital and they can’t stop this systemic bleeding, particularly of cash that no one will give them anymore. Show me an investor or banker who will provide a company with cash to augment their working capital and I’ll show you a fool.

Producers are all giddy with themselves over the price of oil these days. Having also survived the annual general meetings in most instances, with some having challenges from their investors, they feel they have another year of partying and the good times are owed to them, once again. My advice would be to be careful. The media and analysts are certainly promoting the return of the good old days for oil and gas. If this should turn out to be another false dawn, as we’ve witnessed so many times in the past decade, what credibility will the bureaucrats have then. Giving the investors the stiff arm during this year’s AGM was successful from the bureaucrats point of view, ignoring their disgruntled shareholders at this point is not going to earn them any sympathy if their credibility plumbs the depths of negative territory such as those negative Canadian natural gas prices.

What we learned from the producers first quarter of 2018’s financial performance is that they’re damaged. Unable to deal with the legacy issues of overproduction of their commodities, for over a decade in natural gas, has left them with the financial resources that enable them to put up a good fight for about five minutes. The other legacy issue that has been discussed here at People, Ideas & Objects is of course bloated balance sheets. Although our arguments have been stated here many times. The issue appears to be one that is inert to the oil and gas bureaucrat in that it’s an “accounting issue” that doesn’t affect cash. Except in reality it’s the money that was raised from investors and bankers and the bureaucrats will never account for their former lavish spending. These bloated balances are a long term issue that does’t get and can’t be resolved through any actions of management. Bloated balance sheets are an albatross around their necks and they are incapable of addressing it as reporting massive, chronic losses might be considered contrary to their best interests. The unrecognized capital costs of past production will haunt these producers in good times and in bad for the next several decades. As much as it was easy to report good profitability and cash flow as a young producer, over decades the buildup of those capital costs became outsized to the performance of the firm. That is where we are today. We have crossed the threshold of reasonableness in terms of acceptable levels of property, plant and equipment. When our sample producers produce only 12% of their property, plant and equipment in revenues in the first quarter, we have some bloat. Depletion at 2.5%, and capital expenditures at 3% of property, plant and equipment for the first quarter shows the never ending desire of the bureaucrats to hide their past wild spending from everyone. This is now the issue that they can’t deal with and can’t account for. When their overproduction overwhelms the market again, what will they do?

The fact of the matter is turning your capital over every ten years was a good business model when the banks and investors provided you with all the cash you could ever want to backfill the deficiencies. A business would normally have to turn that capital over quickly in order to recapture that cash back in the form of higher cash flows. These cash flows would then be used to pay down debt, pay dividends and fund capital expenditures. And that’s not a menu of possibilities as it’s thought to be in oil and gas. A healthy business would have the cash flow necessary to do all three of the activities of paying debt, dividends and funding capital expenditures all the time. That oil and gas producers feel they have to trade one off for the other shows how limited their thinking is. Of course it would be impossible in today’s environment to generate the cash flows necessary to do all three. Producers used their investors dollars to essentially subsidize the consumer for their use of energy by having them pay for the capital costs. These capital costs sit, glowing on the balance sheets of the producers where the CEO can strut about thinking it’s worth something. The only thing that property, plant and equipment reflects today is the amount of unrecognized capital costs of past production and therefore the amount that producers have subsidized consumers for their energy. And how much of these costs needs to be captured in future prices in order to rehabilitate the industry.

As the Wall Street Journal notes, we see with today’s oil and gas prices they are woefully inadequate to cover the cost of operations and overhead of the oil and gas producers. The deferral of recognizing their capital costs continues, and increased in the first quarter of 2018, and they’re still spending more than they bring in, they’re desperately short of cash, yet wildly profitable, with great cash flow. Drilling is being conducted at a reasonable pace now and with shale overwhelming pipeline takeaway capacity pretty much everywhere, the constrained deliverability in those areas is reflected in the high differentials producers are realizing. When pipelines are built we can be assured that the constrained deliverability will be released to the larger market where it’s impact on commodity prices will certainly be reminiscent of the past. And we’ll hear the bureaucrats chime in once again “oh whoa is 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 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.

