To: The Board of Directors, Our RFP Response (S&DOL), Part III

 It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil and gas has now been deemed a failure by our good friends the bureaucrats. They’re getting out, selling properties and writing down those assets that held such promise in all of those investment offerings. These Keystone Cops are on to the real thing now with clean energy and are making the transition with the revenues established by prior investors in an unauthorized fashion. Remember it’s cut and run. Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Granted it’s self serving as it involved developing the Preliminary Specification and demanded the bureaucrats conduct some serious effort, or work! After two years of this paper's publication; is it now acceptable to just walk away from the catastrophe they've created and venture off into territory that has proven never to be profitable? Or do they have a plan to make clean energy profitable? If so they should have submitted that in the business plan they needed to seek authorization for such a radical change in the underlying business. Why is it acceptable to let the bureaucrats saunter off now and forget about the failure they’ve created? Who will hold them responsible and accountable, it should be the boards of directors. And why is this method of failure the consistent behavior of these bureaucrats over the past four decades? Or am I mistaken about this and am unaware of some amendments to the Directors and Officers Insurance contracts? This behavior is unacceptable and reflects their moral and ethical depravity. And why would they do anything about this if they’re never held to account?

With this post we begin a series within a series where we’re describing the number of organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil and gas producers. These define the “what,” “how” and “why” of the Preliminary Specification. But most of all adopting a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

I have to admit I’m quite excited about this marketing phase People, Ideas & Objects are in now. I no longer have to concern myself with the bureaucrats and their activities, they’ve left a legacy they need to live with and I’m sure there will be more to talk about. I’ll find no argument anywhere that they’re the ones responsible for the industry wide damage that’s been done, no one is listening to them anymore and they’re probably on their way out anyways. The untenable nature of the producer firms is reflected in the downward trajectory of these organizations. The extent of the damage is so severe they are beyond remediation and the economic principles of creative destruction and disintermediation are fully in play. The situation on the ground is therefore ripe for a solution such as the Preliminary Specification, our user community and their service provider organizations. Marketing is a much more enjoyable situation for me as I do not need to be the grumpy guy in that far off distant corner of the Internet anymore. Our appeal to the directors of the producer corporation is simple. They decide which ERP software to implement within the organization. People, Ideas & Objects know that the directors are just as concerned with continental self-sufficient deliverability of profitable oil and gas operations and providing abundant, affordable energy to the consumers. People, Ideas & Objects assert, as in every business today, it’s not enough to just own the oil and gas asset anymore. It’s also necessary to have access to the ERP software that makes the oil and gas asset profitable. Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil and gas today and the systemic lack of profitability throughout the industry. It is what we refer to as a “modern day software bug.”

The creative destruction being undertaken provides opportunities for everyone, except the bureaucrats, and these opportunities would definitely include the directors. The new producers may be the best opportunity we’ve seen for a long time in the industry and what these companies could use more than anything is a steady hand to help navigate this road ahead. The advantages that People, Ideas & Objects Preliminary Specification brings for all producers is significant. Whether that is Exxon or the producer firm that was started at the breakfast table this morning. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil and gas economy, no matter their size. However, in the categories of the junior and startup oil and gas producers, the advantages we provide put their organizations in the driver's seat in terms of how they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under the bureaucrats' business model. This will begin being detailed in our next post. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We feel the overhead costs of the producers demand these be dealt with by making these organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed producer based capacity and capability, into a variable industry based capacity and capability, their variable behavior being based on a Joint Operating Committees ability to produce profitable production. Another reason for the high overhead costs of each producer is that all of their capacities and capabilities are replicated within each producer firm in an unshared and unshareable form. Today these accounting and administrative capabilities and capacities are purpose built within each producer organization to meet the demands of the various stakeholders and these overhead costs are the secondary cause to the lack of profitability throughout oil and gas. These costs do not form part of any of the producer's distinct competitive advantages.

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to their Joint Operating Committees. If it’s not profitable then the property will be shut-in and none of the service providers will therefore receive any data from our task and transfer network and therefore no processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

There are many benefits for producers to begin their operations in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. Whether that is at 25% or at 100% of the producer's capacity. When all costs are variable, production will be profitable at any volume of their production profile. This will preserve their oil and gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have occurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage where the costs of production and storage are zero. Producer bureaucrats assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once the bureaucrats realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such nonsense. That is until they ran the oil price down to negative $40. The refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of production the reserves reflected there was no damage whatsoever. These are just some of the many reasons for the Preliminary Specifications implementation. Oil and gas commodities are price makers, not the price takers the bureaucrats assumed they were for all these decades. One critical aspect of a price maker is that they only bring on new production when it’s profitable. The method we’ve developed is detailed further in the Preliminary Specifications Preamble. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil and gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in previous years. With technology and other industries providing growth opportunities, for oil and gas companies to assert they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect the producers capital allocation and capital discipline too. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets” and the like to the scrap heap. 

Cash demands in the industry are currently one of the producer's pressing difficulties. This is due to all of the producer's costs outside of operations being more or less capitalized and then recognized as depletion over the course of several decades. Including the capitalization of large percentages of overhead and interest. By not recognizing overhead costs in the current period producers are able to more easily declare their specious profitability. However, the cash that was consumed in those overhead costs is not returned in the current period in the prices of the commodity charged to the consumer. These overhead costs then sit as assets on the balance sheet in property, plant and equipment, or as we call them “the unrecognized capital costs of prior production,” for the next few decades. Therefore the search for new cash each month to replenish the cash float has been the issue for the past number of decades. When investors were willing, this was not an issue with the annual top up of investors dollars. Now the reality of their specious accounting haunts them daily as they try to find this new cash to cover the basic costs of their operation. Working capital has been and will continue to be a crisis in the industry under the current business model. No matter what commodity price is attained. Basic cash management would have indicated this to the bureaucrats many decades ago. (I wonder why they never changed these methods? I’m sure they must have had their reasons!) With the Preliminary Specification recognizing overhead in the current period as part of the operation, capturing that in the price charged to the consumer, return of the cash to the producer will occur within that production month. That however assumes profitable operations are conducted and all costs are accounted for appropriately. I’m on record, and allege that hasn’t happened. Calling the producers accounting specious and deliberately deceptive. I do at times wonder what costs are in that capitalized overhead that no one is aware of. Both in terms of its size and its composition. 

As a director of an otherwise terminal organization this might appeal as a more exciting type of work. With a directors experience, skills, knowledge and ideas, or what form the basis of an individual's capabilities. The directors would be valuable and rewarded throughout the industry. Don’t count yourselves out. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

To: The Board of Directors, Our RFP Response, Part II

 There is a consensus throughout the industry that the self-serving bureaucrats are the primary cause of the difficulties we’re all experiencing. Their two predominant attributes throughout the past decades have been inaction and enhanced personal financial compensation. Now that there is nothing left for them, they’ve been able to orchestrate our “managed industry” hypothesis for a convenient opportunity to exit the industry and their obligations. We may well see this final chapter of the destruction phase of creative destruction soon being completed. Leaving the directors of these producers in an untenable position themselves. What their actions will be is the big unknown. This series of posts is to identify an option for them to pursue, a solution to both their personal financial and legal jeopardy that they may now find themselves in. And to provide for the constructive means in which the creative phase of creative destruction begins. Let's call this final chapter of the destruction what it is, bureaucratic capitulation. Will this be an orderly and well controlled process that is methodical and predictable? It will be anything but. The level of opportunity that will be experienced throughout oil and gas, what I call the greater oil and gas economy, will be something far greater than anything that has ever been experienced before. With opportunity comes chaos. 

