Where's the Problem? Part II

 First off, this blog post is number 3,000. Secondly, you all have my humble apologies.

Declaring some team as the innovative leaders of the producer firm is usually how the bureaucracy has dedicated themselves to innovation. Having the “team” resume their regular duties once the press release, or dog and pony show is completed. At best these “team” members which emulate the Former Soviet Union's propaganda committee, will gather once a month for advanced naval gazing sessions of their innovativeness. Although the situation is not the same, the two are oddly consistent in terms of their performance and productivity.

People, Ideas & Objects undertook the necessary research into how innovation is conducted and developed, implemented and managed in technology and science oriented businesses and industries. This was done through a comprehensive review of primary research on the subject. With a dedicated focus on two specific Professors Giovanni Dosi and Richard N. Langlois. What we learned is that innovation is a defined and replicable process that is instilled within the organization. It is either purpose built, as in the most obvious case of Apple, or it is culturally missing both organizationally and industry wide. In a global business environment where competition is no longer across the street and the consequence of it usually arrives in your market seemingly overnight. Or made apparent through the demands of the capital markets, with its speed of decision making and wealth of global options. Where the long standing reputations and cultures of a firm’s performance are what stand out and are what exist for eternity in an Internet connected, global rumour mill. 

Idle navel gazing is unproductive as most everyone can comprehend. In Tuesday’s post we discussed how the Preliminary Specifications detailed, actual, factual accounting identifies which properties are not producing profitably. How a team of engineers and geologists could be deployed to triage what might be possible to remedy the situation at that specific property and enable the changes necessary for profitability to return. Deployed on a real, live issue is where innovation is needed. Dreaming up solutions with no understanding of what the issues are, other than how to build the balance sheet faster might be what navel gazing is defined as. Profitability is the only business issue of concern anywhere and always. In the Preliminary Specification profitability drives the organization and innovation is its defined organizational solution. 

One of the five Organizational Constructs of the Preliminary Specification is Intellectual Property. The point of today’s discussion is on the IP of the engineering and geological science and technologies of oil and gas. These are now being documented and the copyright is being earned by the individual engineers and geologists that are joining our initiative to rebuild the oil and gas industry on an innovative and profitable footing. They will be the ones that are forming the technical expertise in the industry from the point of view of their application of engineering and geology as a service they’ll provide in combination with the Intellectual Property they’re now developing. (See also the discussion on Specialization and the Division of Labor.)The Knowledge & Learning module of the Preliminary Specification enables these triage teams to know and understand the state of the art in oil and gas. The engineers and geologists would be able to maintain their Intellectual Property in the Research & Capabilities module which then populates the Knowledge & Learning module by geographical, geological, operational and other criteria for the Joint Operating Committees that are associated with those designated characteristics and classifications. Providing the engineer or geologist with a means of marketing and distribution of their newly published, probably published somewhere else first, and well earned Intellectual Property. Where they will be able to use that published explicit knowledge in combination with their tacit knowledge as a service to build their consulting revenues we’ve discussed in the Intellectual Property section of the Organizational Constructs page of our Wiki. IP based on some unique understanding of why that formation or that method of completion has behaved in that matter over the course of its productive life, and the innovative solutions they’ve developed. Solving real life problems that are derived from the lack of profitability. Not necessarily developing new earth shattering, pun intended, shale technology but focusing on the critical science and technological details of the entire oil and gas industry.

As a result of People, Ideas & Objects, our user community and their service provider organizations proving there has been a deliberate lack of profitability, accountability and speed in today’s North American oil and gas producer. And there has been no action to resolve it. We are relegated to rebuilding the industry brick by brick and stick by stick in the vision of the Preliminary Specification and as we’ve defined in the recent series “Oddly Enough, That’s Not Much Different Than the Old Plan.” To make these changes in the institutions that exist would be difficult at any point in time. When these organizations are faced with existential crises such as they are today, then they have the opportunity to do so. No changes will be made under the current administration, we’ve now proven they’re too conflicted and self interested to make the appropriate choices. Therefore it will actually be a simpler process of organizing in our new environment without having to deal with the constraints and compromises of the past cultural influences being considered. We will be able to rebuild much quicker in the vision that has been laid out and gain an efficiency and effectiveness above what a compromised solution would have offered. We are liberated and unconstrained.

