User Community Developments, Part XVIII

At one point early in our journey here we had developed a Technical Vision that set out how we thought that the Information Technologies were going to develop. The Technical Vision contained four features that would impact the way that we saw ERP systems being developed and used. The first was the use of object oriented programming and specifically the use of the Java Programming Language with its static capabilities. Second was the roll out of IPv6 which would expand the number of unique Internet addresses. The third component was what we called Asynchronous Process Management and the fourth was wireless communications. Many would see this today as the Internet of Things which is what we’ve begun to use in place of the Technical Vision.

The Internet of Things is the technology that is always just around the corner. And there is nothing to say that in ten years it will still be just around the corner. However, there is a major piece of the puzzle coming into play during the time period that the Preliminary Specification will be under development. One that will enable the Internet of Things to become real. (Crossing my fingers here.) If so then the dynamic that is the Internet of Things can be a key attribute of the Preliminary Specification, our user community and service providers offering. And the majority of the implementation of that offering would be through our user communities inclusion of the technologies within the Preliminary Specification as they build it, and the use and further iterative development of those technologies through their service provider offerings.

The technology that I anticipate will be the reason that the Internet of Things becomes real is the primary reason that everyone’s cellular phone bill is so high. That being the build out of the next generation of mobile phone service that’s in process in the U.S. and Canada. The expectation that these services will be provided some time in 2019 and 2020 is the projected time frame. The technology is labeled 5G and is substantially different than the phone service that your using today. The speed or bandwidth of the service is up to 20gb / second. A remarkable rate. But the real feature of the technology is that it’s not point to point, as I call it. Where your phone is communicating only with the tower that handles your signal. The 5G technology is able to communicate with anything and everything all the time. The ability therefore to interface with the persons phone next to you and communicate directly without having each to be routed through the entire global infrastructure. Therefore having sensors and controls on every aspect of the oil and gas infrastructure with the necessary secure and addressable communications will soon be a possibility.

How is this going to change ERP systems? How is this going to change the Preliminary Specification? How is this going to change the work that we do here at People, Ideas & Objects? And how is this going to change the role of the user community participant and their service provider organization? Well first of all there will be some extra data that we’ve not seen before. I think that’s a given. Here is where the value of the user community and service providers come into focus. I could sit here and come up with some good ideas of what the impact of 5G would be for the Preliminary Specification, and to the larger issue of the oil and gas industry. However, with 3,000 people in our user community who have been endowed with the capabilities and capacities, the power and authority to make the changes to the underlying software and services they use to manage their oil and gas producer clients, the sky's the limit in terms of what the possibilities would and could be.

A new module could be written to include the 5G technologies however, as with Artificial Intelligence, that would be very limiting. The inclusion of 5G and the adoption of the concept of the Internet of Things into the long list of competitive advantages of the user community and service providers is where this belongs. Giving them the understanding that they have the power and control to do what it is they want and need to be innovative and valuable for their producer clients.

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.

Third Friday

User Community Developments, Part XVII

We raised the point about Artificial Intelligence and how it was alleged to have provided the current producers with substantial gains in efficiencies. The possibilities that AI would be responsible for an increase of one million barrels per day and a reduction in the head count of 21% is well beyond what would be reasonable to assume the technology would or could be able to provide in the next decade or two. The Wall Street Journal doesn’t involve itself in the type of “fake news” that some outlets are involved in. Therefore someone had to be providing those reporters with this information and we can only assume that the bureaucrats are actively looking to enhance their “performance” reputation in the eyes of their investors. This may be the current excuse or reason that will become the go to standard excuse for them in the next few quarters.

Artificial Intelligence is a useful tool and one that will be used throughout the Preliminary Specification, our user community and service providers. We will not be writing a module within the specification that deals with AI’s features. We won’t be writing anything about AI into the Preliminary Specification. What AI will be in terms of the user community and service providers will be another key competitive advantage to be used to provide the oil and gas producers with the most profitable means of oil and gas operations. As will the People, Ideas & Objects developers. Where and how much of the technologies to use and apply in their day-to-day interactions with the producers will be based on the AI skills and capabilities that they the user community member and service provider are able to create. I would also expect that the way that AI is implemented within the service providers would be somewhat of a source of competitive differentiation throughout the service provider sub-industry that we are creating. Just as all their other competitive advantages would be.

In 20 years time we will have gained significant benefit from Artificial Intelligence in the oil and gas industry. What we have learned in the Preliminary Specification is that innovation doesn’t just appear out of thin air as the WSJ report intimates. The structure of the organizations and the processes that support the producer organizations have to be structured in a way to facilitate innovation. Only in that way will innovation be able to foster and grow. Apple is such an organization and there are many organizations that are not. I’m sure that many have tried to emulate the innovative capabilities of Apple in their own organizations. That’s not how it works, for more on how the oil and gas industry will become dynamic, innovative, accountable and profitable, the reader needs to study the Preliminary Specification.