The stumbling block to all of this, the trigger for this to happen and the reason it’s being held up is the funding of the Preliminary Specification. This isn’t me boasting about this work. The industrial organization and the software that supports and identifies this new world being unavailable will force us to remain in this sludge of a bureaucratic industrial environment forever. Or until something replaces it. In the 21st century software defines and supports the organization. This was the defined reason the bureaucrats purposely never pursued any ERP software developments. It would establish a competitive organizational alternative that would impinge on their personal revenues and the means in which they were “earned.” Spontaneous order has been the principle that has enabled economic growth and prosperous development to occur historically. Both creative destruction and spontaneous order are stifled in the 21st century through the organizational cement of ERP software used by the current producer organizations. Any attempt to break out is futile. The Preliminary Specification will encase the industry in its own form of ERP cement as well, as will any other ERP software. This is the reason that we’ve endowed our user community with the Intellectual Property and the power to make the changes to the software as they, who are on the ground at all times, see and understand what changes are needed in the market. This enables the dynamic nature of the producers to continue developing when the ERP software is user community based. People, Ideas & Objects user community is a permanent industry based capability, and they are endowed with the necessary power to make the changes to provide for the most profitable means of oil and gas operations, everywhere and always. These are provided for in People, Ideas & Objects user community vision. Undoubtedly one of the key reasons our good friend’s, the bureaucrats, disliked what we’re offering. 

It is these C Suite officers that need to scuttle out of their posts as quickly as they can before the facade of our “managed industry” hypothesis is proven, or the industry realizes that it's in no condition to face even one of at least seven of the listed crises they’ve created for themselves. What we know for certain, if this “managed industry” hypothesis is valid, is that it is not what the directors signed up for. To cover for and repair the damage done by the officers they supported. To involve themselves in the spaghetti like details of an untenable corporation that’s unmanageable. Which is without the support of the financial community and headed quickly towards any number of outcomes that would be considered tragic. Whether they knew or understood the situation as it was developing, or if they know and understand the nuance of their situation even today, it does not matter. Directors are culpable and guilty of ignoring the overproduction of oil and gas since at least July 1986, on a systemic industry wide basis. And the solution to that overproduction problem that People, Ideas & Objects has published in the form of the Preliminary Specification in December 2013. However, a solution that has been openly discussed here since December 2005. It’s not what you know necessarily, it's what you should have known. I find the difficulties the industry is realizing are predictable, tragic and wholly unavoidable. The fact that I’ve detailed a solution to them many decades ago has caused me to be the target of these bureaucrats' vile and anger during that time. 

Through People, Ideas & Objects, our user community and their service providers the systems and organizations throughout the greater oil and gas economy can begin to develop under the vision of the Preliminary Specification. Through the interaction of the user community and the creative, greater oil and gas economy to rebuild the oil and gas industry. To build it brick by brick and stick by stick as we’ve stated here on this blog as far back as our October 20, 2008 post entitled “No One’s Fault But Our Own.” Here are suggestions of some questions that directors should ask themselves, today.

• Maybe People, Ideas & Objects et al have a point, what alternative is there? 
• If there is an alternative, is it a viable business model, as comprehensively researched, based on the issues and opportunities that are experienced in oil and gas today? Setting a clear foundation and vision for the future of this industry? 
• If directors funded People, Ideas & Objects et al budget they would have no subsequent influence in their success or failure. They would have control of their own destiny. What if they failed? What if any alternatives the directors may decide to use failed? 
• What control and influence do directors have over their current producers' success or failure?
• Would the sale of producer's existing reserves provide the directors with the best means in which to provide for their stakeholders under any future scenario? 
• What would happen if oil and gas prices rose higher, “to the moon” as they might say? 
• Would directors still capture that value in the sale of the reserves?
• And what if, directors would have, could have, or should have found… The commodity prices collapse again. 
• How could I as an investor / director participate in that exciting new oil and gas industry?

There is nothing left of the producer firms in terms of value left to extract. The industry's momentum has hit the point where it will be all consuming under the current business model. It has been expended and exhausted with the industry demanding cash in order just to operate. The state of affairs in any sense of the business could not be in worse condition than it is today. Higher commodity prices will not help. If existing producers were to provide any remedial value generation it would be too little and too late. The decades of triage that are necessary is far too much time. Especially when compared to the time that’s available for the producers to consider they have a systemic profitability issue. Then they would have to prove they’d seen the light about profitability and cease to operate the industry in their behavioural and cultural manner that has so fundamentally destroyed it. Through People, Ideas & Objects et al these objectives can be achieved at less cost, without the need to fight the bureaucratic cultural inertia and resistance to change that exists. With far less time when the entrepreneurial talent throughout the industry is unleashed to solve these problems through the Internet. Most importantly it will be done successfully.

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response, Part I

 A quick note to say we never received an RFP. We would never be included in the bureaucrats list and don’t expect one at any time. This blog series would be our response if we did.

We’re marking another milestone here at People, Ideas & Objects. A point in time that we have not achieved and have not been in a position to conduct until now. Today we begin the active marketing and sales of People, Ideas & Objects, our user community with their service provider organisations and our Preliminary Specification to the North American based oil and gas producers. What we’ve been upto these past few decades is a matter of discussion. I’ve been of the belief that we conducted the necessary research into the issues of the industry's poor financial performance. Brought about a robust discussion of the issues and opportunities involved and brought the fight to those that I felt were the culprits responsible for the damage and destruction that they’ve caused. We identified a historical process that industries have seen repeatedly when faced with the demise of their organizational methodologies. That process is in its final days as we expect the bureaucracy have achieved what we’ve hypothesised as their “managed industry” scenario where the appearance of normality allows them to slip into the darkness without the awareness of their destruction's culpability. Leaving others to the potential catastrophic results when the facade of the “managed industry” fades back to reality.

In the beginning we identified that the lack of real profitability in the industry was to be felt across the industry but also with everyone involved across the greater oil and gas economy. Without profits there is no value being generated and therefore the decline and destruction of the activities being conducted. This point is well understood and appreciated throughout the greater oil and gas economy. The efforts of everyone whether that be time, energy or money have been wasted by the self interests of the bureaucracy, who we’ve defined as the C suite of the producers. The capitalists focus on profits being earned by investors is therefore appropriate in any and all cases. When the investors are satisfied, they are there to provide for the future. When they’re not satisfied, they are quickly able to leave, sending the ultimate message of disapproval of the activities being carried out. It is our belief that investors, as were others, were duped by specious accounting that did not represent the situation on the ground. Aggravating the poor performance of the industry for a protracted period of time. Leading to the comprehensive exhaustion of value from the industry. What is represented today in the financial statements of the producers would not be something to be proud of. Producers' financial statements reflect they are in serious long term financial jeopardy. And none of these financial statements are representative, they are as specious as they’ve ever been. 

Throughout People, Ideas & Objects history it has always been our objective to appeal to the investors of the oil and gas producers. This will continue and nothing has changed. The Preliminary Specification provides for the most profitable means of oil and gas operations, everywhere and always. We will not waver from what we believe to be our ultimate competitive advantage over our ERP software competitors. Investors are however not the decision makers that are able to influence the producers towards the selection of People, Ideas & Object et al. What we are now doing in this marketing shift is that our focus has moved to the investors representatives, the Boards of Directors of the producers. Ultimately they are the final decision makers that will be making the decisions as to which ERP system provider they’ll use within the producer firm. Based on the bureaucrats recommended list of vendors. Of which we most certainly would never be on any of these lists due to the creative destruction and disintermediation forces we have leveraged and focused on these bureaucrats. Therefore we are now seeking to exploit the sunlight that we see breaking through between the Boards of Directors and their bureaucrats. 

