Our Oil and Gas White Paper, Part XXVII

The Preliminary Specifications assumption is that the industries interpretation that oil and gas commodities are subject to price taker characteristics is incorrect. This is evidenced recently through the actions of OPEC+ with their removal of less than 2% of the oil from the market on two separate occasions which has brought about at least a 32% increase in the global price of oil. There is also the example of the Alberta government's mandated production cuts that removed regional differentials on heavy oil that were in excess of 80% of the global price. This small production cut, less than 10% of the overall productive deliverability of the province, had a dramatic effect where the differentials were eliminated within one month of the implementation. These are markets that follow the characteristics of price makers, not price takers. To state that “markets will rebalance” or to continue to produce and increase production in a market of declining prices and profitability is not a business. It is foolish, irresponsible and reflects an uncaring attitude that is prevalent in today’s oil and gas producers. The Preliminary Specification is structured to implement the decentralized production model’s price maker strategy to rectify this behavior.

Secondly the concern that is expressed by producers is that if their products become too costly to the consumer, alternatives will become viable and replace the carbon industry. Therefore I guess it’s permissible to fleece the investors, have them pay for the capital costs and only charge the consumers for the operating costs of their energy consumption. For fear that the alternative energy boogeyman will otherwise deny them health and happiness. These masters of the universe who run the oil and gas companies are all powerful and can deem the configuration of the economy and its energy output in their own minds. Bureaucratic control is their forte and they will not bow to any challenge. Market economies provide choices to consumers. Alternative energy sources are not viable today, and as we will read later will never be viable. Consumers will choose to use less carbon based energy if they have to pay more for it. Consuming it more prudently is the choice they’ll have to make. Nonetheless at 23,200 man hours of equivalent labor in each barrel of oil we believe that the most powerful economy will be the largest consumer of energy. In whatever form the consumers choose.

With the inherent value contained within each barrel of oil. With the supply possibly limited to the next half dozen generations. Why would we ever produce any oil or gas that was unprofitable? What would be the purpose of doing so? Would we not just be robbing future generations of the resources they’ll need to expand their quality of life? On the one hand the costs of oil and gas exploration and production continue to escalate with each barrel of oil produced. This is due to the increased difficulty and science necessary to extract the resource. Therefore a more accurate accounting is necessary than what has been provided to the industry in the past decades. People, Ideas & Objects provides a more accurate accounting of the costs of exploration and production as part of the Preliminary Specification, our user community and their service provider operations. When only profitable production is produced it is implied that we are accurately capturing the costs and passing these costs on to the consumer. Profits and innovation will be used to ensure an abundant, affordable supply is provided for the long term. Conversely, consumers paying the full cost of their energy will ensure that they’ll choose the most efficient and effective use of the resource.

We see that the Democratic Parties indoctrination of the youth into the communist way of thinking is almost complete. The fear is that the world will meet with environmental Armageddon if we don’t stop burning carbon based energy sources. The bureaucrats within the oil and gas producers have bought into the party message too. They are more focused on their role in eliminating carbon then they are with their own business. In Canada we have the producers who need pipelines more desperately than sunshine; are mute, invisible and leaderless on the topic of pipelines. They’ve experienced hundreds of billions of dollars in revenue losses which they point out are the governments fault, the pipelines fault or soon to be Santa’s fault once again. If it’s not their responsibility to safeguard the upside of their revenue streams, then I would state that it’s difficult for me to understand how they can claim to be the responsible party for their existing revenues. Meanwhile they gladly cut another check to Greenpeace and all manner of environmental organizations so that those organizations can fund the next pipeline protest against what the producers need most. This is masters of the universe thinking once again. If they can save the planet as well as make alternative energy sources viable, all the time benefiting from the carbon economy then they’ll be seen as the hero’s that they know they are. We all understand that actions speak louder than words, and we have neither actions or words to indicate this thinking is not what they’re doing. These decisions are best left in the consumers hands. Let them make the choice in terms of their behaviors and their consumption. I would also challenge anyone to suggest that one individual has truly changed their energy consumption in any material way in the past twenty years as a result of the imminent, environmental Armageddon. Intuitively and deeply I don’t think people outside of the environmental echo chamber believe in any of it. They pick out the good ideas and use them, but just tolerate the noise otherwise. And as for the producers maybe they should get busy managing their business with the first step being to secure the upside of their revenue streams. This will require the Preliminary Specification however.