The above detailed process of the IP of engineering and geology deployment is part of one of the two processes of innovation provided in the Preliminary Specification. By using Intellectual Property to appropriately manage the development of the science and technology of engineering and geology we are using the tools that were set out in the U.S. Constitution and the primary reason the U.S. is the most dominant economy in the world. Producers today have sought to consistently wash the IP of any vendor across the industry in an attempt to foster copycat styled competition in a vain attempt to achieve cost control. This is contrary to what the law requires, or in other words illegal. And it has stifled the innovation in the industry as there is nothing in it for anyone to bust their brain when the industry just abuses the results. The copycat competition fostered in their environment has ended as Intellectual Property is now recognized as its dominant position in business. Oil and gas will be based on its science and technology of engineering and geology by those who advance it. Copyright provides the monopoly power to express the ideas that are discovered. Therefore limiting the duplication of innovations in the industry and focusing the market on those that have the ideas. Today, in order to adopt these copycat competitive policies, producers had to ensure that none of this explicit engineering or geological knowledge was published. It had to be freely available to anyone and everyone in all of the producer firms. It is therefore undocumented and available for anyone to pick up, publish and begin advancing it by beginning to build their IP and service organization or oil and gas producer around. In today’s business environment there is quickly becoming the understanding that it is a software world. Such as what People, Ideas & Objects et al claim that it’s not good enough to just own the oil and gas asset. You’ll also need access to the software that makes the oil and gas asset profitable. 

Software is derived from Intellectual Property. It is therefore an Intellectual Property world and those that are eligible to earn it and claim it are those that are respected. Trolls, pirates and others are sent back to the fourth century. If you are actively seeking to destroy another firm's well established Intellectual Property by copying it, then you are effectively destroying all Intellectual Property. And you will be going against all those that are now basing their organizations on IP, and that is no longer and will never be acceptable again. You will be making yourself a pariah. The fact that oil and gas has not documented their IP is an opportunity. You wouldn’t be copying any other published works. And the process of having it documented and published by those who will earn the rights should be seen as necessary in order to turn things around in this industry. You’ll not be a pariah, but will be conducting a valuable service that should have been completed long ago. Even if there were published works they would form the foundation of the industry that is readily available and can be seen by those with new and innovative ideas that are outside the domain of the status quo. Expanding the understanding of the industry with the opportunity to publish their new ideas and establish new service organizations or producers around that idea. An endless cycle of rapid and iterative innovation where technologies expand the sciences and in turn expand the technologies… 

Please note that this treatment is different from what was one of the compromises that were contemplated in the Preliminary Specification. Initially, and as the Research & Capabilities and Knowledge & Learning modules are written, they denote that it is a producer based development of engineering and geological based capacity and capabilities. This is no longer the case and is as I’ve defined here today. The earth science and engineering capabilities and capacities of the new oil and gas industry we’re building here are discussed in the IP section of the Organizational Constructs page of our Wiki. We’ll be discussing these points further in our next post. 

I’ve proposed a solution to the chronic lack of profitability in the industry and its associated issues of specious accounting. In late August 2021 People, Ideas & Objects put producers on record that they can’t, won’t and will not ever address their lack of accountability. Leading to the question of whether all of these issues were by design or incompetence. I feel this has now sealed theirs and our futures. The opportunity People, Ideas & Objects sees is that all of us can channel all of these people and Organizational Constructs into innovation, productivity, performance and profitability throughout the North American oil and gas industry. Tapping into their inherent motivations to capture a dynamic, innovative, accountable and profitable oil and gas producer and industry, focused on providing the most profitable means of oil and gas operations, everywhere and always. To enable a continued expansion of the deliverability and reserves to ensure North American energy independence for the lowest cost available to consumers. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Where's the Problem? Part I

 We’re starting off with a new journey here at People, Ideas & Objects with our user community and their service provider organizations. Opening the door to more participants in the industry to be included in the transformation of the old oil and gas industry into the new one built on the vision of the Preliminary Specification. With the size of the Internet we have the room to accommodate everyone. I thought that it would be worthwhile to start here with a quote from St. Augustine. 

Hope has two beautiful daughters; their names are Anger and Courage. Anger at the way things are, and Courage to see that they do not remain as they are. 