Victoria Day

Third Friday Off

Our 12th Module, Part IX

One of the advantages of using the blockchain is the immutable nature of the data contained within the blocks. The ability to change the data within the block is possible, however the checks and balances inherent in the technology make it nearly impossible to get away with it. Any changes to the data are written to subsequent blocks and the user can therefore see the result of the two blocks data which provide them with the information that they’re looking for. A simple description of this is featured in this YouTube video.

Using the Ethereum blockchain throughout the Preliminary Specification would be the preferred technology at this time. However, there is significant innovation being made in the various blockchain technologies being offered. For example one blockchain technology has now achieved the capability to process 2.5 million transactions per second. What People, Ideas & Objects and our user communities needs will be and the capabilities that will ultimately be provided by Oracle’s Cloud Blockchain offering will need to be determined by the user community after consideration of all of the industries needs and technical requirements.

As the Petroleum Lease Marketplace describes there are a number of data elements, mostly attributable to the Joint Operating Committee, that come into play as a result of this module. What is necessary is that the data that is captured by the Preliminary Specification in any of the modules must be unimpeachable in terms of its quality and integrity. Chasing data elements to ensure that they’re the correct data is a well respected time consumer. With blockchain the nature of the data within the Petroleum Lease Marketplace can achieve this unimpeachable level of integrity and save the industry time and effort in checking information that was either correct or should have been correct. The level of effort necessary to achieve this assurance on a consistent basis is the job of the user community. Doing the research, design and development once, then defining the process management in the software, and the data source that provides these levels of assurance can be done by the user community during our development. This level of examination and review is what is necessary for the oil and gas industry to move forward to the next level in terms of their systems quality.

Financial Marketplace

Within the Financial Marketplace we concern ourselves with something that is present in the other two marketplace modules. That concern is how the dynamic, innovative, accountable and profitable oil and gas producer obtains their capabilities. At the extreme, each producer can house all of their capabilities within their own organization and therefore mine for the steel to make their own drill bits. Or it can use the market to obtain the capabilities that it needs. Within the Preliminary Specification we move from the current producer configuration to one that is more dependent on the market to obtain its needs. This is most obvious in the shift of the administrative and accounting that will be conducted by the user community based service providers. Moving from the fixed overhead of the producer to become the variable overhead of the industry. The point in moving resources around is to focus on their key competitive advantages, enhancing the focus on the service industry is to expand the throughput of the industry by way of specialization and the division of labor. Enabling the producers themselves to focus on their key competitive advantages of their land and asset base, and their earth science and engineering capabilities.

We also implement the change of using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. Therefore from a financial point of view we are moving from a producer perspective to a Joint Operating Committee perspective in order to advance the speed, accountability and innovativeness of the industry. In the Financial Marketplace and other modules we are therefore looking to establish each Joint Operating Committee to be its own standalone organization. With each providing full financial statements of the property where these are consolidated upwards to the producers that are represented in the partnership. These Joint Operating Committees will have their own bank account, bank loan and financial resources that the banking community currently provide the producer firms. Then at the end of each month, in addition to the consolidation of the financial statements the profits, those being the real profits, can be distributed to the owners of the Joint Operating Committee.

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.

Our 12th Module, Part VIII

Innovation in oil and gas will not withstand decades in which coiled tubing developers are begging producers to try their product to see what the possibilities are. Or Packers Plus is abused and humiliated for their ball dropping developments. People, Ideas & Objects can speak of these things as we’re only the most recent example of the abuse that people have to withstand to deal with the oil and gas producers. Nothing in the industry would have happened in the shale industry if it weren’t for a number of individuals who brought those technologies to life in the service industry. These innovations taking decades for the producers to accept as common sense. Today with Canadian producers paying customers to take the natural gas off the producers hands, People, Ideas & Objects can assume that it’s only a short period of time from now in which the producers realize that producing only profitable production with our decentralized production model’s price maker strategy is considered common sense. Or alternatively this next quarter may be the Canadian natural gas producers most profitable yet!