Producers have a job to do. None of which they are doing today. Providing affordable and profitable oil and gas across the North American continent has been compromised. Energy self sufficiency is a political objective that does not suit an industry that is in an advanced state of destruction and on life support. The introduction of shale reservoirs has accelerated the destruction over the past fifteen years. There is no net value reflected in the industry today. It demands cash in order to function, implying that it is worthless. The past 34 years has seen 5 years that would be classified as good years retrospectively. The oil and gas industries current destruction has extended to the service industry which is now affecting the tertiary industries and the broader economy in significant and detrimental ways. The responsibility for this societal damage has to be placed at the feet of the oil and gas bureaucrats. They, who piously bark out orders towards these “lesser” industries have done nothing to safeguard their revenue streams when they sell their products for less than half of what they’re worth. Something as price makers they have complete control over. They are deluded by myths that have no basis to be considered in the oil and gas business. Myths such as alternative energies as a competitive alternative. Yet the business principles that have been proven over the past several decades are not considered or implemented within the industry. They are all knowing and all powerful, yet haven’t a clue.

The investors and bankers have suspended all of their activity in the industry over the past three years. This has had no effect on the behaviors or actions of the producers. People, Ideas & Objects have been discussing these points on this blog since 2005 and have received no support from the producers whatsoever. On the contrary, we have received the full force of their negative attention. We have determined that the state of affairs in the industry are terminal. There is little that we can do to remediate the industry from the current financial catastrophe that exists. We suspect that given our best efforts the implementation of the Preliminary Specification would be a failure. And therefore we have chosen to use the toolset provided to us in the form of creative destruction, spontaneous order and Initial Coin Offerings. The production of this paper is the beginning of this renewal process.

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 American 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 Oil and Gas White Paper, Part XXVI

By way of two analogies we are able to capture the oil and gas accounting issues that have been in place now for four decades. We call these the donut shop analogy, and the second is the pizza shop analogy.

The donut shop analogy has a new operation opening in the local strip mall. The new owner recently retired from oil and gas and has brought the culture of that industry with him. When the doors are opened business is good and the operation is declared a success based on the financial statements that are produced. Understanding that only some of the territory that could be covered by the donut shop the owner purchases new donut making capacity that triples the output of the operation. He does this with investors money based on the strength of the financial statements he produced. The new donuts are made at double the throughput and at twice the pace of the previous capacity. Creating somewhat of an issue with surplus donuts. As business continues to expand the owner thinks this is a temporary situation that will remedy itself in time and he should let the market rebalance itself. Therefore these surplus donuts are stored in the parking lot. As a result of the changes to the operation the owner is very pleased with the performance of the donut shop as a result of the most recent financial statements. Clearly the operation continues to perform and has much more room to expand. Therefore he goes to the financial market once again to raise money to purchase more donut making capacity and also additional parking space to store the surplus donuts while he waits for the market to rebalance. Investors make their investments and the operation increases its capacity and begins to produce triple the number of donuts that it had just recently. Luckily the foresight of the owner had purchased the land for the extra donut storage.

Soon it’s realized that the operation is not generating the cash that a successful business would be expected to be producing. The banks are asked to provide some funding to help wait out the period of time while the market rebalances. Upon the bankers review they see some anomalies with the last financial statements that were produced. All the donuts that are stored in the parking lots are capitalized as goodwill in building the business. In addition all the labor, oil and flour are capitalized too, making for a very well capitalized operation. The only costs that are expensed are the utilities and the rent on the store. Something that the owner adamantly disagrees with as he feels they should be capitalized too.