If we are correct in our opinion of the situation on the ground as it stands today. Those being these three main components. The critical financial jeopardy the producers are in, the current state of the “managed industry” and the probable exit of the bureaucrats. There is much to be concerned about for these directors. We have discussed what we believe the financial situation in oil and gas to be and won’t revisit that. The “managed industry” is somewhat of a new hypothesis that I developed recently. It began last summer when we noted the legal jeopardy of both the officers and directors in terms of identifying their specific personal risks as a result of the long term issue of overproduction in the industry. Since July 1986 we’ve been able to document the fact that overproduction has been the source of a lack of real profitability throughout North American oil and gas. Secondly we noted that the Preliminary Specification addresses overproduction specifically with a direct solution to that issue and as a result generates profitability everywhere and always. It was published in December 2013. Noting these two facts would allow their insurance providers providing their Director & Officer Liability (D&O) insurance coverage to void the contract. The solution to this probability was a strategy that we were stating as “Issue Mitigated, Nothing Litigated.” Directors would be able to achieve the mitigation of their personal risk by adopting the Preliminary Specification and avoiding any claims of mismanagement. From Holland & Knight.

The Application Severability Provision (as an example provided from this website.) 

Absent an “application severability provision,” if any insured had knowledge of a fact that was misstated in the application (regardless of whether the insured knew the fact was misstated in the application), coverage under the policy could be voided to all insureds. An application severability provision avoids this potentially unfair result by making it clear that the knowledge of an insured who knew of facts that were misrepresented in the application will not be imputed to any other insured for the purpose of determining whether coverage is available under the policy.

Coverage under this policy shall be void as to the following:

Clause 3. the company if any past or present chief executive officer, chief financial officer or chief operating officer of the organization knew, as of the inception date of the policy period, the facts that were not accurately and completely disclosed in the application.

Such a provision helps ensure that “innocent” insureds do not lose their coverage through no fault of their own.

However, in light of the fact this issue of overproduction was raised as early as July 1986. Has been the systemic cause of financial destruction in the industry for all but 5 of the past 35 years. The Preliminary Specification as the solution to overproduction was published in December 2013. How does one claim innocence? People, Ideas & Objects have also stated, repeatedly since May 2004, that software defines and supports the organization. Therefore any organizational change will have to be made in the ERP software first or the organization will regress to that which is defined in the current software. This has been used by the bureaucracy to secure their franchise by sponsoring no ERP software developments in the industry. Leaving them uncontested in their methods of “governance.”

Knowing today how bureaucrats think; they may have adopted our “Issue Mitigated, Nothing Litigated” insurance loss mitigation opportunity however, with their own plan. If they could make it appear that all was back to normal, in the form of a healthy and prosperous industry. That facade would provide them adequate cover to make their hasty exit and be able to state unequivocally that they left when the company was performing well and they’re not responsible for anything that may happen subsequently. People, Ideas & Objects hypothesis, unproven as it stands today, and undetermined if the current oil and gas industry is in a “boom” as alleged or a “managed industry” environment. Our “managed industry” hypothesis being roughly defined as the consolidation of peers at or above the listed book asset or reserves value through a further dilution of shares, stopping the pursuit of new production and aggressively buying back the remaining shares on any share buyback authorization.

It is true to a larger extent that the directors of the producers could exit just as easily as the bureaucrats. From what I noticed however, most of them were re-elected for the 2021 fiscal year and the opportunity to retire from the board may not arise for another three quarters. That may be too late. They could leave now however that would look bad if our hypothesis became valid. I see them being somewhat stuck as a result of the bureaucrats exercising their goodwill and good judgement that we’ve learned from them over the past decades. It is also true to a large extent that the shareholders are being provided with the opportunity to exit their positions with the higher valuations being realized by the producers in this “managed industry” scenario. To what extent this would be possible is and would be the question. I believe in either scenario, Directors need to consider the implications of their D&O Liability insurance.

It will therefore fall to the Boards of Directors to establish new governance and compliance methods, new organizational structures and start the rebuilding process anew. It is generally well known that the industry does not use first tiered ERP applications such as Oracle. The underlying base of the Preliminary Specification. This will be a mandatory requirement in order to win back the trust of the investment community in the future. The reputation of the specious accounting and systems obtuseness is well known and understood throughout the investor community and the need to address that today is the first priority of these directors. Our good friends the bureaucrats were well aware of these issues and it is not happenstance that the governance is as bad as it is. That none of the necessary software developments were undertaken were a result of our Preliminary Research Report published in May 2004 that stated ERP systems defined and supported organizations. 

People, Ideas & Objects, our user community and service providers stand at the ready, with the well researched and functional business model of software and services defined in the Preliminary Specification needed by the industry. Ready, willing and able to deal with the issues and opportunities of the industry today and in the future. I would personally assert that September 1, 2021 is an ideal time to start an initiative such as the Preliminary Specification, however not the only time. People, Ideas & Objects uses the Joint Operating Committee as the key organizational construct of the Preliminary Specification. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. We move the compliance and governance frameworks from the hierarchy and align them with the seven frameworks of the Joint Operating Committee to achieve speed, innovativeness, accountability and profitability in the producer organizations. 

It’s so good to have made the transition to a marketing phase of these developments. The difference in my writing is self evident isn’t it. I’ve never criticised a client as a policy of my business career. Today I don’t have any clients though. I’m therefore consistent with my policy and will continue to always be. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

The Perils of "Data" and "Best Practice"

 We’re continuing with a look at the tools, methods and competitive advantages of the People, Ideas & Objects user community as we inch ever closer to that inevitable day where we’ll all be needing them. In terms of developing ERP software user community based developments are mandatory. If you want exact, quality software you’ll need a robust user community. There is too much complexity and subtlety in the world of business to ignore. Developers are involved in a complex science of their own. Working together they can capture the nuance of the business within the software. We have been focusing on the development of our community as our priority for the eight years since we published our user community vision. Providing an understanding of the power our users will have in this development. Power in the form that only they have been licensed to prepare derivative works from the Intellectual Property of the Preliminary Specification. And power from the point of view that our developers are deaf, dumb and blind to everyone but them. Developers are licensed to only take direction from the user community. Those people who People, Ideas & Objects consider to be our customers. Our competitive advantages are our user community, Intellectual Property and research. As an overall community we are all focused on providing producers with the most profitable means of oil and gas operations everywhere and always. In our last post we highlighted the use of conflict and contradiction as two high level means of analytical review. Today I want to touch on two areas that I’m personally not of the belief hold too much value in determining any of the value we will need to provide producers with the value generation and profitability we’re focused on. Those being the focus on data and best practices. These I see as the prolific go to, catch all phrases that are used to refute criticism of the objectivity and understanding of the work that was analysed. In reality data is not going to tell our development teams very much. And I feel best practices only homogenize failure. 

These are the opinions of one man and I’m sure that some people have had other experiences  that may be of value to our user community. That will be for them to determine. What the data tells us about the failure of the oil and gas industry is that all of the producers were profitable and have been for the past four decades. We know now that was a purposeful lie that continues today. If not for a steady stream of investor and banker dollars to constantly feed the spending machines there would have been no oil and gas industry. The data will not tell us anything about the opinion of the investors or bankers or the changes they may make in the future. The past five years should have provided a real life example of what the capitalist system is and how it functions. Why the focus on shareholder returns is the primary and some would say only concern. Without organizational profitability at the top of a primary industry you have a rapid decline and destruction on a wholesale basis across the greater oil and gas economy. It’s that simple. For everyone down to the local corner grocery store clerk to be fully employed demands that oil and gas be profitable in the real sense of the word. This will only come about with the knowledge, experience, skills, education, routines, ideas and perspectives of everyone involved. Reading streams of data that give the bureaucrats a satellite output of the floating roofs of oil storage tanks to determine the state of the overall markets. Only to be so rudely interrupted by negative $40 oil prices I think qualifies as a best practice. 