A more cooperative and collaborative environment is created within the Resource Marketplace to ensure the innovations that the industry needs in the next few decades are brought to market in a timely manner. An environment where ideas are respected, supported and developed with the understanding that it is the producers who will benefit from them. What other purpose could there be for coiled tubing or ball dropping? The service industry is not the producers enemy and they are not leeches, greedy or lazy. What I’m most concerned with as a result of this downturn is that producers will begin to reap what they’ve sown.

It is therefore within this area of the Resource Marketplace module that blockchain is most valuable. Supporting the recording of transactions and reporting them through the distributed technologies is what the user community will implement. Specifics of what and how will hopefully be done through collaborations between our user community and the producers. Even if it is just our user community that determines the details of the Resource Marketplace and its use of blockchain, we’ll be more than satisfied with that. With the Resource Marketplace module there is the implementation of the Marketplace Interface which is shared with the Petroleum Lease Marketplace and Financial Marketplace modules. There is also from a transaction processing point of view the Accounting Voucher and Partnership Accounting modules. In addition the Resource Marketplace module feeds critical data and information into the Research & Capabilities, and therefore the Knowledge & Learning modules. It is the focal point, the point where much of the transaction history that will be reflected in the blockchain begins.

One of the markets that blockchain is uniquely qualified to address is the area of Intellectual Property. Particularly from the point of view of the smart contract technologies that are included in the Ethereum blockchain. As we noted the innovations and the IP of the oil and gas field operations mostly resides within the service industry. And those people or companies have ample protection provided by the three forms to secure Intellectual Property by way of copyright, patent and trademark protections. What I’m suggesting here in the Resource Marketplace module is that we have an element of the Marketplace Interface that is a registry of that Intellectual Property. This registry would be implemented within the blockchain and therefore be available for people to view and see when and where the ideas were created. In addition it could be used as a marketing tool by those who are behind the idea to recruit producer participation and active involvement in the funding and deployment of those IP based technologies. It would focus the innovations and ideas of the oil and gas industry and exclude any other noise of innovations or ideas from outside the oil and gas domains. Concentrating the focus of the service and oil and gas industries on these innovations and developments of the field technologies.

Petroleum Lease Marketplace

Don Tapscott defines blockchain technologies as the Internet of value. In terms of value land and mineral rights are the area where producers secure their ownership of oil and gas reserves. Having a registry of land titles in the blockchain is a logical direction for the industry to pursue. Most of these registries are managed by the federal, state or provincial governments who lease the mineral rights. Would they, or are they beginning to consider this as an area of development of their service? Nonetheless the user community should fully explore the opportunities and issues that are present in using the blockchain to manage the land titles for the industry. What would be needed to stimulate the governments to act and would that be within a time frame that is consistent with our initiative. Otherwise we will be reliant on developing the Petroleum Lease Marketplace on the basis of the Preliminary Specification as it stands today. That is not an issue as I see it as a necessary part of our system and would be an advancement in comparison to the current market offerings. Subsequent developments to incorporate the blockchain within the module would be enabled once the jurisdictions had enabled their registries to use the blockchain technology. Subsequent developments being one of the defined benefits of People, Ideas & Objects software development capability.

Petroleum Lease is a marketplace module implying that it is the place where buyers and sellers interact to transact for things of value. This marketplace would be populated by producers seeking to acquire and divest of oil and gas assets, make arrangements with new partners in Joint Operating Committees, post and bid on new leases and engage with the market as a whole. As with the Resource Marketplace module the Petroleum Lease Marketplace module is a source of transaction origination. Therefore the administrative and accounting service providers, producers legal representatives and others would also be engaged with the principles behind the transactions. Ensuring that the details of the transaction were understood and implemented on that basis. As has been mentioned in the Marketplace Interface both “tiles” and contextual menus would be available to support these transactions and their principle users. Embedding these within the blockchain, even if it may not initially involve the issuing jurisdictions registry, would still provide value with a history of the transaction and a level of integrity achieved over the history of the property.

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.