Some may state that I’ve had the anger down, which is true, but all of this damage and destruction should be seen as unnecessary. The Preliminary Specification is a radical, surgical reconfiguration of the industry to address it’s performance, profitability, innovativeness, accountability and speed issues, to highlight just some of the larger ones. Where are these issues and whatever could the problem be? And now we’re bringing up speed? When did speed become an issue on People, Ideas & Objects list of objectives? Good question, but it always has. Recall the many times that I’ve stated… 

We provide this by moving the compliance and governance frameworks of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee. Enabling a greater speed, accountability and innovativeness of the producer.

The argument regarding speed may not have been discussed directly as clearly as the profitability or accountability has. I would assert that it is part of dynamism. The issue is of significant scope and scale as speed remains unaddressed in the current environment. It is a result of the lack of accountability mostly, but also the “belief” through specious accounting that building balance sheets is the sole purpose of executive management. When you’re not accountable for incinerating investor money it’s easy to keep the party humming for another quarter. Holding someone to account for the real loss of money is moot when the next truck with new investor cash is in the loading dock. 

Speed comes into play when the continuation of overinvestment as represented by that additional cash coming in from investors eventually leads to overproduction, or unprofitable production as we describe it, that destroys even the specious earnings these producers have reported for four decades. But this process takes time to take effect, think in terms of a few years for it to play out. This is followed by the invocation of the highly effective blaming, excuses and viable scapegoat generating machine that has the effect of taking a few more years before the religion of “capital discipline” is restored and field drilling activity is cut. Think of capital discipline as the brain surgeon who’s favorite tool is a hammer. It is the deliberate destruction of productive capacity of the producer firm, while the market "rebalances." In the course of the point of initial overproduction of a commodity dependent on the economic characteristics of a price maker. This causes the commodity price to drop below the marginal price instantly. And it has historically taken the speed of the industry to cycle through this entire process anywhere from 3 to 7 years. With shale producers looking to establish some solid records in the commodities recovery speed. I have argued that oil and gas will require deliberate efforts to remediate the markets back to normalcy. So yes speed has always been an issue, however the point of the exercise is that the producers would always display their bravery and courage to muddle through, once again. 

Since the commodity responds to any overproduction in real time this response by producers is inadequate and the cause of the 5 reasonable years of performance out of the past 35 in terms of their famed boom / bust cycle. Their accounting methods circuitously avoid the ability to recognize this or adhere to the requirements of basic business principles as those have all been worked out of their “build bigger, better, beautiful balance sheets” business model. Their inability to respond to their shareholders demands for accountability, an issue that People, Ideas & Objects proved on August 31, 2021, is what will be their defining criteria until such time as they are physically removed. Which is the job that the People, Ideas & Objects, our user community and their service providers, engineers, geologists and our customers are undertaking today. 

With the Preliminary Specification each property or Joint Operating Committee is furnished with complete financial statements each month. These will include the actual overhead incurred as we’re eliminating the charging of any overhead allowances. The monthly accrual of depletion will also be conducted for each producer in the property based on a reasonable, and competitive basis for producers to compete for capital in the North American capital markets. Therefore each property will be evaluated monthly as to its profitability / loss and if it is losing money it will be shut-in to provide real value in the business model that we’re pursuing. Incurring what we call a null operation, no profit but also no loss, the producer firm therefore achieves their highest profitability on their overall production profile based on the commodity prices on offer. The reserves will be saved for a time when they can be produced profitably. The reserves are not incurring production and storage costs for the excess production the markets don’t need. And the reserves are not incurring the cumulative and recurring costs of the losses if the property continued its unprofitable operations. But the best part is, the commodity prices would find their marginal price which would define the critical point where production should / should not occur. And the commodity market's response would be instant.

With the Preliminary Specification the organizational speed in which this occurs would be within the following few months that the property slipped below the null threshold. Accruals are done on the production process that will define the possibility of a loss in the subsequent month and this could be the opportunity, should there appear to be a loss, to deploy engineers and geologists to quickly review the property to see if there was anything they could do to immediately remediate the property and move it decidedly back to profitability before it was shut-in. Otherwise once the fact of the loss was verified the property would be shut-in to ensure that the maximum profitability was achieved by all of the producers involved in that Joint Operating Committee. The overall time for this being approximately three to four months contrasts to the three to seven years, and maybe upwards of several decades in the shale era that “capital discipline” provides. I am unaware and it is unknown at this point what this cycle time for clean energy will be. People, Ideas & Objects abbreviated process has the added feature of ensuring profitability in the producer is maximized at all times based on the realized commodity prices. Invoking a market or production discipline over the process that is missing and the main cause of the financial destruction we’ve witnessed today. Alternatively we can wait until oil prices reach negative $40.00 and refinery's make the decision to have producers shut-in production by force.