There are two key things to remember at this point. The only manner in which value has ever been generated in the past two or three centuries is through the application of specialization and the division of labor. These are the key competitive advantages of the user community and service providers. It will be a long time before AI knocks these two off their value generating perch. The second thing to remember in this the 21st century is that software defines and supports the organization. Therefore if we want to make a change in the producer organization, based on your analysis of specialization and the division of labor, you will need to change the software that the organization uses first. And that demands that we first configure the industry and producer structures in such a manner as to facilitate these changes. Which is what the reorganization of the administrative and accounting resources of the producer firms into the user community and service providers will do. Making the effective changes to the software that they have the power to do so through the user community vision, and to make the changes to the processes that they manage on behalf of their clients the dynamic, innovative, accountable and profitable oil and gas industry.

Eventually, I don’t know when, the industry will depend on a high volume of ideas being generated throughout the oil and gas producers, service industry, user community and service providers. The volume of ideas today, although highly constrained by the bureaucracy, is still a quantum level higher than it was fifty years ago. Just as the number of ideas will need to be a quantum level higher in terms of volume and velocity in the near term. The distributed nature of the user community and service providers will facilitate the ability to generate the ideas and implement them within the software derived from the Preliminary Specification and follow through with the necessary organizational changes at their service provider organizations.

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.

User Community Developments, Part XVI

What the Preliminary Specification, our user community and service providers represent for the oil and gas industry is the capacity to change, the leadership in the administration, accounting and business model development and realization of the full value of our objective of providing the oil and gas producers with the most profitable means of oil and gas operations. It is through our value proposition that we are able to quantify and qualify the industry gains of using the software and services that we’ll provide. It’s not enough in the 21st century to own the oil and gas asset. Producers will also need to have access to our software and services that make their assets profitable. What we have seen is that the industries producers are incapable of generating a profit, they are incapable of generating cash! Without the Preliminary Specification, our user community and service providers the industry will fail. The investors and bankers who once believed the producers now see the future of the industry as bleak and are not actively participating in the decline that is underway.

When the user community and their associated service provider organizations are providing the oil and gas industry with the quantifiable increase in their revenues and profitability. Increases that they’re incapable of generating on their own. Increases that are being valued at $25.7 to $45.7 trillion over the next 25 years, only a fool would believe that the administrative and accounting provided by the service providers would use price as one of their key competitive advantages. Why would they? It is the same issue that we see the industry having towards People, Ideas & Objects development budget. The the high value of the amount of our budget, the payment of Intellectual Property royalties, and the expectation that we would earn substantial profits too! The issues that the producers take with our budget reflect to me that they really not interested in solving problems. Problems that even they can see are quantified in the trillions if only they had the means in which to implement the appropriate solution. They need to pay for that solution, and building that solution is the cost they’ll have to incur in order to earn back what they’ve lost, stem the tide of current losses and build for the future. Otherwise they’ll be headed out of business on the basis of how they’re operating today. It's not our businesses that needs to be corrected, we’re doing fine thanks.

The competitive advantages that the user community and service providers employ are comprehensive and consistent with what a 21st century firm needs to be providing their clients. We have talked about the long list of competitive advantages that they’ll have available to them in order to build value for their producer clients. These have included quality, specialization and the division of labor, innovation based on the administrative and accounting expertise, automation and having the computers work for us. A change from today where the computers have the people shuffling data between here and there. We will relegate the use of computers to what they do best, storage and processing. And the people will involve themselves in the leadership, problem solving, decision making, creative, collaboration, research, ideas, design, planning, thinking, negotiating, compromising, innovating and financing. To name just a few.

I read an article of great interest in the Wall Street Journal the other day. It was discussing the productivity of the oil and gas producers in the field as a result of their application of Artificial Intelligence, automation and other technologies. Suggesting that since the downfall in oil prices in 2014, oil production is much higher at 10.9 mmboe / day, yet oil and gas employment is down 21%. Doing much more with far less as a result of that automation and Artificial Intelligence has provided. Who would have thought, who would have believed? Well I certainly don’t. Deliverability has nothing to do with how many people are employed by the industry. That is not a direct correlation. The industry has not hired any of the people they laid off either. Remember they don’t have the cash. And to suggest that the result of this is that they’ve squeezed higher profits out of the oil is too far of a stretch for me. For your reading enjoyment I’ll provide the two paragraphs that I find the most comical. From WSJ.