Our 12th Module, Part VII

Continuing with yesterday’s discussion of integration of the blockchain in the Security & Access Control module. Implementation of the blockchain technologies at this point open a number of possibilities as to how the technology will be implemented. There are a variety of possibilities and too many to go through now and document here. The need for our user community to fully identify and explore the issues and opportunities of each of these possibilities will be their responsibility during development. Producers needs in the area of confidentiality and their specific concerns regarding the cloud, encryption and security, as well as the many other areas, need to be addressed through their active involvement with the user community. Otherwise decisions will be made without producer involvement and there will be little in the way, after the fact, for them to make the changes that they desire. User community based systems are the only development methodology worth pursuing, the user community understands oil and gas, and can implement that understanding within the software on their own. Without producer involvement only producers will suffer. It is in their own best interests to participate by interacting with the user community.

The key area that producers will suffer is that their perception is in their belief that these developments are a one way street. That the users absorb what it is the producers want and deliver that to them. That was the theory in 1989. Today the producers need to keep on top of the changes that are being made in the software and how those developments impact their organization. Implementation of the software will have to be done with significant consideration to its impact by the producer firm. Changes will need to have been made during our development and most definitely during implementation. To sit out the first round of software developments with the user community may preclude the producers organization from ever benefiting from the software. As the ability for a producer to assimilate the first round of changes alone while iterations are being made upon those in the second round of developments may render the producer unable to keep up with the industries new standard of profitable organizational performance.

People, Ideas & Objects use the cloud implementation of Oracle to host the software that will be derivative of the Preliminary Specification. In Oracle's Database version 12 we adopted their new feature called MultiTenant. Although each “tenant” or producer in our case have a unique database instance, that is its data is separate and distinct from all other instances (producers) data. Each instance of the database is using the same database for its functionality. From a software development and deployment point of view this significantly reduces our costs and difficulties in deploying the Preliminary Specification as conceived. Each producer will have their own, for all intents and purposes, database and applications that are distinct and unique onto each and every other producer. In prior databases, and in other vendors currently, the need for cloud implementations of those databases to be either separate containers each or we would have had to use a producer ID in order to identify the data belonged to one producer in a pooled database of all of the other producers in the industry. Either of these last two options would have been either wholly unacceptable or costly from a licensing and support point of view.

When we look at the decentralized nature of the blockchain we see a further separation of the data and information of the producer from each of the other producers in the industry. Although we are unaware of the implementation within Oracle technologies at this time, please review the IDC whitepaper, the addition of decentralized ledger technology that is the blockchain will have the effect of enhancing this MultiTenant effect of the Oracle database. It is difficult, in my opinion, to justify the use of hardware and software for ERP purposes within the producer firm itself. The decentralized nature of the blockchain can be achieved through the cloud implementation just as easily. The feature that we want to maintain by using the cloud is the overall feature of the Security & Access Control of “the right people having the right access to the right information with the right authority at the right time and at the right place.” For these purposes the “right place” is the cloud and whatever the location may be of the user. It is my understanding that there is a feature of blockchain that is called Blockchain Access Control. It consists of public / private key encryption technology enabling access to the blockchains individual blocks. Eliminating the use of passwords and providing the level of security and overall access control that not only the producers data and information needs but also for that of the Joint Operating Committee.

Resource Marketplace

“A marketplace to support contracting from A to Z.” Pretty simple really. The issue that People, Ideas & Objects takes to the manner in which the industry is operated is that producers appear unaware and uncaring that they are the benefactors of being a primary industry. They feel the secondary industries that they rely upon to complete the work they need done are “greedy and lazy” and are leeches off of their revenue stream. It is simplistic to view the world from this perspective when you collect 100% of the cash from oil and gas commodity sales. It is however difficult to understand that those revenues were not earned 100% by the efforts of just the producers. Cutting the service industries “costs” during times of difficulties, extending the time in which accounts payable are paid to 6 and 18 months are easy to do when everyone does it. And everyone does it when no one is paying attention to the fact that overproduction of oil and gas commodities are chronic and systemic, yet unaddressed by an uncaring bureaucracy. The Resource Marketplace changes this. It also identifies the source of the innovations that the producers are first to claim as theirs in the press are really those of individuals who have worked hard for decades in the service industry. Who have had their Intellectual Property disrespected by the producers and who’ve been generally ignored until the producers so badly need the innovation from the service provider they finally begin to approach the situation responsibly.