Once the process of shutting in the property has been completed, possibly as a last act of the engineers who were on the initial team sent in to try and quickly turn things around. A second team is sent in to do a deeper analysis of the issue and opportunities of what could be done. Looking to build the appropriate programs and raise the appropriate AFE’s for any field work that could or should be done to enhance deliverability, reserves or cut costs. This could be a key part of the overall process of innovation that is an inherent part of the Preliminary Specification. And although we haven’t been speaking directly about innovativeness, innovation is part of the genetic makeup of the Preliminary Specification and is defined within two major processes of the system, but also enabled throughout the industry. Our recent discussion of Organizational Constructs includes Intellectual Property of the industry as an organizing principle. How they ensure a rapid development of science and technology with the added feature of eliminating the useless nature of redundancies through repeated duplication.

I’ve proposed a solution to the chronic lack of profitability in the industry and its associated issues of specious accounting. In late August 2021 People, Ideas & Objects put producers on record that they can’t, won’t and will not ever address their lack of accountability. Leading to the question of whether all of these issues were by design or incompetence. I feel this has now sealed theirs and our futures. The opportunity People, Ideas & Objects sees is that all of us can channel all of these people and Organizational Constructs into innovation, productivity, performance and profitability throughout the North American oil and gas industry. Tapping into their inherent motivations to capture a dynamic, innovative, accountable and profitable oil and gas producer and industry, focused on providing the most profitable means of oil and gas operations, everywhere and always. To enable a continued expansion of the deliverability and reserves to ensure North American energy independence for the lowest cost available to consumers. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Oddly Enough, That's Not Much Different Than the Old Plan, Part IV

 With this plan of People, Ideas & Objects, we have a vision of how the new oil and gas industry will be rebuilt. There is much to be done for everyone who has an interest in the oil and gas industry and knows the critical role it plays in society. How the lack of profitability at the producer level devastates all those associated with it. And how truly damaged the North American industry is. Let's begin with two quotes that I find put in context the point where individuals, who see things this way, should look at this once in a lifetime opportunity. 

Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world. 

Joel A. Barker

If your life's work can be accomplished in your lifetime, you're not thinking big enough.

Wes Jackson

It is here that I mention that the monetization of the rights to access People, Ideas & Objects software are considered our revenues for a variety of reasons. We are not offering an investment, we’re offering a software service. People, Ideas & Objects do not have the wherewithal to be offering an investment with the regulatory requirements that are needed for that. This is also not part of our future, desire or need. The right to access the software is the same process that is conducted when purchasing any software anywhere including on the Apple App Store or Google Play. Those that purchase our production rights are our customers.

We began asking some of the difficult questions around how our revenue model was going to operate with this new plan. Let’s start today’s discussion of who we see as the customers that would be interested in developing the Preliminary Specification and in turn gaining the rights to realize the upside of our value proposition in a dynamic, innovative, accountable and profitable industry. Where the new producers' administrative and accounting, production and exploration are all managed through People, Ideas & Objects, our user community and service providers software and services we’re building. If we included the population of those people who work in oil & gas and associated industries we would be accessing a valuable group of customers that know the in’s and out’s of the industry and are able to effectively deal with its issues and opportunities. If we include our user community and their service provider organizations then we would have that same positive influence. And they would have in addition to their part-time revenues as a user community member, their service provider organization as their primary operation of day to day activities and the opportunity to realize the upside of our value proposition. For the industry, all these people would make up a highly motivated group who were fully vested in the future success of oil and gas. 

In addition to our potential customers from throughout the oil and gas industry I believe we have some appeal to the disenchanted oil and gas investors who have left or will be leaving the industry. For them to realize the upside of our value proposition is something that they feel they should have realized for the past four decades. For investors to leave an industry is the ultimate message of displeasure which they began expressing in 2015. Contrary to what the old producers state today about them, they’ll not be returning when nothing has been done to correct the chronic lack of profitability, specious accounting and serious lack of accountability. When they see a solution where these problems are rectified, particularly in the disintermediated and creative destruction world that now exists, they'll return. 