Oil and gas bureaucrats find this analogy insulting, as they should. They feel that the oil and gas business is different and the amounts that are invested and capitalized are supported by the reserves that are discovered. Their understanding of accounting is that it should emulate the value that is being generated as a result of their activity. The activity of drilling and cementing casing are all intangible costs. They can not be retrieved just as the oil and flour is irretrievable at the donut operation. What they fail to understand is that accounting is about performance, not about assigning value to the organization. If it was about assigning value then the donut shop in its current configuration could eventually challenge Apple and Amazon as a trillion dollar company. Eventually they will spend that much just on land. Therefore since the end result of the oil and gas producers accounting emulates approximately the value of the firm, what’s the issue? The issue is that there’s no financial performance in terms of the money that has been invested. It has reported large profits but never earned them. Cash became an issue and the donut shop was closed as a result of being unable to pay its bills. Even though they were building their balance sheets!

We now turn to the second analogy that provides evidence that the valuation of the producer firm is supported by the market value of the properties. The other end of the strip mall has the pizza shop that has been in operation for a few years. It has successfully provided the owner with the opportunity to work sixteen hour days and feed his family a steady diet of pizza. Nonetheless for a variety of reasons he feels that now is the time to sell the operation and retire. What’s the value? There are the financial statements, however he does not believe they accurately reflect the market value of the operation. Therefore he lists the property on the following basis. Most of the money that he makes is in the sale and delivery of pizzas. Each pizza sold averages $2.00 profit. He also has 450,000 pizza boxes in storage. Therefore he lists the property at $900,000 which is for this example the present value of those earnings.

We have an example of a sale of an oil and gas producer and the financial statements that had been produced over the past number of decades. It is important to note that People, Ideas & Objects assertion is that the attempt of producers is to reflect the market value in the accounting reports. It is not about performance. Building balance sheets is the name of the game, where capitalizing most of the costs and recognizing very few of them is the art and science of oil and gas accounting. Therefore what we see in Anadarko’s financial statements is the net capital assets total $28 billion. Just $10 billion short of Occidentals offer. In terms of accounting that has to be considered fairly accurate accounting since they’re just about one quarter short of the actual offer. What this clearly represents is that Anadarko has operated on the basis of an attempt to emulate the market value of the assets. However, the equity of the company is only $8.9 billion of which $695 million are the retained earnings. Debt is $31.46 billion. Anadarko’s market cap is $36.84 billion closely emulating Occidentals offer. Therefore at the end of the day Occidental will have paid $68.3 billion dollars for assets that have produced a cumulative lifetime earnings of $695 million. Whereas these earnings were also based on the recognition that few actual costs were ever recognized, only capitalized, reflecting the bloating of the balance sheet and the bloating of earnings, sort of. This makes the pizza box analogy valid, the donut shop analogy is seen as valid when Anadarko had $6 billion in cash in the second quarter of 2017 and they now have a working capital deficiency of {$1.32} billion. The only thing I can say is that’s a lot of pizza boxes.

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 American 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.

Memorial Day

Our Oil and Gas White Paper, Part XXV

Abstract

People, Ideas & Objects Preliminary Specification is a twelve module ERP system specifically designed for the issues and opportunities that exist in today’s oil and gas marketplace. Built upon the Oracle ERP Cloud, it is a comprehensive offering that sees structural changes in the producer firms as well as the industry itself. The key organizational construct of the Preliminary Specification is the Joint Operating Committee. When we move the compliance and governance frameworks of the hierarchy into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee we achieve a speed, accountability and profitability within our producer firms. It is our competitive advantage that we provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations.

It is necessary that we place the North American oil and gas industry on a profitable footing in order that we can then begin the process of making North America energy independent. Continuing to expand North America’s production profile without setting a foundation of “real” profitability, without the support of the investors and bankers, will be a temporary and politically dangerous road to travel. Only an industry where all oil and gas that is produced profitably is sustainable for the mid to long term. Occasionally hitting the high watermark will not be satisfactory. We believe that the past four decades have seen the industries profitability overstated due to the SEC rulings in the late 1970’s. This ruling regarding the method in which capital assets are recorded by oil and gas producers has now distorted the culture of the industry away from commercial operations, to an industry who’s competitive advantage is spending money where the objective is to “build balance sheets,” mostly by spending money and capitalizing almost everything for decades at a time. Leaving the producers overall dismal revenues responsible for large reported profits due to the fact that few costs are attached to those revenues. This has been the case for most of the history of each of the producers. Now with bloated balance sheets, well beyond their revenue structures, we are seeing a transition taking place where the previously unrecognized capital costs of past production need to be recognized at a greater pace. Leaving the producers to account for the profitability that they reported in their earlier lives to be offset with today’s more mature assets creating large losses.