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.

Our 12th Module, Part VI

Canadian natural gas producers are driving the industry forward with new innovations on the natural gas front. We can only assume they’ve been unhappy with low natural gas prices and therefore have implemented a policy of paying their customers to take their gas. That’s correct negative prices of natural gas are all the rage in the Canadian natural gas industry. After all, the time to have implemented the Preliminary Specifications decentralized production model’s price maker strategy and only produce profitable production was around 2009. We have to give them credit for this bold and determined move since then to fully explore the implications of chronic overproduction. Now we’ll only have to wait and determine if the same principles of chronic overproduction apply to the oil market.

We now shift back to our documentation of our Blockchain module. Before we get into that I want to clarify a seeming contradiction in last week’s commentary. That producers are focused on “where the money is” of finding and producing reserves which is consistent with their competitive advantages of their land and asset base, and their earth science and engineering capabilities. Therefore their current focus is appropriate. My criticism is that they don’t understand that they’re a primary industry and the secondary industries that support oil and gas, the service industry, pipelines and software etc. need to be a part of the business and the producers concern as well. Producers can’t just leave the outcome of these activities to fate. They need to be involved in order to make them happen and they need to be involved in ensuring these businesses are compensated appropriately. If investors see that the service industry, pipelines and software businesses are treated with disrespect and financially abused then they’ll be hesitant to get involved in those businesses, as is the case today. Leaving producers unable to get the job done. So yes they need to focus on the things that they’re able to be competitive in. And they need to understand that as a primary industry it’s not just the producers who’ve earned or are entitled to those oil and gas revenues.

Security & Access Control

We’ll now take a module by module step through each of the eleven modules of the Preliminary Specification and discuss the implementation of the Blockchain in each. The first module is the Preliminary Specifications Security & Access Control which seeks to ensure that “the right people have the right access to the right information with the right authority at the right time and at the right place.” Which is one of the more difficult aspects of the Preliminary Specification. This requirement is complicated by a number of unique elements that are introduced as a result of using the Joint Operating Committee and the expectation that producers, as well as service industries dependent on the producers, will be required to expand their throughput through enhanced specialization and division of labor. This as a result of the natural demand for more engineering and earth science effort in each incremental barrel of oil or gas produced. And the reduction in the industry wide availability of earth science and engineering resources as a result of the recent downturn and the anticipated retirement of large percentages of those professions. Triggering the need for a pooling of technical capabilities between each of the producers that are participants in the Joint Operating Committee and imposing a temporary compliance and governance structure over this pooling through the Preliminary Specifications Military Command & Control Metaphor, a feature of the Security & Access Control module.

The majority of the information that is contained within each producer firm regarding the Joint Operating Committee is the same. Each producer shares in all of the data and information that is pertinent to the Joint Operating Committee and will be party to the billings from the service providers for the administrative and accounting services that are rendered for that Joint Operating Committee. One clarifying aspect of using the Joint Operating Committee was the data and information that was created and used within that organizational construct was unique to the partnership. The sharing of this data within the Joint Operating Committee is standard fare in the industry and has always been. This contrasts to the unique and proprietary nature that is contained within the producer firms data and information. Segregating these two unique types of data from each other would and should be the first order of business during our developments. That way members of a Joint Operating Committee, of which a producer firm may have an interest in several thousand of, doesn’t leak any proprietary firm data.

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.

These Are Not the Earnings We're Looking For, Part XVII

Focusing on the earnings of the producers is not the only concern of People, Ideas & Objects. Ours is a more global perspective that includes the societal impact that oil and gas has. Starting with the consumer who realizes 5,000 man hours of labor with each and every barrel of oil that is consumed. Consideration of how and with what other energy source that could be replaced with should have everyone understand the real value of these resources that we consume. At the same time it is the largest and most powerful economy that consumes the most oil and gas. Using the mechanical leverage that is available to us through the use of oil and gas is the means in which we can advance our economy the furthest and the fastest. We owe it to our future to at least produce our energy profitably. Otherwise it would be wasted.