For our customers to have the production rights that we’re granting. Which leverages our claim that it’s not enough to own the oil and gas asset anymore, you’ll also need access to the software that makes the oil and gas asset profitable. Which consist of simply the exclusive right to access the software of the Preliminary Specification from People, Ideas & Objects and the service provider organizations that manage it. Gives them the exclusive right to earn the upside of the value proposition that we’ve defined across the North American industry. Our customers would therefore earn profitable operations on the oil and gas assets they own. If they participated in the development of the Preliminary Specification and acquired rights to access the software without any asset ownership this would still entitle them to earn some of the value associated with the value proposition. Such as a right of access fee. 

This discussion brings up the topic of the overall size of our budget which is significant. Mostly due to the profits and royalties that I’ve defined for myself. These are based on the value proposition that the Preliminary Specification provides over the base case. Although this would be lower than those times such as last April when oil was negative $40. There is a history of the high value of the differential that was accepted by the bureaucrats. The cyclical nature of the “muddle through” strategy has prospered in my estimation for a total of 5 years over the past 35. 1986 being the beginning of when I’ve been able to document that overproduction by our good friends became a global issue in the oil markets. Although current commodity prices have put a bounce in the existing producers' step, the number of times we’ve been here before is in the dozens that have cumulatively made up all of those 5 good years. A failing behavior that is unaddressed and unresolved yet remains to be promoted as the key "muddle through" strategy across the industry. The consolidation exercise will end in tears as the “big is better” mantra discovers “the bigger they are the harder they’ll fall.” The customers we’re addressing here are usually the ones who realize the consequences of the producers past chronic inaction. I’ve proposed a solution that addresses these inherent behaviors, the motivations, the issues and organizations that are necessary to eliminate these difficulties.

Our solution, the Preliminary Specification deals specifically with the chronic lack of profitability in the industry and its associated issues of specious accounting. In late August 2021 People, Ideas & Objects we’re able to record that the producer bureaucrats can’t, won’t and will not ever address their lack of accountability. Leading to the question of whether all of these issues were by design or incompetence. I feel this has now sealed theirs and our futures. The opportunity People, Ideas & Objects sees is that all of us can channel all of these people and Organizational Constructs into innovation, productivity, performance and profitability throughout the North American oil and gas industry. Tapping into their inherent motivations to capture a dynamic, innovative, accountable and profitable oil and gas producer and industry, focused on providing the most profitable means of oil and gas operations, everywhere and always. To enable a continued expansion of the deliverability and reserves to ensure North American energy independence for the lowest cost energy is abundantly available to consumers. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Oddly Enough, That's Not Much Different Than the Old Plan, Part III

 Today we’re going to be discussing the value that the oil and gas customers will gain as a result of their direct financing of the development and implementation of the Preliminary Specification. The three key attributes that are highlighted to begin this discussion are as follows. It is clear throughout this blog and our wiki that there is a high level of motivation for our user community members to be pushing forward at all times based on their distinct competitive advantages. These are in no particular order, quality, specialization and the division of labor, automation, innovation, leadership, issue recognition and resolution, creativity, collaboration, research, ideas, design, planning, thinking, design, negotiating, compromising, financing, observation, judgement and reasoning. To name just a few of their highlights. These also apply to their service provider organizations that are developed to deliver their tacit knowledge as a service in combination with the People, Ideas & Objects software delivery of the explicit knowledge. Second is the engineering and geological capabilities and capacities to deliver the exploration and production operations that in combination with People, Ideas & Objects et al round out the comprehensive needs of an oil and gas organization. Customers would only need to sprinkle in a little leadership here and there. And thirdly, the Organizational Constructs we’ve captured and are an inherent part of the Preliminary Specification. 

As you can see we’ve made some changes to People, Ideas & Objects. Cleaned the place up and moved some of the furniture around. Same people, same furniture, yet it’s a whole new operation! Another thing we’ve done is we’ve changed our funding paradigm. Dealing with the bureaucrats was not something that we could rely on. How could we ensure that their motivation was the same as what we were pursuing? Our concern was they would set the development in motion and then cancel the funding to it, causing a fatal blow to our effort, or any effort to challenge their administration. With the alignment of the motivations of People, Ideas & Objects et al, the engineers, geologists and customers funding these developments, we don’t have these motivational concerns. Each of these individual groups has their own intrinsic motivation to ensure these developments are successful and fully implemented as soon as possible. Why then would we hold out any delay of these efforts being undertaken until our budget was fully funded? We wouldn’t, and therefore we’re not. And as a result we’re proceeding on a pay as you go basis under this revised plan. We look forward to dealing with people who are motivated as equally as People, Ideas & Objects et al are, throughout this initiative. 