Oil prices are back up to their highest levels in more than three years. U.S. production has topped record levels, hitting 10.9 million barrels a day in the last week of June, according to the U.S. Energy Information Administration, compared with its high of 9.6 million in 2015. But as of May, nationwide oil and gas employment is down 21% since 2014, according to state and federal data compiled by Karr Ingham, an economist for the Texas Alliance of Energy Producers, an industry group.

The energy sector had been shielded from pressure to innovate by high oil prices. When prices fell 75% over 20 months beginning in 2014, oil and gas companies were finally forced to modernize to squeeze out profits. Many found they could use new technologies to do the work better and cheaper, with fewer people. They have invested billions of dollars on what the industry dubs “digital oil fields,” embracing artificial intelligence, automation and other technologies.

As long as we know it has nothing to do with prolific nature of shale or the layoff's that occurred during this bureaucratic, disastrous downturn.

Since 2014, and even prior to that when it involved the natural gas business, producers have had nothing but excuses as to what will be the results of the never ending “current situation.” “We’re praying for a cold winter,” “it’s OPEC’s fault,”and “next quarter.” To be honest I’ve been laying in wait for the day when the producers attributed any alleged “increased performance” to the application of Artificial Intelligence or Machine Learning. I thought they would use it as an excuse, though in the form of “we’re going to apply Artificial Intelligence and Machine Learning to the business to gain improvements.” Not that here are the improvements we’ve attained by these technologies. This is very bold statement.

Since 2004 I have been asserting that the issues in the industry are serious and would cut to the core of the industries survivability. Which is exactly what has happened. Taking our breakthrough of using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. And expanding on that through ten years of research that introduced hundreds of concepts that are codified in the Preliminary Specification and related documents. These concepts have pushed the industry forward substantially in terms of identifying and resolving the issues that are prevalent in the industry today. As of today, they are not so much considered possibles as necessaries in order to put things back together again. The point I want to make is that at no time did I receive any support from the bureaucrats. On the contrary I was subject to constant abuse and on five different occasions other firms were hired to try and poach my Intellectual Property. None of these other firms were successful and all expressed disappointment that they were used by the oil and gas industry in the fashion that they were to violate others IP. These were substantial companies with premier reputations which included Cambridge Energy Research Associates, McKinsey & Company (twice), Ernst & Young, The Oxford Institute for Energy Studies. The ideas inherent in the Preliminary Specification have been fought over due to the effect they have in disinter-mediating the bureaucracy.

For those of you who are unaware what Artificial Intelligence is, it’s very much an extension of what engineering and financial modeling have become. Brute force computing of many different scenarios to determine which is the best solution. Artificial Intelligence takes this same approach and applies it to the conceptual level. Creating new concepts that build off what is known today. If I have had nothing but arguments, fights and difficulties in getting the concept of higher, material profitability across to the bureaucrats, what do you think they’ve determined from Artificial Intelligence that has enabled them to a) reduce the head count in the industry, and b) expand the profitability? And where is that profitability? Acceptance of ideas have been always difficult in oil and gas. Maybe some of the most recent stories regarding coiled tubing and Packers Plus would enlighten you on the decades long pursuit they needed before they were accepted in oil and gas. Bureaucrats will stoop to any level to make it sound like their on the job, meanwhile will stop at nothing to ensure that no concept is ever introduced. That they now claim to be benefiting materially from Artificial Intelligence is a certain type of misrepresentation. One I think they should be called upon. It’s all bunk as my grandmother used to say.

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.

User Community Developments, Part XV

With this post I continue to summarize the contents of our prior series. It has been a while since we posted anything regarding this series and instead of everyone rereading them it would be easier for me just to point out the topics discussed. Making changes to the industry accounting and administrative processes will be easier once the Preliminary Specification, our user community and service providers are in place. With each producer currently building their own accounting and administrative capabilities, capabilities that are replicated within each and every oil and gas producer, capabilities that are not shared or shareable. The industry in general has minimal to no capacity for change. Software that is used by the producers might be different from one producer to the other. Making changes in the software from one producer may not interest producers on other software systems with different vendors. Therefore the ability to make the changes, that would alleviate the difficulties that administrators and accountants face each day in the processes that they manage, remain unaddressed. No one has the power, the capability to make the changes, this has been learned over the past decades, and as a result no one even tries anymore. Who do you address your inquiries too? Where do you go to get things changed? In the environment where the Preliminary Specification, our user community and service providers exist the producers representatives will be able to call upon the user community member to have their needs addressed and the software changed.

If any producer is holding out that their administrative and accounting capabilities are one of their strategic competitive advantage it might be a good time to relieve yourself of that companies stock. What the Preliminary Specification, our user community and service providers are building are standardized, objective, accurate and timely process management software and services for accounting and administration in oil and gas. The user community members are the ones capable of making the changes to the software and processes that they manage. The suite of competitive advantages that they’ll provide are fundamentally different than just price and we’ve discussed those on many occasions. In future posts we will be adding to this list with a number of new competitive advantages that have developed recently.