And the broader scale of our economies are dependent on a healthy and prosperous oil and gas industry as the primary industry that drives much of the activity that the industry itself depends upon. With over ten years of devastation in the natural gas marketplace. And more than three years in oil. We can measure the impact and number of losses outside of oil and gas that have been adversely affected by this downturn. The service industry has had it much worse. The people who have dedicated their careers to the producers are finding that their efforts are not as valuable as they thought they were when they line up in the unemployment lines with the construction laborers with only their high school education. In Alberta, partly due to mismanagement, the government has incurred a debt of $43 billion. Oil and gas royalties are a big part of their budget which has caused the deficit to form and expand. This in the land where savings in excess of $30 billion had been the norm. I can only assume that the situation is similar with other royalty regimes. And what about the cities and towns where all of these companies and people live and work. They’ve also felt the downturn with many businesses closing and sending the mood across the town’s and cities down too. Alberta is possibly unique in that we are a one industry province and Dallas, Houston and Oklahoma may not be as dependent on one industry to carry the freight for all concerned.

The question that people should be asking is why is this happening? Why is it necessary that investors pay for the capital costs of oil and gas on behalf of the energy consumers? If the consumers are generating real value from the consumption of their hydrocarbons, and the real cost of energy is incidental to its replacement, hire 5,000 people for an hour as a replacement to a barrel of oil to discover the difference. Why don’t they pay full value for that. And full value as we’ve calculated here at People, Ideas & Objects is $137 / barrel for 2017. This wouldn’t be a doubling of the consumers energy costs as most of their costs are taxes that are fixed in nature. Therefore doubling the cost of the feedstock would not have the effect of doubling the consumers energy price. Even if it did can we continue to function as an industry on the basis of finding new and naive investors that will volunteer their capital to subsidize energy consumers? The other alternative is we watch the industry atrophy to the point that it is now, and as we’ve noticed in the first quarter of 2018, begin to see it fall off the cliff where the operational and political declines are as dramatic and as devastating to all those concerned above, but also the consumer who can’t source their energy securely and reliably. Do we have to go to that level of destruction in order to prove the point that this situation is not working?

We can also assume that this has lost its lustre for our friends the bureaucrats. Instead of dining for hours for lunch their having to spend their time finding truck drivers to haul water in the Permian, which isn’t what they signed on for. The logistics of putting the people that are needed into place have now become complicated by the fact that the supplier can’t work for you because you haven’t paid him in 18 months and their starving. Or you haven’t paid them for 18 months and they refuse to work. Complicated by the fact that the cash resources that were used to overcome these kinds of troubles and get the job done is now empty and lining up everyone and everything is near impossible. I’m certain, it’s not that bad in industry today, but do we have to go there before anything changes? The only people that are financially satisfied in the industry are the bureaucrats who are running the show. Although they were challenged here and there at their annual meetings, those have always been useless venues to orchestrate change. And the bureaucrats are now entrenched for another year.

Bureaucrats will never care about these issues. As long as their making out like bandits that’s their only concern. As soon as things become untenable though, as they are now. They’ll hightail it to greener pastures in other industries or retirement as the wheels fall off. It’s up to us to provide the industry with an alternative. That is People, Ideas & Objects Preliminary Specification. That is the only way we’ll proceed as a healthy and prosperous industry.

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.

These Are Not the Earnings We're Looking For, Part XVI

We see with oil prices reaching $70, the past behaviors of the producers coming back into play. Also known as muscle memory, the downturn that they’ve experienced is over as far as their concerned and it’s time to drill some wells, because that’s where the money is. While they focus on expanding their reserve base that generates the revenues they earn as a primary industry. It will be somebody else’s responsibility to develop the service industry, the pipeline takeaway capacity, software and all the other needs of the oil and gas industry. Producers will pay for those services on a 6 to 18 month accounts payables basis, or when they should happen to feel like it. “That is the way the capital market system operates” they’ll say. “If you go after the reserves all these little nuisance parts of the business will work themselves out.” This is also known as the “muddle along” strategy and the “do nothing” operating procedure. And as I’ve said before in this never ending cycle of producer behavior, here we go again.