Far too much time, energy and money has been wasted on evaluating data in the oil and gas markets. People, Ideas & Objects solved the real profitability problems in the industry by pointing out that oil and gas commodities are subject to price maker characteristics and are not price takers. We mentioned that on this blog for the first time in our November 11, 2008 blog post entitled “Times Like These...” While I have been obstructed and vilified for this. Literally run out of the industry by these bureaucrats for publishing this knowledge. They continued to use their satellite data and destroyed the industry comprehensively and completely. All they needed to do was to recognize that oil and gas as price makers implied they would only bring on new production if it was profitable. That is what a price maker does. Well they will argue that all of their production is profitable which according to their accounting it is. And we have argued that is a lie and produced through their providers who are not first tiered ERP systems providers such as People, Ideas & Objects proposed use of Oracle’s Cloud ERP. Why is it that these, now mammoth bureaucracies are using homegrown, very old ERP systems unable to report the fact that producers have not been making any money? Why hasn’t it been evident to everyone that they just swap in investor money, swish it around a bit and then bring in another round of investor cash the following year? Seeking the truth from data needs to be something that I maybe need to be educated on, that I’m missing or is as specious as I’m suggesting. We have to look at more than the data as it would seem that the bureaucrats have been doing plenty of just that.

People, Ideas & Objects through the reallocation of the producer's administrative and accounting resources into service provider organizations brings about a standardization and objectivity to the accounting and administration conducted in oil and gas. Therefore those that find their Joint Operating Committees are not producing profits will be motivated to shut-in those properties to enhance their corporate profitability. This is done when the unprofitable properties no longer dilute the profitable properties. Producers will know that their accounting information is the same standard, objective accounting that all the other properties in the industry were subject to and can accept that. They’ll know that the costs of administration and accounting of the Joint Operating Committees was consistent with all the others on a feature by feature basis. This standardization and objectivity is desired in the accounting and administrative areas. The competitive advantages of our user community and their service provider organizations are; quality, specialization, division of labor, automation, innovation, leadership, integration, tacit and explicit knowledge division between humans and software, design, planning, thinking, negotiating, compromising, observation, reasoning, judgment, ideas, research, collaboration, creativity, issue identification, issue resolution, the use of conflict and contradiction as analytical tools and decision making. It will be these attributes that our user community members and their service provider organizations use to differentiate themselves from other members. Price competition is eliminated in our vision as it provides no value. Having our user community focused on these distinct attributes in a competitive environment will provide their customers, the oil and gas producers, with the most profitable means of oil and gas operations. Having others jump in and offer a competitive offering at a lower price precludes the time and energy necessary to do the hard work of building the producer's value over the short and long term. These rights are provided to our user community members through the Intellectual Property license from People, Ideas & Objects that gives them a monopoly over the process they manage. Only they will be able, and in turn be responsible for ensuring their process is completed consistently and correctly across the industry, but also enhanced from a service point of view within their service provider organization and their exclusive access to People, Ideas & Objects developers. 

What do “Best Practices” provide? Once again I’m negative on this attribute as much as I am on data. Too much reliance on this as a catchphrase is done, in my opinion, and little to nothing can be done to amend or alter a process in any material or beneficial way. Tinkering at the edges of the interfaces has been all that’s been conducted in this sense as no one has the responsibility or power within the producer organization to authorize or implement any changes of any material size. The issue comes about as to how to get the software to change to accommodate the new requirements of the processes? Traditional ERP software providers are not interested in one off customizations, if it's a benefit to the company requesting it, then maybe it's a benefit for their entire client base. The last question to solve is who’s going to pay for the costs. A decade later the new best practice that is truly value enhancing in 2011 appears and things have changed and it's no longer understood or required. Therefore everyone knows this and has resigned themselves to these facts. It takes too much energy for changes to come about. Tinkering at the edges in the form of best practices looks good and fulfills the demands as defined in the Job Description and Performance Review. With the Preliminary Specification all that will be necessary is to email or pick up the phone and call the user community member responsible for that process. Either way it can be done at the speed of light. Assuming the call is over VOIP and the Internet are both provided through Fibre Optic cable. 

Take the example of what our user community will be doing for what I think will be the most extreme example of the analysis they’ll need to undertake. People, Ideas & Objects Preliminary Specifications Material Balance Report. A soup to nuts management of the production process from the well head to the financial statements of the Joint Operating Committees and producers that own them, but also the custody transfers of the product. All the regulatory, royalty and internal reporting requirements included. Automation of these processes has been a dream of many people in the industry, most of those are the people that have to work on some area within this domain. If we don’t begin to deliberately automate these menial data handling, massaging, filling out of forms and the seeking out of data; we’ll be short of people to do the things that humans have the competitive advantages for and that we listed above that our user community will be conducting. These apply to the entire industry not just People, Ideas & Objects et al. Let's begin to have the computer do what they have competitive advantages over us. Data management, storage and processing. We can’t compete. And they can’t compete with what we have as advantages. 

The Material Balance Report is almost purely logical and mechanical. Agreements may override the logic of the chemical makeup or physical layout of the infrastructure. That doesn’t preclude it from being automated. There is a process where the information is estimated, initially and mostly for accounting purposes. Then amendments start the process of refining the data for the production month. Where changes in the makeup of prices, sales or production volumes and transactions are different than first reported etc. This will occur until the accounting month and production month magically appear to be reporting the same values. Which may take up to three months to complete. The number of iterations through each of the processes, the number of people, companies, regulators, service industry representatives and ghosts in the machine are too numerous to count. The objective to automate this process has been well beyond the scope of any one individual producer. People, Ideas & Objects have our proposed, consolidated, industry wide budget in which this could be accomplished. Now is the time and today we have the user community and technology that have the means in which to do so. And taking this vision further with the objective of implementing the Internet of Things which is an inherent part of the Preliminary Specification. 

This will require a massive effort on behalf of our user community for them to put together. To have it fit in with the overall architecture of the Oracle Cloud ERP and Preliminary Specifications. The regulatory jurisdictions in North America that will be involved. Their parsing of the myriad processes within the Material Balance Report into their service provider organizations to achieve the performance, efficiency and effectiveness that is demanded of them. This task will not be for the faint of heart and will break a few brains in the process. My brain was broken in the process of developing the Preliminary Specification so consider yourselves lucky, you won’t have to deal with me. 

What will the Material Balance Report look like when it is complete? How easy will the interface be to use? Will it accommodate the myriad of changes that will be commonplace in the future with new and elaborate devices being developed in the Internet of Things environment? I think that everyone who has looked at this area from a high level or a detailed level knows that it can be, and should be done. The impediment has always been it’s too costly with little return on that investment for the one producer if they undertook the task. The real value comes about when all the partners in a Joint Operating Committee and elsewhere are using the system. The cost / benefit value proposition has changed with what can be accomplished by our user community. What has also changed is the reliance and weighting that has traditionally been given to data and best practices. It will be the facts as presented that will need to be dealt with. Facts such as the process's operation must contain X requirements at this point, and Y for these people… And we will interface it here in order that the producer's user will be able to have… This is the line of work of our user community. I could go on but leave it here with the comment that this comes from the narrowest point of view for brevity purposes. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industries revenues away from the development of these initiatives. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

Conflict and Contradiction

 The past number of months I have on occasion mentioned that conflict and contradiction were analytical tools that were added to our user communities list of competitive advantages. To some these may seem counterintuitive to a team environment focused on productivity, profitability and prosperity in the greater oil and gas economy. I am not of the opinion that they’re that new to our primary target audience, those that we consider our customers, they being our user community members, not the oil and gas producers. People, Ideas & Objects exist to provide our user community with the software development capabilities they’ll need to satisfy the software needs of their customers, the oil and gas producers, in combination with the services they’ll provide through their service provider organizations. 