Shale has made a fundamental difference to the oil and gas industry. It is an endowment of untold riches that will be what is necessary to ensure energy independence in North America. Shale has been with us for a decade and a half in natural gas and less in oil. What we can say unequivocally about this time is that shale has not obtained commercial operations. Shale also appears to be unable to. It has been a financial disaster that has laid waste to any and all value that had been built within the industry. There is an insidious side to the over reporting of profits that is, or should be, known in most businesses. Profits attract investments. The higher the profits the greater investments it will attract. Investors have been attracted to the industry for many decades and the producers themselves participated in annual shareholder issuances to “build their balance sheets.” This overinvestment has led to an unconstrained, chronic and systemic overproduction that has been with the industry since the mid 1980’s. This overproduction continues today and has become uncontrolled. Investors have starved the producers of capital for at least three years creating a severe cash and working capital shortage. To the point where producers are only able to look to new production as their only source of new cash. We are in a true death spiral that will not stop until such time as the Preliminary Specification is implemented and the decentralized production models price maker strategy ensures that all production is produced profitably everywhere and always.

The Preliminary Specification demands change. After all, as you will see, we are not talking about minor changes to the floor plan for accounting. We are exercising wholesale changes to the oil and gas industry by adopting the Preliminary Specification, and fully utilizing the Joint Operating Committee. Change that is as significant as that which is represented by the changes in energy prices, the global energy demand structure and shale reserves.

It was during August of 2003 when I determined the Joint Operating Committee was the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. In May 2004 I published our Preliminary Research Report that verified that innovation was a quantifiable and replicable process. I then undertook the research necessary to determine what a producer and industry would need to look like and how it would function if the Joint Operating Committee was used to structure innovation in oil and gas. In December 2013 the final version of the Preliminary Specification was published and we have continued to build the organization necessary to provide for this solution. Noting that our user community is the primary focus of People, Ideas & Objects. Review of the 2.8 million words that have been published in this weblog will provide you with an understanding of our research. The 200,000 words contained within the Preliminary Specification provides a viable, workable business model for the oil and gas industry. What was relevant in the Preliminary Specification in 2013 are now the critical issues within the oil and gas industry. These are existential issues that have eroded the financial foundation of the producers to the point where cash and working capital are disappearing and creating a desperate need to act. Our solution is not what the bureaucrats suggest is necessary. Though it is true we are disintermediating them from the scene. Their issue now is that the only solution that exists in the market is the Preliminary Specification and any others haven’t even been conceived of yet. Indicating that it’ll be at least 2035 before any other possibilities are where People, Ideas & Objects are today.

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 American 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 Oil and Gas White Paper, Part XXIV

Preamble - Part II

As I indicated earlier in this white paper, the issue we are resolving comes down to essentially bad accounting that has influenced the culture of the industry since the late 1970’s when the SEC prescribed its full cost methodology for capital assets. The action that most producers now publicly promote is that they’re “building their balance sheets.” I am not familiar with this “business” concept and am unaware if you build a balance sheet with cement or wood, if it needs a basement or you can build it all above ground. It is “building balance sheets” and “balancing markets,” I would guess on the head of a pin, that are two of the many “business” concepts that do not exist anywhere else in the business world! “Building balance sheets” has morphed from a foolish idea, that no one in their right mind would adopt, to a culture of spending as the key competitive advantage (capital discipline) that oil and gas has become. Any attempt to differentiate the financial statements of any existing producers to determine which one is the superstar and which is run by the village idiot is something that I can not discern the difference. If all you do is spend investors money that will be replenished again next year because they can’t tell if your doing a good job either, all of this spending is capitalized as an asset in property, plant and equipment and depleted over the course of several decades. Any revenue earned as a result of this spending orgy will naturally be profitable as all the costs of the producers are capitalized. Yes, even the Post-it-Notes of the receptionist, their time and the phone service they use. Big balance sheets with big earnings. Leading to big investors thinking their making big profits only to find that commodity prices are somehow collapsing as a result of chronic overproduction as a result of overinvestment by investors fooled by specious accounting.