Secondly, recapitalization of the industry will be conducted by the customers organizing themselves with the support of those engineers, geologists we discussed and People, Ideas & Objects to purchase the assets from the market of the cash starved bureaucrats. We should note that the prices paid for those assets would not be what the bureaucrats have been swishing amongst each other at hyper inflated asset prices. Alternatively, customers could offer Judges in bankruptcy proceedings with alternative means of profitable organization of the assets as opposed to the current failed management plans. Those are just two routes in which the assets of the industry may be transferred, at fire sale prices, to the new and rebuilt oil and gas industry. 

What we do know today is it’s a new world. One where ideas are the predominant foundation of the industry. Acquisition by the customers of these industry assets would be a great place to start this thinking and apply game theory, strategic and tactical approaches to how those oil and gas assets are moved out of the cash dependent and desperate old producers into their newly formed dynamic, innovative, accountable and profitable oil and gas producers. In the short term they could own the property as a participant in the Joint Operating Committee as a non-operator. Customers may provide subsequent assistance to the banks to provide them with better management of the assets by having the bank reassign them to their more prosperous and viable candidates? Just a thought to get everyone doing some “outside of the box” style of thinking. After all, we'd be doing the existing producers a favor. They’ve all renounced dirty oil & gas and have moved on to clean energy don’t you know.

The issue regarding ideas is the ability to access them legally. Copyright demands their publication in order to maintain the right to express those ideas. People, Ideas & Objects hold the commercial license to develop the software and related services of the Preliminary Specification that I’ve researched and written. Access therefore is controlled through rights and privileges that are granted by the holder of the Intellectual Property. It is here that we find the source of the funding of the development of the Preliminary Specification. We spoke of the motivations of those associated with these new development plans. 

Let me now suggest that there will be derivative rights granted to those customers that are funding the development of the Preliminary Specification. Licenses will be granted to those customers who are financial supporters of People, Ideas & Objects budget. No non-licensed producers will be granted access to the operational software or to our user communities service provider organizations. Granting what we believe to be a significant competitive advantage to those customers who contribute to the success of this overall eco-system and the rebuilding of the oil and gas industry. Enabling what we believe to be an opportunity to realize the acquisition of the full asset base of the North American production profile. And in turn therefore, ultimately earning the entire value proposition of People, Ideas & Objects that has been discussed here before, the one that we’ve valued at between $25.7 and $45.7 trillion dollars over the next 25 years, to flow to them exclusively and for their benefit. With well in excess of $1 trillion dollars in market capitalization in the existing producers, investors do have the wherewithal and the motivation to support our budget and participate as our customers. People, Ideas & Objects therefore look forward to dealing with people, for the first time, that actually have cash!

Much needs to be done in the next few years. The Preliminary Specification needs to be built. The engineering and geological explicit knowledge needs to be captured and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with. I believe it must be done as preparation for the future. But also to learn from the experience of this transition as we’ll be faced repeatedly with situations that share this same scope and scale of change in the near future of this business. We’ll therefore be somewhat prepared and experienced in challenges of this nature.

The question therefore, is this an appealing offer to the investment community? How should we structure the granting of production rights and importantly what level of interest would there be? People, Ideas & Objects are granting these production rights as a revenue generating operation. Do the bureaucrats with their unaccountability and unprofitable operations offer a viable opportunity or alternative? Begging, badgering and blaming in the same way the homeless do on the street. Recall when they begged the U.S. government to step in to save them in April 2020 because they ran their oil prices to negative $40. Maybe I was supposed to forget about that, or at least have the courtesy not to write about it. This is what I like about this business. Creative destruction and disintermediation are about change. The change today is the source of revenue in People, Ideas & Objects revenue model.