As these accounting and administrative capabilities are part of the overhead costs of the producer firms the Preliminary Specification is shifting them to be the variable costs of the Joint Operating Committee. Variable based on production at that Joint Operating Committee. These overhead costs will also be part of the overall overhead costs that will be incurred in the current period. The Preliminary Specification eliminates the policy of capitalizing interest and overhead costs. The capitalization of overhead is a foolish policy that attempts to deceive investors into believing that producers are profitable. By incurring the overhead in the current period the financial resources incurred in providing these services will be returned to the producer almost immediately and therefore be available to fund the next months overhead costs. Assuming they are producing only profitable production. As it stands today producers expect that they can capitalize a large percentage of overhead costs and that the current and subsequent years worth of overhead will be financed by investors providing more cash to make up for the cash shortfall of the producers foolish overhead capitalization policies.

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.

User Community Developments, Part XIV

Last week we discussed at length many of the deficiencies that exist within the oil and gas industry. Offering many of the alternatives that we provide the oil and gas investor community to deal with the staid bureaucracy. The Preliminary Specification, our user community and service providers are designed to deal with these deficiencies and provide for the dynamic, innovative, accountable and profitable oil and gas producers. A substantial change from the “muddle along” strategy and “do nothing” operating producer that’s in place today. Natural gas has been depressed for over a decade. Oil is moving towards its fourth year considering that today’s commodity price, as we’ll learn in the producers second quarter reports, is inadequate to solve these issues and deficiencies. The investor strike continues with no sign that they’ll be changing their ways despite the desire of the producers for them to do so. I project the cash situation in the industry is getting hypercritical and will be detrimental to the operational capacities of the industry soon. As we documented last month the industry has lost the financial, political and operational control of the industry. There needs to be a concerted effort involved to return the industry into “real” profitability in order to fix what ails it. I only ask where is the motivation, the energy and drive to do so?

Back a few months ago we were diverted from our discussion of our user communities development. Today we are resuming that discussion and I hope that we’ll be able to finish it off before we’re distracted again. The only things I see in the future that might distract us would be the second quarter earnings season beginning in late July and finishing in mid August and a two week vacation. Therefore if we hurry we may get through it this time. I can’t express to you enough the level of commitment that People, Ideas & Objects has towards user community based systems developments. The alternative to these is in use today everywhere else in the industry and those systems are not solving the problems that are epidemic in the industry, are they. Why recreate that poor performance now? Well we won’t be and although our attention has been diverted, we do have 311 posts on this blog that have been tagged with the “user” tag reflecting the volume of discussion about our user community at this point. I enjoy taking the baseball bats and other weapons that are handy to me and giving my best to the bureaucrats. People might think this is counter productive in attempting to develop software for the producers. That may be the case however the issue falls with the bureaucrats and they are the ones that caused this with their own self serving actions. Our customers are not the producers. Our customers are the user community and to a lesser extent the oil and gas investor. These are the two groups that we cater to in terms of the work that we do. As our user community vision reflects we are deaf, dumb and blind to the oil and gas producers. We only deal with the user community in terms of what and how our software does what. And that will always be.

So before we get back to the discussion of the user community I’d like to review what was discussed in the prior thirteen instalments of this series. The overall objectives of the user community are very simple. They will become the state-of-the-art providers of leadership and capabilities in terms of oil and gas administration and accounting in North America. Now we face the hard work that is associated with that objective, and that of course would be building the user community. Something we have been hard at since the publication of the Preliminary Specification in December 2013. We are not just looking for quantity, we estimate that there will be a population of approximately 3,000 user community members and hence service providers. We are looking for the quality necessary to meet our objective and provide the oil and gas producers with the most profitable means of oil and gas operations. As the permanent replacement to the fixed costs of the producer based capabilities for administration and accounting with the variable costs of an industry based administrative and accounting capability based on the Preliminary Specification.

User community members will be granted licenses to manage a process in the software derived from the developments of the Preliminary Specification. This is a substantial business opportunity that we have estimated will have revenues in the range of $2 to $20 million / annum in each of the service providers. We have established a strong business model for both the user community participant who will generate part time revenues from their work with our developers as well as their service provider operation. The competitive advantages of these service providers will be comprehensive and diverse. It will not be on the basis of price however, the granting of a license to manage a process will provide the user community member with an exclusive right to manage that process. Their competitive advantages will include innovation based on the administrative or accounting expertise, quality, specialization and the division of labor and automation to name just the highlights.