On the other hand we have the concerns of the consumer and the need to ensure that they’re being provided with the lowest costs of oil and gas for their consumption. This should not be as a result of the investors subsidy that has occurred over the past four decades. The gross amount of this consumer subsidy is the aggregate amount of property, plant and equipment that exists on all of the producers balance sheets today. We believe these amounts are best described as the unrecognized capital costs of past production. They are unrecognized capital costs and not assets. Consumers have paid for the operating costs and the investors have paid for the capital costs of all past production. The industry as a whole is now worthless as a result, as it consumes large volumes of cash in order to have it operate and function. Speaking of cash, since the investor strike three years ago the producers only source of cash is new production. They’ve extended accounts payable to 18 months and have done everything they could in an attempt to increase production. Now in addition to having little to no working capital they are experiencing severe cash issues as the business does not return adequate performance without annual shareholder infusions. The producers current approach to their situation is to wait out the disgruntled shareholders until they learn to see the value the producers have generated. Also known as the producers “muddle along and do nothing” strategy.

In order to obtain the value consumers are entitled to. Producers will need to adopt an innovative footing. We’ve learned that an innovative footing is not a happenstance occurrence and is well within the domain of what management can implement within their organizations. That is if their software also supports innovation which is what the Preliminary Specification was designed for and provides. People, Ideas & Objects also believe that it should be incumbent upon the current producers to adopt a policy that no production is produced unprofitably. How is it that we will justify the consumption of unprofitable oil and gas production to the future users of this resource?

We are hopeful that none of the producers are pursuing their competitive advantages of being the most efficient and effective administrative and accounting providers in the industry. The Preliminary Specification leaves that to the service providers and the producers would be hard pressed to compete with the structural advantages that we’ve built into those organizations. Earth science and engineering capabilities, and their land and asset base are the only competitive advantages that the producers need to concern themselves with. Throughout the Preliminary Specification we have included enhancements to the producers capacities and capabilities in terms of these competitive advantages. We have provided solutions to many of the issues that are plaguing that part of the business. Using specialization and the division of labor to resolve the looming shortage of geologists and engineers due to the current downturn affecting the intake of new graduates and pending retirements, the increasing demands of these resources in each incremental barrel of oil and gas produced, and the expansion of the underlying science demanding a scope and scale of internal operation that we believe will soon outstrip every producers commercial capacity to develop.

It is the price maker strategy of the Preliminary Specification that makes up the core of our value proposition. One that we’ve calculated in the range of $25.7 to $45.7 trillion over the next 25 years. Such is the state of affairs in the industry and the capacity to deal with these issues has been proven to be non-existent due to the conflict of interest that is raised between our solution and the current producer bureaucrats. The Preliminary Specification, like so many other applications in today’s business world, is disintermediating these bureaucrats and they are clinging to their last possible days before they can no longer justify remaining, even to themselves. Leaving the industry in desperate condition. We believe the prices for oil and gas commodities need to be in excess of 250% of what are being realized in the marketplace today in order to be truly profitable. Profitable on the basis of a reasonable accounting of capital, operations and overhead. It is a capital intensive industry and the capacity to avoid the recognition of the industries capital costs by these bureaucrats will ultimately end in some fashion. My point in all of this is that you can argue the validity of our value proposition, what is the producers existing plan to deal with their difficulties. In addition to the price maker strategy building value for our value proposition, we have the fact that the principles of specialization and the division of labor have provided incremental value in all industries since Adam Smith’s publication of the Wealth of Nations in 1776. These principles are used throughout the Preliminary Specification to aid in the performance trajectory of the producer and industry, and there are many more areas in which value is generated in comparison to the status quo.