Conflict and contradiction are most certainly unwanted attributes that people do not want in their lives. They’re avoided and ignored in order to make their lives easier. “Don’t rock the boat,” “he’s (insert your ad-hominem attack here).” If there is nothing to be argued from the other side then ad-hominem attacks, attacking the character of the one generating the conflict, is the method used to gain support. Very effective, i.e. “Trump is an ‘ad hominem attack’.” We need to look at those who are attacking others with comments about others personalities and character to understand that this shows they have no counter argument, policy or solution to provide and they’re only concerned with maintaining their self interest in the status quo. Bureaucrats use these tactics prolifically as we’ve seen in their excuses, blaming, lying and viable scapegoats as to why they’re such failures. What they should be doing is standing up and stating unequivocally the benefits they provide under their current business model. Benefits such as how they’ve kept the pulp and paper industry prosperous and profitable. My ad-hominem attacks of the bureaucrats are somewhat due to the fact that they are as bad as I state, and indeed are the issue of oil and gas’ destruction. Other than these facts, what would I write about?

Hugging things out in the Boardroom during the Directors meeting and C Suite has to be what’s been going on. Professor Jordan Peterson, of 12 Rules fame, states that “conflict delayed is conflict multiplied.” It’s clear that throughout the bureaucracy, but most importantly in the C Suite and Boards nothing but coffee, donuts and hugs have been taking place for a long time. The volume of producer issues reflects not so much a multiplication but an exponential extension of the original problem that could have been solved. If someone would have raised their hand and asked the pertinent questions at the right time, however unpopular it would have made them, everyone could have subsequently avoided so much destruction in the greater oil and gas economy. 

Conflict is not a reflection of the individual that no one seems to be able to get along with. It is the one that has to ask the difficult questions at the right time before the issue manifests itself into the greater problems that can eventually take down an industry. It demands an understanding of the situation and a deeper knowledge of the issue than one would normally have acquired. It could and should come with a proposed solution or the consideration that it should be studied to determine what solution could be provided. Conflict is not a tool to disrupt the personal interactions of the team, only a means in which to disrupt the flow of another key human attribute and competitive advantage, that being our unique ability to make errors and mistakes. Something we’re quite good at and most familiar with. With the scope, scale and volume of work that each of us are managing within our domain. In an exponentially more complex environment that we’re building in the Preliminary Specification and we described in our previous blog post. Where people are using their thinking attributes more than their doing activities in the very near future. The implications and interactions of the work that will be done by an individual will be more involved and hence more important and impactful. 

So where is the issue that needs to be addressed? How can these issues be identified and pointed out in a timely manner? Students of philosophy would know the answer comes about by identifying the contradiction of whatever it was they were looking at. That will be the source of the issue and the point that needs to be resolved, in most cases. The issue may go deeper than what it appears to be. The method necessary to analyze the contradiction is nothing more than the Socratic method that is the basis of all artistic and scientific progress since around 400 B.C. The Platonic Aristotelian philosophies are derivative of the Socratic method which means that you ask a lot of questions. The questions are pointed and have an agenda behind them in which those being questioned are informed and advised with an understanding of the issue, the perspective the questioner has and a probable solution that is consistent with the questioner's understanding. And in turn the questioner's understanding is broadened by the answers they recieve. Where contradictions and false assumptions are rooted out. 

This is how People, Ideas & Objects, our user community and their service provider organizations will be able to seek and find the truth regarding the most efficient and effective method of proceeding with the development of the Preliminary Specification. “How, What and Why” it is that needs to be done and by whom at what point in time and where. Will need to be asked repeatedly by those in our user community in order to formulate solutions based on that understanding and knowledge. This, in a nutshell will be the method of how the Preliminary Specification is taken from its current form and prepare the details needed for our developers to develop the software in order that the user community is able to meet the producers needs. 

Due to the fact that People, Ideas & Objects have been organizing our user community since the first quarter of 2014 we have been able to achieve something significant that I’m not aware that any other ERP software initiative has been able to do. Our user community will be able to do this work in the current configuration that we’ve determined. This consists of approximately 3,000 user community members. One for approximately each process in the application. To organize a community of this size isn’t the difficulty per se. It’s a challenge but certainly not the difficult challenge in putting together a user community. With eight years and the Internet it can be done. The difficulty is in expressing a usable vision, a viable business model that expresses a solution to those issues that are present in the marketplace. One that solves today's problems and sets the foundation for the future. A future where the means to make the necessary changes on an incremental and individual basis are available as needed on a timely basis where they are needed. Everyone in oil and gas has been able to view People, Ideas & Objects vision as spelt out in the Preliminary Specification since December 2013. These people have also been able to see how our user community vision has the ability and capability to provide them with the means to build the appropriate applications and services. Where by joining our user community they can affect change in the industry as change is required. Bring about the permanent, prosperous and profitable oil and gas producer and industry everywhere and always. And in turn, for each and every user community member. 

None of this information regarding conflict and contradiction is new to the majority of the people we are attracting. I learned an important lesson that I don’t think many people know. When I published our first document in 1996, we then followed up with sales calls to discuss the work that we were doing. In almost all the meetings I was shocked at what I saw. The “white paper” I published was quite literally trashed. They were annotated, highlighted, dog eared, bent, rolled, used and abused to the point where they were almost unrecognizable. When people who were in the lower levels of the organization were in attendance they were cherishing the document. Looking at me as if to say we want this. This taught me something very important about my target audience. They were a) hungry, but that wasn’t the most important thing. Instead of consuming the bite sized marketing quotations, slogans and “nutshell it for me” type of summaries. They consumed the critical conflict and contradictions pointed out in the paper. They wanted analysis, they wanted to be challenged and they wanted to see the solutions that were being presented. I have used this understanding and the comprehensive response that people have to my writing on this topic as my personal competitive advantage throughout this adventure. To summarize this, I would say that people read voraciously. I am only willing to express this now as it would be too late for any of my competitors to learn from it and be competitive today. And I don’t think it is just my words but the words of anyone who conducts this type of analysis and determines this type of solution to real life problems. This is why I am listing conflict and contradiction in our user communities analytical tool kit for them to build out the Preliminary Specification at this critical time. This is how they’ll be making the product and their service provider organizations services polished and precise. By understanding that people read and they appreciate the hard work of others. 

I’m not just identifying a competitive advantage of mine. This blog is not about me, never has and never will be about me. I only raise these points to make the following argument. I see the same competitive advantage in our user community today. It is inherent and present in their culture and reflective of the quality, highly educated and vastly experienced group of people they are. The bureaucrats ignore these cultural attributes and have their own means and methods of taking the organization in the direction that they’ve taken these firms. They perceive that their people have been along for the ride. And these people are as a result frustrated and disappointed as what has generally been expressed here on this blog. They also know they’re powerless to do anything about it. If they do say anything it will accomplish nothing. If they point out People, Ideas & Objects Preliminary Specification they’ll be dealt with negatively. If they’re found to be members of our user community, that would be the end of their careers. That is why we keep their information confidential. Only I know who they are. Only I know the full scope of the despicable tactics of these bureaucrats and how they will seek to destroy them. I wouldn't be surprised if there were a few who are only there to try to find the names of others to make examples of. Such are the ways of our good friends, the oil and gas bureaucrats. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industries revenues away from the development of these initiatives. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous. If the producers will not invest in their organizations profitability by implementing the Preliminary Specification, our user community and their service provider operation, why would anyone invest in them? 