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Oddly Enough, That's Not Much Different Than the Old Plan, Part II

 I want to thank the oil and gas producers for their conscientious efforts this year in focusing on increasing their share prices. This has been of great benefit to People, Ideas & Objects and it would be inconsiderate of me not to take the time to say thank you and that I appreciate their work. Where do I start? The standard of performance that you've set for yourselves will be challenging and I certainly wish you the best of luck in meeting those expectations. These higher share prices will signal an opportune time for investors to get out with some of their investment. Funds they could in turn use to finance the rebuilding of the new oil and gas industry we’re starting at People, Ideas & Objects, our user community and their service provider organizations. And there’s more. As we mentioned on Wednesday, disintermediation through the industries engineering and geological resources to establish the foundation of Intellectual Property of engineering and geological explicit knowledge. Therefore People, Ideas & Objects et al provide the administrative and accounting capacities and capabilities. Defining and supporting a dynamic, innovative, accountable and profitable producer and industry. And whereas the engineering and geological resources ensure the exploration and production capacities and capabilities are provided to ensure a dynamic, innovative and performance oriented producer firm and industry are established, defined and supported within our ERP software and their services. 

What’s in it if the oil and gas investors, should they decide to rebuild the industry with us in this manner? Many primary reasons and a couple thousand secondary ones. The first is our value proposition. There are significant costs associated with oil and gas exploration and production that have not been covered by the appropriate revenues over the past four decades. These costs were in turn offset by the excessive level and the high volume of equity issuances made through the capital markets. That was pre 2015 however, and not much has happened since then. Creating the current cash drainage and working capital crisis. The Preliminary Specification rectifies this and ensures that all production is produced profitably everywhere and always. This would create for the investors a valuable and lucrative value proposition that would attach to their, and only their production. We’ll be discussing this attribute further.

What we’re therefore offering is the opportunity for the oil and gas investor to rebuild the industry based on the vision of the Preliminary Specification. With an issue of this magnitude, the first step to its resolution is to organize. To organize anything on a continental system such as the North American oil and gas industry can not and will not be resolved through serendipity or spontaneous order. It must be purpose built within its ERP software first, such as the Preliminary Specification, or there is no conceivable way that the current industry will ever be challenged in its methods and means of management. This last point was proven unequivocally on August 31, 2021 through the complacency in which the officers and directors have approached this issue and its resolution. Refusing to account for any performance or their activities, or generate real profitability. 

Possibly the largest future issue the industry faces is the motivation issue. Currently there is no one in the industry for any reason other than themselves personally with any concern for the firm or its consequences. When the leadership has taken the steps that they have there is nothing left for anyone else to do. There are no resources dedicated to any initiative that is inconsistent with their personal requirements. The denial of People, Ideas & Objects is evidence of that. It may have been prudent for them to have kept their ERP choices open, yet that was not considered. Don’t get me wrong there are many people that are dedicated to the oil and gas industry, are motivated to do the right things, however are unable to do so with the leadership compromising any of their initiatives. Will the officers and directors consolidated mega-corp business model fail? Ultimately yes. Although it is a capital intensive business and the return of capital makes up the majority of its cash flow, it’s performance is substandard. Living off cash flow has proven to be a slow drain of the working capital of all producers, regardless of the commodity prices over the past four decades. Therefore it will inevitably come down to the same issue that has been resolved in the Preliminary Specification, but unaddressed today. The issue of production discipline and a fair and equitable means of allocating who produces. The Preliminary Specification uses profitability as the determinant of producibility, if it’s profitable based on a standard, objective accounting at the Joint Operating Committee or property level, then it produces. The current system of production discipline being practiced is a free-for-all with no discipline other than what is best described as “fools rush in.” When your product is subject to the market characteristics of a price maker this is a fatal approach. The devastated financial status of the industry is that it’s been destroyed. Providing producers with the motivation to continue to “rush in” to get what they can. 

Why is the motivation in the People, Ideas & Objects Preliminary Specifications vision of the rebuilt oil and gas industry different? I’m afraid that’s not a simple answer. My best expression of it would be in the following paper. Free at the link on Google Scholar. Cortright, Joseph (2001). “New Growth Theory, Technology and Learning: A Practitioner's Guide.” Reviews of Economic Development Literature and Practice (No. 4, 2001.) It does an excellent job of summarizing the issues and opportunities. I read an article in 2009 that is no longer available on Reason Magazine where Professor Paul Romer was discussing “New Growth Theory.” And his summary had brought it down to the three things it involved “people, ideas and things,” as opposed to old growth theory involving transportation, finance and communication. I changed things to Objects as we are object based software developers and this is how we perceive the situation in oil and gas today. Interestingly it was in 2018 that Professor Paul Romer shared the Nobel Prize in Economics with William Nordhaus for their contributions to new growth theory. From the paper referenced aboves Abstract.