It is on the basis of our value proposition, the scope and scale of the Preliminary Specification, its integrated and comprehensive nature that shifts the focus to the Joint Operating Committee that demands this approach, and the value that this Intellectual Property generates for the industry that we’ve submitted our budget to be raised by our Initial Coin Holders. Originally we believed the producers would be the source of this funding however their conflicts are far too serious for them to overcome. Therefore effective January 2019 we’ve determined that we’re seeking funding from the issuance of a coin or token based on blockchain technology, an Initial Coin Offering. This we believe will be completed mid way through the 2022 calendar year and are working to put together the necessary components to do so now. We do not believe the producers will do anything as they’ve displayed no initiative or desire other than to fill their own personal pockets full of cash. We have therefore determined, due to the advanced decline in the oil and gas industry, we are unable to assist those producers in reclaiming their future prosperity. We have always believed fundamentally in creative destruction and knew that that was the method that we would have to use. We are therefore setting out the rebuilding of the oil and gas industry in the vision of the Preliminary Specification, complete with our user community, their service provider organizations and our coin holders.

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 American 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 Oil and Gas White Paper, Part XXIII

Preamble - Part I

People, Ideas & Objects competitive advantage and value proposition is that we provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for the industry to obtain the objective of profitable energy independence on the North American continent. It’s not enough to own the oil and gas assets in the 21st century. It’s also necessary to have access to the software and services that make the oil and gas assets profitable. We do this by providing the Preliminary Specification, an oil and gas ERP software solution that supports a business model that defines the following characteristics.

Throughout the Preliminary Specification we have used specialization and the division of labor to create new organizational structures for producers, and an industry configuration that provides producers with the opportunity to change the direction of their performance trajectory. We have stripped down the producer firm to the C suite executives, the earth science and engineering resources, some land and legal support. The remaining administrative and accounting resources are reallocated to service providers that are affiliated with People, Ideas & Objects and provide the accounting and administrative services in combination with our software across the entire oil and gas industry as their client base. Focusing on one process, or part of one process, the service provider specializes in the processing of that information. Billing the individual Joint Operating Committees for the services that they render. This industry and producer configuration enables the producer firms to focus on their key competitive advantages of their earth science and engineering capabilities, and land and asset base. Whereas the service providers will be able to focus on their competitive advantages of their accounting or administrative skills, automation, specialization and the division of labor, problem solving, issue identification, leadership, creativity, collaboration, research, ideas, thinking, design, innovation, negotiation, compromise and planning to name just the highlights.

This revised industry configuration, in addition to recognizing and supporting the Joint Operating Committee as the key organizational structure of the dynamic, innovative, accountable and profitable oil and gas producer provides us with an opportunity to do many things differently. The most significant, at this time, is the implementation of the decentralized production model with its price maker strategy. Since all of the operational, and most of the overhead costs, will be shifted from the producer to the Joint Operating Committee we will be producing detailed, complete financial statements for each property. It is in this transition to the Joint Operating Committee that all of the producers costs become variable based on production. If the property is unprofitable then it can be shut-in and incur what we call a null operation, no profit but also no loss, and at which time the reserves will be saved for a time when the can be produced profitably, those reserves will not have to carry the incremental monthly losses as additional costs to be recovered in the future, the producer maximizes their profitability as their unprofitable properties will no longer be diluting their corporate profits and the commodity markets will find the marginal costs when the unprofitable production is removed from the commodity marketplace. Markets provide one thing and only one thing. That is the price of the oil and gas commodities in this case. If natural gas or oil prices are too low to make a profit than the logical, business and sensible thing to do is to not produce until such time as the price provides for profitable operations. That is how the producer will operate with the Preliminary Specifications decentralized production models price maker strategy. “This is collusion and the wrong approach” according to today’s producers who choose to produce, largely unprofitably, at 100% of their production profile everywhere and always. They do not accept this basic business understanding of how to run an organization. If making independent business decisions based on detailed, factual accounting that determines profitability is collusion then I suggest they hire Robert Mueller. We have based our understanding that oil and natural gas are price makers not price takers. Losing the once abundant investors money had become a right, a privilege and an honor for the producers bureaucrats and they will justify their operations of that with whatever logic, or illogic they can muster. Please review the Preamble, the Resource Marketplace module or Partnership Accounting module of the Preliminary Specification for further information on the price maker strategy.