Just as the investors have learned in oil and gas, bureaucrats take care of bureaucrats. As I’ve documented many times before the expectation by the producers is that “someone” will fund the development of systems that they’ll eventually purchase. This was the game that was played in the late 1980 and early 1990’s. The problem came about when the system vendor, who survived off of the otherwise naive investors money during development. Couldn’t sell their systems for the appropriate price. The producers new the small size of the limited oil and gas market that uses ERP systems and as such squeezed the software vendor for all its worth. This is the primary reason that no software developments have been done. Investors realized there was nothing in it for them. And this same story can be heard across the landscape. Small service industry firms are never given the chance they would otherwise have had in any other industry. Producers only deal with the “big boys” who can provide them with the services they need. The Schlumberger and Halliburton’s of the world get bigger while the rest of the service industry atrophies. The point everyone should learn about the oil and gas or service industries is to never have an idea. 

Most people are beginning to fully appreciate the changes in society as a result of Information Technologies. The only businesses that will exist in the future will be software companies such as WalMart, Apple etc. In oil and gas with the Preliminary Specification it’s not enough to own the oil and gas assets anymore, you’ll also have to have access to the software that makes the oil and gas asset profitable. People, Ideas & Objects Preliminary Specification provides oil and gas producers with the most profitable means of oil and gas operations. Or in other words the way things are done today is about to end. Maybe not next Friday, but certainly soon. With the producers resurrecting their past behaviors due to the $70 oil we know we’re close to the top of the cycle. I would suggest that our collective future may begin to look a lot like the recent past, downward. The big difference this time is the producers are in desperate financial condition to be able to survive either a boom or a bust. They’ve damaged themselves so completely that they will need a decade of extremely good times just to rehabilitate themselves. If you can find the capital that can wait a decade to show any signs of life in the investment, oil and gas producers are in desperate need.

Most of the smart people in Information Technology have left oil and gas many years ago. They’re selling Apps on the App store for $2 to the 7 billion people on the planet. It’s an easy business in comparison and one that leaves only the crazies thinking they can bring the ERP systems to life in oil and gas. The point of this rambling dissertation is that dealing with the producers will be frustrating in trying to see outside their point of view. And if you should happen to capture one of them, their attention spans are as limited as the daily direction of the commodity price. What we can say is that we tried, once again, and once again proved that it was futile.

Not to contradict myself in the many ways that I am about to now. Our Initial Coin Offering is developing as to be expected. The token that we’ll be issuing will have the rights in which it will be able to process the oil and gas production through the People, Ideas & Objects Preliminary Specification. We have recommended that the price the producers would pay for this would be one third of the incremental value that is attributable to the use of our system and the result of the decentralized production models price maker strategy. For the one year period ending March 31, 2018, on a North American production basis, this amount would total after royalties and taxes at $112.594 billion. There have been two developments on our ICO. First, my assumption was that we would generate our full budget from this market at the beginning. A necessity when we were dealing with the mosquito like attention spans of the producers. However this is now deemed to be unnecessary. We could issue additional tokens on a pay as you go basis throughout the course of our development. The balance of the unissued coins would remain in my hands. Secondly the development of the Private Initial Coin Offering (PICO), using the SAFT project which provides a level of compliance and governance over the tokens. This will reduces our timeline down from a little less than two years to about 18 months.

It is frustrating and difficult to determine what the outcome of all of this will be. Attempting to work with the producers has been an exercise that has borne no fruit. As much as we all would like to see a healthy oil and gas, and service industry it is not going to happen under the current management. Our appeal to the investors over the past decade has been very lucrative. They see the world in the same way that we do. What the result of all of this will be can not be speculated upon. What we can do is our job by continuing to work on developing our user community as our first priority. Work on our PICO and the completion of all of the other initiatives that were involved in. Where and when this all comes together is one day less than it was yesterday.

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.