The role that the user community members take in the industry is substantial. They will be the leaders of the industry in terms of administration, accounting and business model development. Through the user community vision they are in control of the Intellectual Property that makes up the Preliminary Specification and its derivative works. They will have the power and control to make the changes necessary to ensure that the oil and gas producers continue to attain the most profitable means of oil and gas operations. It is also the user community participants that the oil and gas producers will turn to exclusively to have their systems needs taken care of. User community members are not your grandfather's user community members. It is People, Ideas & Objects belief that Intellectual Property will be a critical element of a successful business strategy. The user community members use of the Preliminary Specification in the manner of the user communities vision provides them with the beginnings of a successful business strategy.

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.

Known Knowns

Whether or not the oil price goes up or down is unknown. There are a few things that we do know with absolute certainty. Even at today’s prices producers will not be reporting any real profits. Fake profits will continue to be reported but those are not fooling anyone anymore. As much financial damage that has been sustained by the producers since the financial crisis, no action has been taken to deal with any of the issues that are present within the business. Expectations that the investors will return, begging the forgiveness of the bureaucrats and to once again fund the bureaucrats addiction to spending is the overall belief. To expect change from the producers is culturally constrained and will not happen no matter how bad things become. This is also evidenced by a cheerful and supportive press that believes the producers story lines. But most of all, the fact that People, Ideas & Objects have been working to make the needed changes in the industry for as long as we have, and the problems have become so critical to the health of the industry and society in general, and still nothing is done, is all the proof that nothing will be done by these producer firms. Adequate cash flow is spun off from prior investments to keep the bureaucrats pockets lined and keep their show moving forward in their financial interests.

People, Ideas & Objects recommend the Rip and Replace scenario we detailed earlier this week. That provides the investors with the means to make the effective changes necessary to put the industry back on track and recapture the financial losses that have been squandered by the bureaucrats. An alternative is our default position that we’ve discussed here many times before. That is the Initial Coin Offering that we’re working on with an effective issuance date of September, 2019. That is the deadline that we’re working towards to raise the funds needed to begin the developments of the Preliminary Specification. Whom will participate in the ICO will be interesting. If we are unable to secure funding of our budget from industry or the oil and gas investors then we will be sourcing our funds from the ICO. We also have the option with the issue of the coins to raise money on a pay-as-you go basis. That option is not being offered outside of the coin offering. The ICO will have a vested interest in the completion of the software and will seek to ensure that all the necessary subsequent funds are provided in order to ensure that happens.

The vested interests that the coin holders have to ensure that the Preliminary Specification is built are the permission rights they gain by participating in the ICO. People, Ideas & Objects provide the most profitable means of oil and gas operations. We do this in a material way with the quantifiable aspect of our value proposition being in the range of $25.7 to $45.7 trillion over the next 25 years. The unquantifiable portion of our value proposition is the enhanced producer performance that will be as a result of our use of specialization and the division of labor to expand the deliverability of the industry from a more efficient resource base. Or, more revenues from fewer inputs. It is our value proposition that motivates the coin holders. They will be participating in one third of our value proposition that is attributable to the use of the Preliminary Specification. The question immediately is asked if the producers are not interested in our developments today, what makes me think that they’ll be interested at that point? Simple, the producers will be able to tell their investors that they’re not part of the industry that uses the Preliminary Specification and therefore don’t participate in any of the upside. I am not of the opinion that is an effective argument for the producers to be making to their investors. Particularly when participation in the Preliminary Specification, as a result of the coin holders funding the developments, would be provided to a producer for only the costs of usage.

There is a very fluid situation shaping up for People, Ideas & Objects in terms of the funding of our budget. At a minimum we will have our ICO done in September 2019 and proceed on that basis. We are not of the opinion, if it’s not too obvious, that the current producers have things addressed or under control. The second quarter of 2018 will be further evidence of the chronic financial disaster that they continue to pursue. Cash will have drained from the producers as fast as it has in any prior quarter. We are also not of the opinion that the current producers will ever, or could ever, make the changes to deal with their issues. This is a job for creative destruction. The objective will be to secure the volumes of unrecognized capital costs of prior production sitting in property, plant and equipment of the current producers. These amounts represent the value that has been lost by the investors and can be monetized through the implementation of the Preliminary Specifications decentralized production models price maker strategy. We will explore the various ways in which these can be secured. The key constraint in this monetization is the understanding that these values are in the hands of the oil and gas investors today through their ownership of the producers. The need to pay for them again would be redundant and foolish. Therefore the means in which we proceed is, as we’ve said, fluid with two key objectives of People, Ideas & Objects. Those being the funding of our developments of the Preliminary Specification and the maintaining of the ownership and monetization of the capital costs of prior production in the hands of the oil and gas investors, while the bureaucrats are forced into their early retirement.

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.