This lighter, leaner configuration of an oil and gas producer provides for greater flexibility in terms of the operations that are undertaken. Specialization and the division of labor are the two primary sources of every increase in our standard of living and organizational performance. These two tools have stagnated in the past twenty years as a result of the role that software is now taking in society and our organizations. It has the effect of cementing the organization permanently to the software configuration and no changes can be made without the corresponding change in the software being made first. As a result of this we are experiencing no increased performance trajectory as a result of the lack of any specialization or division of labor. Other economic concepts such as creative destruction and spontaneous order have also been stifled as the ability to act outside of the defined software methodology is impossible. Therefore it is proposed by People, Ideas & Objects, and adopted within our Revenue Model, that we are change based software developers. We are compensated for the changes that are made in the software based on the desired changes of our user community who are empowered through our user community vision. It is in this way that the oil and gas industry acquires a software development capability that will enable the Preliminary Specification to accommodate any changes, approach any issues and opportunities as they arise and will never disable the dynamic nature of the industry for many decades again.

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 American 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 Oil and Gas White Paper, Part XXII

Blockchain

We were able to write our twelfth module into the Preliminary Specification in 2018. It is the first module that is technologically focused. All of the other modules, including the Security & Access Control are focused on the business of the oil and gas industry and producer, as viewed through the Joint Operating Committee. Therefore the Blockchain module provides the blockchain technology to all the other modules of the Preliminary Specification. Included within the Blockchain module itself there is detailed discussion of how each of the other modules is affected by this technology and how I expect it will be implemented. This will be in its initial implementation and it would be expected to become more robust as the years pass. I see blockchain as a must have Information Technology that will need to be the base of the ERP systems that industries will require. I also expect and anticipate throughout the development of the Preliminary Specification our user community will be able to define the use of the technology in a more effective and efficient way. This is due to the relatively “new” aspects of the technology and its current rapid developments and adoption.

In terms of understanding this new Information Technology Don Tapscott, who has been a leader in the field of businesses adoption of Information Technology. Has taken a leading role in the understanding and implementation of blockchain technology. He is a co-founder of the Blockchain Research Institute who’s participation includes most of the companies that are involved in business and Information Technology and has robust support from all industries. Here’s an introductory video that we used in the Preliminary Specifications Blockchain module.

The key takeaway from this video is the concept of a “shared network state.” Which accurately describes the perspective and point of view that People, Ideas & Objects have created with the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas industry and producer. As a result everything within the industry becomes a shared network state based on the glue that holds it all together, the Preliminary Specification. The producers themselves are stripped down versions of what they are today. Their earth science and engineering capabilities, and land and asset base are highlighted and focused upon as their key competitive advantages. Their working interests in the Joint Operating Committees are supported through the service industry through our three marketplace modules and have a far more involved and appropriate relationship with the producers and Joint Operating Committees. Bringing the service industry in as partners in terms of the development of how the field operations will develop from here. The administrative and accounting resources are reallocated to service providers that are established by the People, Ideas & Objects user community members, who have the power and control over how the Preliminary Specification software is developed, and are therefore also involved in the day-to-day of the service providers who provide our software and their services to the producers and Joint Operating Committees. Trust, transactions, agreements, vision and direction are understood and implemented throughout this “shared network state” and the industry is therefore able to move forward into what is unquestionably the most difficult future in a dynamic, innovative, accountable and profitable manner.

What we are finding is that the People, Ideas & Objects approach to the oil and gas marketplace is becoming the more common sense approach as each day passes. Our approach being that we provide the software and indirectly the administrative and accounting services to the entire industry with one solution. Our approach was to mitigate the software development costs that are incurred today by each and every producer to conduct the same accounting and administrative tasks as the producer across the street. These costs being replicated across the industry to develop the same capabilities at each and every producer. Costs and capabilities that are not shared and are unshareable. These software development costs, in addition to the overhead incurred in accounting and administration, are a major detriment to the industries ability to be profitable and maintain their costs.

The difficulties that the Information Technologies and their infrastructures are presenting are new challenges that each producer has to face. There are now business challenges, that the Preliminary Specification addresses, that are also presenting issues where the administrative, accounting and Information Technology costs are escalating further for each and every producer. Don Tapscott calls the “shared network state,” which is appropriate, that a producer as an island unto itself is no longer functional in a world where the future oil and gas industry needs to be. We had always argued that the costs of the Preliminary Specification would be lower than what the industry would incur collectively as individual producers. What we have to undertake from an industry point of view will increase our costs, however the base functionality of our applications would need to be put together and maintained by each and every producer. The push back from industry on our thinking here has been that the scope and scale was to large to be successful. If that were the case, then how do they propose to build the same functionality within their organization with the budgets that a profitable producer can allocate? Administration, accounting and Information Technology may be claimed to be a competitive advantage of a few producers, but it shouldn’t.