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

Centralized vs. Decentralized

 One of the greatest contrasts between People, Ideas & Objects, our user community and their service provider operations versus the bureaucracies consolidation “vision” is the method used to earn a profit. Bureaucrats have established specious accounting as their preferred and only method of “earnings.” People, Ideas & Objects our user community and their service provider organizations have spelt out our vision in detail within the Preliminary Specification. The Internet establishes the means in which decentralized organizations are once again able to provide the value that society needs to move us through this next century profitably and prosperously. By using individuals in markets and their inherent dynamism to provide for the needs and direction of the greater oil and gas economy. The return of the invisible hand as Adam Smith described it in the late 1790s. Or the vanishing hand, as described by Professor Richard N. Langlois in his research which we’ve included in the Preliminary Specification. As a direct replacement to the visible hand of the bureaucracy of the past century, which was the only effective method at that time. Consolidation does nothing but double down on an expired, but personally lucrative, business model which is understandable for those who have benefited so handsomely. 

The Internet is introducing many new conceptual models and societal changes. Consider the impact of automation, the Internet of Things and to a lesser extent robotics over the remainder of this century. Replacing the “doing” aspect of man and enabling us to be more involved in the “thinking.” If we were to just limit our thinking to the prospect of increasing profitability through enhanced productivity, innovation and cost control. These would require that people throughout the industry adopt the same competitive advantages that the people within People, Ideas & Objects, our user community and their service provider organizations have adopted. These include; quality, specialization, division of labor, automation, innovation, leadership, integration, tacit and explicit knowledge division between humans and software, design, planning, thinking, negotiating, compromising, observation, reasoning, judgment, ideas, research, collaboration, creativity, issue identification, issue resolution, the use of conflict and contradiction as analytical tools and decision making. Just to start. None of these are able to be conducted by computers and none of these will be able to be conducted by computers in anyone's lifetime today. Clearly we have much work to do. The bureaucrats are suggesting that the shuffling of paper on a much larger scale is what will be necessary in order to earn the prosperity that their former small scale application had failed at. And just as computers will never begin the thinking process for us, bureaucracies never will either.

What is desperately needed in the future is for individuals to have the necessary influence in the determination of profitability and value generation for the Joint Operating Committee. Using their distinct, personal competitive advantages in an organised and controlled manner to ensure that forward progress is always possible and achieved by the organizations that employ them. This does not allow for or permit everyone to be making decisions to determine what they believe should be done when and how at any time. Innovation does not happen in that manner. Innovation only arises out of the organizational structure that is configured to produce it. This was a comprehensive aspect of the research that was conducted and included in the Preliminary Specification. Having people potentially causing damage to things is a significant risk in oil and gas. In addition, doing the same thing over and over, expecting different results is very costly, foolish and insane. Situations such as this must be avoided and can be through the appropriate organizational structures such as the Preliminary Specification. Where anyone can offer their contributions and they are welcomed as a necessary ingredient to this new world. That doesn’t mean they’re all necessarily tested and / or deployed. That also doesn’t mean they’re not viable in the future or forgotten. They may be the seeds of some new idea that will be developed from them. Ideas that can be developed further, collaboratively and enhanced. These imply the methods of the organization are structured to deal with these and manage them appropriately. The bureaucracy finds these contributions best left in the hands of the CEO and COO. All others will need to continue to sit down and stfu. We’re not where the Preliminary Specifications vision is enabled yet. We are constrained by an obstinate, stubborn and self interested bureaucracy who are threatened by this vision. Does anyone find the bureaucrats' vision of consolidation prosperous, healthy or profitable?

In terms of the current structure of the producer firms, and most particularly those that have been consolidated. We can see they are overvalued in property, plant and equipment. Book value amounts that were not representative of the market value for those assets. (Accounting must record the assets as the lower of cost or market value.) And as such are under severe pressure due to the diminished working capital in the industry and the lack of demand from anyone else to purchase them. Markets were not able to provide for the alleged price they were listed at on the balance sheet. Seeing this issue, I believe the bureaucrats were motivated to initiate the consolidation phase in order to reestablish the values in property, plant and equipment to at least their book value through the issuance of common shares at these “established” prices. In essence creating a false market value for their oil and gas properties. The dilution of shareholders interest is a tried and true currency of the well endowed bureaucrat. Other than covering up this gangrenous infection, what does consolidation do in terms of resolving the destruction that has occurred in the industry. Or establish a prosperous and profitable footing for the industry to be passed onto future generations. The gangrenous infection isn’t visible anymore. The cash is still magically evaporating and working capital continues to be a crisis at whatever the commodity prices are at. Interesting! Investors are even less enthused and bankers who are usually the first to go somehow got the message late and only began their exit last year. None of these people are showing any renewed interest but the most important aspect of the issues being discussed here is that the bureaucracy thinks they have an unmitigated “boom” on their hands. 

The greatest contrast between centralized vs. decentralized organizational structures is best reflected in the two major political theories. Capitalism vs. communism. Communism is claimed to never have had the opportunity to really prove itself as a valid theory. Billions of casualties would be the one reason I would point to its failure. And maybe we’re seeing this play out in our current political environment. The disintermediation of the communists is happening as a result of the Internet too. Resistance by communists to their disintermediation is what’s being played out in the current global struggle. There is far too much government involvement in our lives today. The only justification for it is the power that is obtained by the politicians. Why would we need to be monitored and controlled by big, ugly government bureaucracies in a world where decentralization is enabled, capable and proven to be the far better method of generating societal benefit? Yet the propaganda says I’m wrong. I find it interesting that so many large corporations are so involved in politics today. Birds of a feather.

Ideas have a shorter half life today than they did yesterday, and a much longer one than they’ll have tomorrow. And for every one idea that generates value today, we’ll need ten ideas to build the same incremental value tomorrow. Where will these ten, shorter life ideas come from? In a collaborative effort, where the efforts of everyone are considered this is possible. In a bureaucracy, where today they are not challenged by their inability to change, resistance is futile, implying that any idea purposely dies on the vine, what future is there. Will a deferral to Artificial Intelligence make up for the deficiencies of the bureaucracy? Or will our unique characteristics and competitive advantages remain unique to us? 

Bureaucracies in other words can’t, won’t and will not ever think. Even with synthetic means. Markets full of people who are enabled and capable, who are organized in structures through the Internet, that maintain and enhance their productivity and ensure the prosperity and profitability of the organization, are the opportunities that exist today. We see around us the absolute failure of the bureaucracies in everything they touch. And their last ditch fight for survival. It’s time to stop and think of better ways and implement them. For oil and gas the only other organizational construct that has been fully researched, which is a workable model from a logical business perspective is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industries revenues away from the development of these initiatives. And therefore are unnecessarily directly supporting the status quo behaviors that are now proven to be disastrous, conflicted and personally self interested. They say the enemy is most dangerous towards the end, that is when they fight the hardest, the question therefore has to be are we at the beginning of the end of these bureaucracies, or is there more fight to come?