Doing Nothing is Working Well

What is the current financial condition of the North American based oil and gas industry? What is the extent of the damage it has sustained in this past decades downturn? Was there additional drainage of value realized before the current downturn as a result of the issues identified by People, Ideas & Objects? How will the industry remediate these difficulties and how will they approach the future? I am certain that these are the questions that are prevalent in the minds of the oil and gas investors and bankers. Where do we go from here? The status quo answer appears to be the continued building of the producers “balance sheet.” As if that is something worthwhile, we suggest profitability become the standard fare objective in the industry. Who generates any value from building “balance sheets?” In fact what bureaucrats are stating when they parrot this objective is that they’ll be resuming the spending like drunken sailors that brought us to this point.

Representing that their balance sheets are the real value of the enterprise is a distortion of where we are and how we got here. These bloated asset balances were derived from the chronic overspending in every category of the business. Even overhead such as the receptionists time, phone service and Post-It-Notes are represented in the capital asset balances of the producers “balance sheets.” Usually balance sheets represent the assets of the firm and are derived from shareholder investments, bank loans and the cumulative profitability of the firm. Oil and gas producers have never been profitable because they never accurately recognize the cost of capital in their calculations of earnings. Balance sheets only grow through chronic spending of all types. Therefore we can be assured that no profits will be available to build their balance sheets, and the investors and bankers have been on strike for the better part of three years. So ask them, where will the money come from? Bureaucrats will argue that these are historical accounting arguments that don’t consider the producers oil and gas reserves. To which I say if the oil and gas reserves are unable to be produced profitably, considering all of the costs on the basis of a reasonable and accurate accounting, then they’re truly worthless to anyone and everyone. To face this fact and admit that they’ve been involved in just an activity that has occupied their time these past four decades, just as they were occupied by their activities in daycare, is too much reality for them to process.

What is clearly not evident to the producers is no one is believing a word that they’re saying. The financial statements that they prepare are fairy tales that show profitability and the ever continuing demand for cash in order to produce. Just as all the financial statements have been for the past four decades. Show me a period of 20 months where the business of the oil and gas business performed better than it did in the past 20 months and I would be very surprised. Yet investors were rewarded with nothing, on average, as a result of no upward movement in the price of the stocks during that period. If bureaucrats think my tone has been harsh these past few years, if there is a downturn in the oil prices and further deterioration in the financial health of the business my “harshness” will be comparatively nothing. Walking around with their heads in the clouds mouthing words like building balance sheets in the face of the financial disaster that is the oil and gas industry, with so many vested interests sending them glaring messages of deep concern and demanding that action be taken. If this is the bureaucrats game plan then they’re riding the industry towards its destruction. That is the perception that I’m reading from outside of the industry. This perception has become the reality and has destroyed any faith the investment community had in the industry.

When tens of trillions of dollars have been invested in an industry and the sum total of that investment over the past decade has been a substantial drainage of cash then something has seriously gone wrong. Bureaucrats have managed to destroy the value that was given to them. The sum total of those tens of trillions of dollars that were invested are worthless when these “assets” demand cash to function. Which brings us to the logic behind the “muddle along” strategy and “do nothing” operating producer.” If they’ve messed up this bad the best thing for them to do is to do nothing, fill their pockets with what they can before they’re forced out or leave when things become untenable.

If we take the bureaucrats argument that ours is just historical accounting then I would ask what future do they propose? Where do we go from here, and more importantly, how do we get there? Sketching out their vision of industries capital demands for the globe are in the range of $20 to $40 trillion over the next 25 years excites the spendaholic in everyone in the industry. Then having representatives of the industry showing, as a result of that investment, the decline of societies use of oil and gas tailing off as a result of alternative energy sources in 2050 is highly motivating too. As we stated yesterday no one has made a penny on shale. It appears no one ever will either. Now it’s suggested that investors pony up an additional $20 to $40 trillion to wean society off of oil and gas in the next generation. Exciting. I think the problem might be that they forgot to say please.

There never has been a commitment to profitability in the industry. To be honest I don’t know what the game plan is. Growth through the further building of balance sheets doesn’t inspire me and I would suggest it doesn’t inspire anyone else. If the industry wants to move forward I would suggest that they gain that commitment to profitability. Make it that old time religion. The only way that I’m aware that they’d be able to do that would be for them to fund the development of the Preliminary Specification which provides the most profitable means of oil and gas operations. Always and everywhere. That as far as I’m concerned is my recommendation as there is no doubt in my mind that it’s also the least expensive and most credible alternative that the oil and gas industry has to choose from.

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.

A Rip and Replace Scenario

People, Ideas & Objects are pleased to be offering options to the oil and gas investment community in these difficult times. Do they choose to work with the current producers in order to realize the value that sits otherwise dormant as property, plant and equipment on the producers balance sheets? Or do they adopt the oil and gas bureaucrats position and perceive that these past investment losses are sunk costs too? This leaving the investors with the option to start fresh with the full forces of creative destruction to weed out the archaic and lethargic management structures present today. We discussed these alternatives in our blog posts in the last few days. I would argue that there are more alternatives that we provide the investors which are more or less based on the two choices noted above.