Once again we are able to turn to our key Information Technology provider, Oracle Corporation. Their involvement in blockchain at this time is substantial. Providing the Oracle Blockchain Platform and Oracle Blockchain Applications. These are added to the many applications of Oracles that are detailed throughout the Preliminary Specification modules which include the Oracle Database, Java, Oracle Fusion Middleware and Oracle Fusion Applications.

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 American 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

Our Oil and Gas White Paper, Part XXI

Compliance & Governance

Compliance & Governance, the module everyone loves to hate. It is my hypothesis that it’s here, at compliance and governance, that everything went wrong. What I mean by that is in the 1960’s when the first computers were being introduced into oil and gas companies. The question was asked what will we do with them. And of course the answer was accounting. Then as they became ever more powerful and more capable they began to add more tasks to their duties and added the natural follow on concerns of tax, royalty and compliance. Soon the culture became focused on those “compliance” requirements of the “firm” and the Joint Operating Committee became something that was used over there. Soon after this engineers and geologists began speaking a different language to the “business” types. Divisions grew and the business of the business was focused on the corporation and its need to file the appropriate paperwork to the appropriate agency in the appropriate time frame on the appropriate colored form.

Anyway, the real business of the business, the Joint Operating Committee somehow survived and if we align its legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks to the compliance and governance frameworks of the hierarchy everyone can start speaking the same language as the engineers and geologists and start to get some real business done. And as People, Ideas & Objects research has shown this would provide the oil and gas producer with greater speed, innovation, accountability and profitability.

Compliance & Governance is the eleventh module in our twelve module Preliminary Specification. The question that should be asked is, how are we going to ensure compliance to all the regulations for all the module specifications that we’ve discussed so far? And I would assert that is why these are user based developments. But seriously, one thing governments seem to be fond of today is regulations on oil and gas companies. With Information Technology enabling various governments to issue technical business rules, technical specifications, XBRL syntax’s and other technological frameworks for these regulations. The ability to write these “frameworks” only seems to have encouraged them to write even more regulations. The larger point is that these frameworks do provide software developers with distinct advantages in enabling the regulations within the software.

The People, Ideas & Objects applications determination of scope will include which regulations it will need to be in compliance. With so many jurisdictions requiring compliance, each transaction may need to be assured to be in compliance with multiple jurisdictions. Add to that the transaction may be generated through a Joint Operating Committee owned by a variety of producers. And those producers may be composed of an international background and the Compliance & Governance module takes on an enhanced importance.

From the point of view of each producer maintaining their own database and applications for all of the compliance frameworks that they need to be concerned with can be a difficult task. The number of people that are needed just to keep a producers applications up to date is significant. However, People, Ideas & Objects, as one software developer acting on behalf of the industry as a whole, the job of building and maintaining the software that provides for the producers compliance requirements becomes much more specialized, automated and therefore manageable with the service providers. Then again if we were building these applications with the purpose of serving an industry we can access and use the division of labor and specialization to manage these tasks in a way that would significantly lower the costs, however, substantially increase the quality of the producers compliance.

I foresee just the royalty compliance requirements of these applications potentially including many dozens of different jurisdictions. To approach this from a software engineering point of view as a sole producer is not cost effective in the least. To consider these costs are replicated across each producer firm, then we begin to see the costs of compliance escalating to the levels that they are today. There is another way, and that is what is being proposed here in People, Ideas & Objects, along with the many other innovative ways we are proposing to deal with the issues of the oil and gas industry.

Here we have the beginnings of compliance and governance for the innovative oil and gas producer and Joint Operating Committee. What we need to do is to deal with the compliance of an innovative oil and gas producer with the tools of the 21st century. Those include automation, specialization and the division of labor. And in terms of governance, we can begin to provide the producer firm with the appropriate operational governance that is consistent with the demands of innovation. For we have learned that innovation does not arise from sloppy compliance and governance.

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 American 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.