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

The Bureaucratic Opportunity of a Lifetime

 Increased activity within oil and gas creates the appearance of opportunity in the producer firms. Where and how, but most importantly for whom will be discussed in this post. Buoyed by higher oil and natural gas prices producers feel they have the cat by the tail once again. However this time is different, and in so many ways. Betrayal by our political leaders, the media, scientists and big corporate interests has more or less been fundamentally accepted by the majority of people. Being dealt with dishonestly these past few years has not been uncommon it seems in retrospect. Who do you trust, and why would you still be trusting them? Is the question that’s being asked again and again. It is in this way the oil and gas industry has shown great leadership over the past decade. The self-serving bureaucrats have, once again in retrospect, failed in everything they’ve attempted to do. And lied about the reasons and purposes in doing what they said they were doing. 

Unfortunately today we no longer have the hollowed out carcasses of the oil and gas, secondary and tertiary industries. Even the skeletal remains of what we once knew have begun to turn to dust. There is an inherent acceptance and capitulation of these facts in the bureaucrats' calling and forceful charge towards “clean energy.” All for the moral and ethical benefit of our grandchildren's health and to ensure the planet remains in one piece for them. Who could argue with that? What clearer indication do we need that they haven’t any idea what to do, where to go and how to get there? Those hooked on the consolidation dream are only remnants of the old school talking points. Such as this article from World Oil discussing Contango Oil and Gas Chairman John Goff’s consolidation with KKR backed Independence Energy. Goff’s only point worth discussion is the size of the projected production volume with the comment “massively larger than where we are today.” Production volumes will double again in the near future and what follows on implies growing more after that. Not a hint of financial performance or the conduct of the business from a financial perspective. Just growth, as if it was competing with a startup tech firm in Silicon Valley. The following comment however somewhat asserts that there is an “overhead burden” issue in the industry? 

“When I look at the backdrop of the industry, it’s still ripe for continued consolidation,” Goff said in an interview. “We’re tracking numerous opportunities of assets and companies that are stranded that are either in the hands of non-natural owners or they have too much leverage or they have too much of an overhead burden and just can’t really survive in this era of the energy sector.”

It’s been implied throughout these consolidated producers that the reason for all of the damage is there are too many producers. And that the smaller producers are at fault for collapsing the prices by overproducing to meet their bank commitments. Ok, let's assume for a minute these derelict, culprit producers are smaller, which implies a generalization that they would also be younger. And therefore they’re the ones that are responsible for the overproduction that began, as we’ve documented in this blog on many occasions, back in July 1986? That makes sense, founded in 2010 responsible for the damage that began in 1986! That’s a sellable point on the capital markets. Here’s an alternative plan. Implement the Preliminary Specification across the industry so these smaller producers, or do bureaucrats refer to them as the unwashed, giving them the means and methods to ensure their production is produced profitably everywhere and always. I’m certain the bureaucrats considered that. If the smaller producers were accessing the Preliminary Specification they would be wildly profitable and very attractive to the investment community. They’d be transparent and accountable in terms of how they accounted for their businesses and oddly enough, performing as they planned and stated. “On second thought let's not do that.” The Hive Mind.

It’s also interesting to note that I suggested that the asset valuations focused on building balance sheets were misguided many years ago. Producers should have adopted the meme of the WallStreetBets Reddit community of “To the Moon” as the natural follow on to their “building balance sheets.” Nonetheless in the depths of despair when commodity prices tanked and financial markets were closed bureaucrats tried to raise cash through the sale of their producing assets. Only to find the market had been beaten down to the point where asset valuations were pennies on the dollar. No one would or could sell, and the issue quickly became how could they establish the prior value they had built “to the moon” on their balance sheets. First was the need to stop the increases in production. Consolidation was where the Keystone Cops were sent to next. They dusted off their share printers to acquire the highly inflated asset values of other producers at the value that they were once stated at. The follow on to that plan was to use whatever remaining share buyback authorization they could afford to quickly pump up the value of their share prices and make it appear that a recovery had taken place. The ultimate objective of these two transactions would be that this “managed industry” would be able to find those investors who were naive and stupid enough to buy the charade, again. It appears the only one so far is the Kolbert Kravis Roberts or KKR group, a firm that started the leveraged buyout phenomenon and were once good at it in the 1980s. If Dr. Fauci declared another pandemic. Would anyone listen? Producers should ask themselves similar questions such as these.

These questions may come in handy as the foundation of a good legal defence. Lawyers as we noted over the past few months have found the oil and gas industry to be a lucrative field in which to mine for their craft. Recently Southwestern Energy and EQT have had investigations launched by shareholder litigation firms over the valuation of their takeover targets. Suggesting that Southwestern and EQT may have overpaid for the assets! Who would have thought? The consolidation drive is to secure the bureaucrats' life line that has been able to keep them in place throughout these up and down cycles. The cash flow that is generated is a result of oil and gas being a capital intensive industry. Cash flow in oil and gas is nothing more than the return of previously invested capital. It should be clear to everyone that there is no incremental value earned by the bureaucrats. Therefore producers cash flow is and has always been just the return of capital, less a sizable bureaucratic tax. These were adequate, with annual top ups from willing investors, to keep the facade operating in whatever environment the business may be in. And only call the attention of the bureaucrats back during times of crisis such as negative $40 oil prices. Bureaucratic resiliency has been fueled by these cash flows. The lack of transparency throughout the industry in terms of the gross amount of overhead that is incurred and the characteristics of those costs remains unknown and unknowable, everywhere and always. If I were to ask one question of a bureaucrat during an annual meeting it would be what was the level of materiality that was determined by the public auditor during your annual audit. Now we’ll only have to take the word of these people until next year. They need to know the level of materiality in order to ensure their expense accounts pass well below that criteria. That is if expense account is what it’s still called. 

Corporate history has shown that for a variety of reasons when the company becomes untenable the rats jump ship first. Sorry, that should read “bureaucrats jump ship first.” I’m on record throughout these writings that the overproduction of oil and gas was deteriorating the financial base of the industry. The company's earnings never existed. It was all just investor and banker money being spent. Investors withdrawal would lead to a financial catastrophe that would see the producers collectively lose control of the financial, operational and political frameworks of the industry. These losses would lead to a precipitous decline in the overall capacities and capabilities of the North American producers. Historically the next step was probably the most destructive of all and that is the bureaucrats would leave their posts. This will be the point where we’ll soon find ourselves and People, Ideas & Objects Preliminary Specification will be desperately needed. Until then we’ll see the trend of CEO’s leaving, such as Chesapeakes at the end of May, three others being terminated without cause and last week's exit of Ovintivs CEO. Ask yourself, what is it that a CEO can do to fix this situation? All I think they can do is ride the inevitable collapse downward. When the ship is sinking you need to get away from it as fast and as far as you can. Or you will be sucked down by the water that is drawn in from it’s passage to the bottom and you will drown. Therefore this “managed industry” they’ve now “achieved” can be the opportue point to state unequivocally they left the ship in good hands during the good times. And there’s more, if they funded the Preliminary Specification on the way out the door, they could also state, they left it with a prosperous and profitable future.

There is a serious upside for these CEOs from their exit from these producers. If you were a bureaucrat, would you want to continue to be harassed by People, Ideas & Objects who are holding them to account and challenging their performance? Identifying their history and legacy? An alternative might be they could move into the unaccountable world of clean energy where performance has never been the objective or concern and never will be. Where after ten years of alleged clean energy related capital expenditures those bureaucrats that chose to stay will be able to state unequivocally “that they’ve failed, it's a difficult challenge yet they haven’t given up yet!” Or take this opportunity to get out as fast as you can, now.