To walk away from the $1.6 trillion in value that is represented in the industries collective property, plant and equipment accounts would be a difficult decision to make. The future of the industry is never that certain that an accumulation of that amount of value would be available for someone to realize. This value would be realized by the processing of these costs, which are the unrecognized capital costs of past production, in the two and one half year period after the Preliminary Specification is operational. Without the current producers these values are not available as they can not be transferred out into new organizations. The historical costs of one producer are the historical costs of that producer. There maybe a market value of these amounts contained within property, plant and equipment, however it would be foolish for the investors to pay for what it is that they already own. It is this $1.6 trillion in previously unrecognized capital costs of past production that will justify the higher commodity prices as part of the actual costs of oil and gas exploration and production the consumer will need to pay. Without these accounts in hand it would be difficult to justify charging the consumer for these costs that were incurred in other, probable defunct and written off, oil and gas organizations. When we look at the $1.6 trillion in property, plant and equipment contained within the current producers we should see them as a store of value if they could be monetized through to the consumer.

Now that the bureaucrats have an idea on how to maintain their reign of terror for another decade, or will that be another decayed. We should see that the ability to exercise this value is dependent on two critical objectives. Control of the producer firm and the development of the Preliminary Specification in order to realize the inherent value that has been built up in property, plant and equipment. Or in other words implementation of the Preliminary Specifications decentralized production models price maker strategy. The question therefore becomes what value do our good friends the bureaucrats provide? And secondly, how could the production profile of the producer firms be maintained during these proposed radical changes? Or, are these even issues in the pursuit of this value?

The Preliminary Specification will be providing those investors with the means in which to manage the industry. From an administrative and accounting resource point of view our user community members will be establishing service providers. They will be taking the producers administrative and accounting resources, which are resident in the producers today, and making them variable, industry based, administrative and accounting resources through their own service provider organizations. By doing so we are moving the fixed overhead of the producers to become the variable overhead of the industry. Variable based on production at the Joint Operating Committee. The service providers will be offering a standards based, objective and quality offering to all producers, large and small in the industry. The need to recreate the individual producers competitive advantages of the earth science and engineering resources, and the land and asset base would be the requirement of whatever new management the investors were able to replace the staid bureaucrats with. These resources that form the competitive advantages are in place and would require reorganization in order to optimize the performance of the producer.

Funding for the development of the Preliminary Specification is the first requirement of this “Rip and Replace” scenario. For our funding we suggest the ICO that we have proposed, and if necessary will be proceeding with independently in September 2019. Although this methodology will increase the costs of energy to the consumers, these incremental costs are as a result of the Permission Rights that are granted to the coin holders. These Permission Rights are the exclusive right of the coin holders to access the Preliminary Specification. These coin holders Permission Rights are then accessed by the producers through the fees they pay for their processing on the software and services that are derivative of the Preliminary Specification. If the oil and gas investor participated in our ICO then they would earn the fees that are provided by their ownership of these Permission Rights.

It is this transition that we see as the most effective. The most valuable to the oil and gas investor as it captures all of the past value that has been lost by the bureaucrats and enables investors to ensure that they only produce the most profitable means of oil and gas operations, once the Preliminary Specification is operational. The bureaucrats may be getting the short end of the stick for the first time, but we believe they may be in advanced stages of planning their exit anyways. Their inability to address these issues and hold together a sinking ship is “stressful” on them and they may not have the need for any further income. Therefore they may be as we speak, self-selecting in terms of their roles in the organizations. Making this scenario a much needed plan of how to deal with the fall out.

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.

Contrasting Strategies

Politicians are pleased with the deliverability out of the oil and gas industry. Providing them with the ability to state the success of their policies. Drilling wells has always been what the producers do. They’ve perfected it maybe. There is more to an oil and gas producer than just drilling wells however. It has to be done in a competitive environment and that demands that producers produce profits. Otherwise it’s destructive and consumes people times in activities for the sake of activities. Wastes valuable resources such as the oil and gas reserves when they are produced without any value gained through that production. And lets not forget this current downturn, which is inevitable when an industry doesn’t earn any money, the societal impact to all the people that are associated with the industry and are taking a financial hit themselves personally. What we should really do then is include the politicians with the bureaucrats as being the benefactors of the oil and gas industries activities. Outside of that I’m not seeing anyone else. We could maybe include the consumer but the amount they’ll pay for their gas today vs. what they’ll pay when the Preliminary Specifications decentralized production models price maker strategy is effective will be marginal. From CNN Money.

The average driver buys about 11 gallons of gas a week, which means they'll spend $1,400 at the pump this year, down from $1,950 in 2014. The most expensive year for drivers was 2012, when they shelled out $2,100. The overall economic impact is big, giving consumers about $130 billion more to spend.

Median household income rose to $56,516 in 2015, up 5.2% from a year earlier, according to data released by the U.S. Census Bureau Tuesday.

Therefore to fuel their driving, average drivers are spending approximately 2.4% of their income on gasoline. If through our price maker strategy we doubled the cost of gasoline for the 2.5 years that are necessary to retire the current balances of property, plant and equipment then the cost to the consumer would total 5%. Then after that prices would decline somewhat and be adequate to cover the current exploration and production costs based on a reasonable and accurate accounting. This also involves providing the oil and gas producers with the most profitable means of oil and gas operations. This is the vision of the Preliminary Specification. To cease the consumers discount that has been financed through continual investments by investors and bankers to make up for and eliminate the chronic cash shortfall in oil and gas production. Our vision is not unreasonable as it assumes the end user will pay, and based on the average income of the consumer, 5% of their income is not material to their budget. The increase is temporary and returns the past subsidy the consumer realized in order that the investors are compensated for their efforts. As we are seeing without investors and bankers, society is not benefiting from the exploration and production of oil and gas.

Contrast our vision to the one that is proposed today by the oil and gas producers. The investors and bankers will continue to forfeit $20 to $40 trillion over the next 25 years in order to continue their subsidy of the consumer. But also wean the consumer off of oil and natural gas by 2050. I’m not sure but the producers may also be implying that their balance sheets will be built to monumental levels in 2050 and be rewarded, somehow, for their good work in doing so.

There is no understanding whatsoever that oil and gas exploration and production is a commercial operation. It’s an activity. One that will continue until 2050 as far as the bureaucrats are concerned. They’re just waiting for the investors to give up their strike and resume their annual stock offering participation. After all that is what investors do. There never has been any profits earned in the past four decades. Ever since the change in the late 1970’s to the SEC’s accounting, where property, plant and equipment only needs to be below the value realized of the commodity price times the known reserves, not one cent has been earned in the industry. Slowly what I witnessed was a cultural change from recording costs to recording anything and everything as an asset in property, plant and equipment. Interest paid on debt is not a cost its an asset. Overhead is not a cost its an asset. Royalties are not a cost their assets. Well the producers didn’t get away with that last one. The SEC are suing PennWest officers as we speak in court about the validity of that scam.

The issue for investors is a difficult one and in this post I’ve assumed that they’ve made the decision to work with the current producers. The reason they would do that is that the amount that currently sits on the producers balance sheets as property, plant and equipment is material at approximately $1.6 trillion. This represents their investment that hasn’t performed. It also represents the amount of the discount that has been provided to the consumers due to the fact that these “assets” were never recognized as costs. They are the capital costs of past production. Therefore recognizing them as costs when the Preliminary Specifications decentralized production models price maker strategy is effective will pass these costs on to the consumer when they are priced into the price maker strategy. Effectively returning the cash that is tied up in these “assets” back to the producer firm. Enabling them to fund their own future capital expenditures, declare dividends to their investors and pay down their bank debt. Doing all three of these activities is what a firm does and the oil and gas producers will be making profits and will be able to join the legion of commercial operations where the profits are distributed to investors, bankers and capital expenditures instead of choosing just one of those as they have since the late 1970’s.

The alternative strategy is to start over with new producers and allow the full forces of creative destruction to take effect. Wiping out the old to start anew would lose the amounts in property, plant and equipment as these dollars are not transferable out of the existing producer firms. Therefore these costs would be unable to be costed in the pricing calculations of what are needed to determine the oil and gas prices necessary for profitable operations.

It is People, Ideas & Objects opinion that the cumulative losses of the producers need to be accounted for. They are material and these losses, in our opinion, have attached themselves to the reserves of the properties costs. Bureaucrats currently think that the past is the past and there is no need to reflect on that in any manner. The materiality of these costs has created the current downturn and without an accounting for these costs then the bureaucrats are only seeking to be forgiven for their past sins while they expect to resume their circus for the next generation. We believe this is unnecessary. There is no requirement of the SEC’s that each producer value their property, plant and equipment at full value of their reserves times the price. It is an aberration that each producer attains that value each year and this has been assimilated as part of the culture. It is why the pursuit of “building balance sheets” is the only motivation that we hear. What the SEC have done is defined the outer limit. Not policy to do so. A competitive, commercially oriented oil and gas producer, in our opinion, would seek as a competitive advantage to maintain the lowest balance of property, plant and equipment as possible. Therefore increasing their working capital and short term assets.

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.