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

Rats Are Abandoning Ship

 We’ve noted at times before that the ultimate manifestation of the decline and destruction we’re experiencing in oil and gas is the bureaucrats' abandonment of their post. This will cause unknown consequences as all the King's horses and all the King's men… In prior situations where this has occurred it has led to substantially more government involvement in the industry as a result of these failures. This is possibly the trend we’re headed to with the recent resignations of Chesapeake and Ovintivs CEOs. And Friday’s termination of three more Chesapeake executives without cause. Maybe we’ll see this momentum build and we’ll be stuck with other consequences. Consequences such as a dependence on foreign sources of oil & gas and the prices those producers deem appropriate. It’s not that North American producers are selling a compelling argument. To summarize they’re stating “oil and gas is finished, we’re focusing on clean energy” and at best they’re offering a status quo environment in terms of economic activity. In a world of massive disruption in business and industries across the continent, where new and better ideas and products are coming to market, oil and gas gives them a comfortable retirement home where it will be a nice place to die. 

The precursor to this was the precipitous decline in capacities and capabilities. People, Ideas & Objects provides a solution in the form of our Resource Marketplace, Research & Capabilities and Knowledge & Learning modules of the Preliminary Specification. What we published in December of 2013 foresaw the inevitable outcome of the chronic overproduction by North American producers. Not only do we have the financially destitute nature of the producers themselves. Today we can count on the major losses of the Schlumberger's and Halliburton's exit from the North American marketplace. The bankruptcy of many service industry providers and the cutting up of machinery and equipment for scrap metal to pay the rent. As people shun working in oil and gas as a result of the lack of demand for jobs. The unchallenged claim that it's dirty and can be replaced with a solar panel, early retirements and the field jobs that have rightly earned the reputation of difficult work that pays extremely well if and only if the oil and gas producer can afford that ever elusive second paycheck or the project itself doesn’t get cancelled. The fact that you can’t raise a family or take on a mortgage anywhere in oil and gas is a well earned reputation. However these jobs are still a big hit in the high schools. 

Last week's abandonment of Keystone XL provides us with the perfect example of what has been going on, where we’re at, where we’re headed and the difficulties we’ll be encountering in that future. What exactly happened and why is this representative of our future as it stands in the hands of these bureaucrats. This question needs to be asked in the context of the past forty years. What is it that the producers have done? In my over the top descriptions of where we are and what was going to happen, yet somehow eerily becoming more valid each day. I’ve belittled the bureaucrats for sitting on top of a primary industry with access to the capital markets through deceptive accounting practices. Relying on revenues that they believed were the result of their brilliance and failing to understand, as a primary industry, that they represented the efforts and consequences of the greater oil and gas economic system. The service industry, which provides no other services to any other industry, was a fundamental part of their alleged success and of which producers were wholly dependent upon. Their assumption that these service industries were businesses that were self-supporting and were not of concern to them other than to fulfill their next purchase order. Whether that was at 10% or at 300% of last year's activity it did not matter. Producers were where the money grew on trees and the sun shines only on them. 

As independent businesses pipeline companies, drillers, completion and frac companies and yes ERP systems providers were able to access debt and equity markets just as producers were, bureaucrats assumed. Therefore let them be subject to the discipline of that environment and that will be the most effective in terms of how producers' field activities are provided. Reasonable assumption. However that is not what happened. Taking away the consequences of the throttle junkies that bureaucrats are with their on again, off again activity levels. The relationship between the service industries and oil and gas are not in any way equal parties. On the demand side there may be few producers operating within the logistical area of a service provider, and producers preferred to only work with the “big boys” of the service industry. Limiting the number of customers to their products and services. Producers saw the market dynamic on these small service markets and understood they could dictate terms and conditions that were favorable to their side of the relationship. This behavior of the producer and the example they’ve been able to successfully implement catches on in the downtown offices with all the other producers. Soon all of the service industry is subject to the latest round of “ask.” This will be quickly followed up by said producers with their accusations of suppliers being greedy and lazy in the local press. Unable to earn the profits that are competitive to other industries these companies have had to be innovative and resourceful. They’ve scraped and clawed their way through the ups and downs and at the end of the day had $0.05 in the bank. When the storm of investor revolt began in 2015 it was felt throughout the service industries first. Covid was just the icing. 

In the case of pipelines the situation was different. Producers committed to provide any prospective pipeline company with the product they needed to go out and build the pipeline. As regulated businesses they are somewhat different to other service industries. However their treatment was a bit different too. Has anyone seen a producer's head office being picketed by any of these environmental groups? How about their facilities? Why is that? How is it that environmental groups can support all those activities and causes that they do? Where does the money come from? Well oil and gas producers don’t like their name in the media, that’s where the money in a primary industry is generated, do you think producers would pay the bounty? So while the pipeline companies face the environmentalists obstruction through right of ways, court challenges and regulatory issues alone. On the other side of these claims are the oil and gas producers' dollars and cents raised in the environmentalists bounty working against them. Would a regulator allow a regulated company to deduct the environmental bounty from their earnings? In addition to this, what producer stands next to the pipeline company saying we need the pipeline to ensure the consumers safe and secure, low cost energy demands are met? Describing how they provide the consumer with the fuel for their lifestyle? That energy is the oxygen that the economy breathes and without it we are reduced to primitives, heating their homes and providing for their transportation. It is the most powerful economy in the world that will also be the largest consumer of oil and gas commodities. This involves producers selling their book, as they say. No one saw this because it never happened, and why would they do that? That's not their business! They would allege.

The implications of this activity over the past forty years has now made the entire domain of all these industries the oil and gas producers business. Any of the $9 billion in costs that were incurred in Keystone XL will be absorbed into the rate base of TC Energies other pipeline operations. The producers will be the ones that ultimately end up paying the consequences of these actions. It could have been so much different though. Just as it will be so much different from this point forward. “You want to build a pipeline? You need to drill a well? You want what completed? Well I’m afraid that’s going to cost you. You’ll have to pay the full price of whatever it is up front, no questions asked. Don’t like the deal, neither do I, and if you do come back after you discover I'm the only game in town, the price will be higher. Take it or leave it.” No one in any of the greater oil and gas economy will be able to get equity or debt financing. Without those who are operating this primary industry c/w its primary revenues are honestly dealing with the greater oil and gas economic infrastructure. Earning a real profit and doing so for a time period that establishes a solid record will others begin to even look. Those in the service industry that have left will take many years of effort in terms of valid profitable performance in the producer firms to bring them back. Same as the pipelines. Until that time when producers can prove they are the appropriate, fair and reasonable custodians of the primary revenues of this economic system. They’ll be paying the full freight in advance. The alternative will be the high school kids who could learn how to do it. The adoption of the method in which the People, Ideas & Objects budget is financed fully in advance will be the commonplace expectation until then. When so much risk was transferred to the service industry over these past forty years. And the fact that they and their investors were the most significantly betrayed by the producers. It’s not a matter of if you were betrayed, it's only to what extent you were. Bureaucrats will chuckle and  say, but they have the money! And I would note that it just so happens to be this same method of financing that the pharmaceutical industry received in order to produce the vaccines. Although they did not have the disgusting financial record of the producers, they needed to ensure that their risks were covered. It’s called business.

The current reputation of the producers precedes them, investors and bankers are not biting. There are many reputable industries in which to earn real money these days. Just look at what's called the meme stocks! Producers have proven their business doesn’t mean that much to them and they’re not interested in it. They’ve drunk the kool aid and are on to the unaccountable clean energy dream bandwagon. Certainly not something investors, bankers or the service industry will need to step out and take any risk for. The stock prices of the producers have been raised to the point where much like their balance sheets, there’s no upside left for anyone now. No equity investment at these valuations, based on this history, would ever occur. It makes meme stocks appear like value based investing. If the exit of the bureaucrats is developing as a trend, I can’t for the life of me think what the upside is for these CEO’s to stay, and therefore this will cause much more distance to be created between the investors and these industries. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.