New Growth Theory emphasizes that economic growth results from the increasing returns associated with new knowledge. Knowledge has different properties than other economic goods (being non-rival, and partly excludable). The ability to grow the economy by increasing knowledge rather than labor or capital creates opportunities for nearly boundless growth. Markets fail to produce enough knowledge because innovators cannot capture all of the gains associated with creating new knowledge. And because knowledge can be infinitely reused at zero marginal cost, firms who use knowledge in production can earn quasi-monopoly profits. All forms of knowledge, from big science to better ways to sew a shirt exhibit these properties and contribute to growth. Economies with widespread increasing returns are unlikely to develop along a unique equilibrium path. Development may be a process of creative destruction, with a succession of monopolistically competitive technologies and firms. Markets alone may not converge on a single most efficient solution, and technological and regional development will tend to exhibit path dependence.

Oil and gas being a complex and difficult science and applied science based business, can not exist for long in the consolidated mega-corp environment with rapidly diminishing cash. And I’ll add engineering and geological talent that will be leaving soon. Society today needs ten ideas to generate an incremental dollar of value. That which could have been generated in the past with just one idea. And what more than one hundred ideas will be needed to build that same dollar of value in the future. Ours, from the point of view of People, Ideas & Objects, our user community and service providers, the geologists and engineers that we’ve discussed throughout here and the Organizational Constructs of the Preliminary Specification, will be motivated to apply this new growth theory for their own best interests. For both their financial interests, as new ideas have monetary value and the career value of their accomplishments. All for the benefit of profitable energy independence across the North American continent, everywhere and always. Post August 31, 2021 we need to ask what is the plan of the existing and consolidated mega-corp producers?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Oddly Enough, That's Not Much Different Than the Old Plan, Part I

  Many might have seen the video of Marine Lieutenant Colonel Stuart Scheller regarding his take on the Afghanistan situation. 

A growing discontent and contempt for my perceived ineptitude at the foreign policy level. And I want to specifically ask some questions to some of my senior leaders. And I’ll say as a person who is not at 20 years, I feel like I have a lot to lose… What you believe in can only be defined by what you want to risk. So if I’m willing to risk my current battalion commander seat, my retirement, my family's stability to say some of the things that I want to say. I think it gives me some moral high ground, to demand the same honesty, integrity and accountability from my senior leaders. 

I too have been demanding accountability for the damage and destruction done overall to the greater oil and gas economy. For the past thirty years we have received no revenue but that has not deterred us from correcting what we fundamentally believe the oil and gas bureaucrats have been doing wrong. Twenty two of those years (1991 - 2013) were consumed in the process of identifying the necessary solution, the Preliminary Specification. I have repeatedly placed accountability in front of those with the responsibility and authority to set their record straight. And now, we have the decisions of the boards of directors and they have walked away as of August 31, 2021. 

Yes we have a new plan that’s very similar to the old plan, I’ll also mention this post with this Victor Davis Hanson quote.

Aggressors have contempt for stronger people. Who have the power but seem to be afraid, or don’t appear to want to do something. And that is a fundamental human question of the human condition I think, but it requires some knowledge of human nature. And I think it’s in some ways a pessimistic view rather than a sermon on the mount.

This is our situation and a good description of the relationship between People, Ideas & Objects and our good friends the bureaucrats. I certainly have been aggressive in my posture due to the nature of the relationship that we have, and the level of frustration at the unnecessary damage and destruction that has, is and will occur as a result of their lack of action. I’d argue that mine is not a pessimistic view but a moral point of view. I wasn’t going to be standing around in 2021 telling everyone I told you so. That is without a solution in hand. 

The process of putting the producers' boards of directors on record was necessary and now it’s been done, they’ve let the deadline pass, we have proof to our claims that profitability and now accountability are not, never have been and never will be in their interest. We can go peacefully along with the rest of our day. What it is they do and how they’ll do it is of no concern or consequence to us at this point. It’ll be entertaining, mind you, but we’ll not expect anything but a continuation of the status quo. And that is what many people want. The point to remember from now on is it’s no longer enough to own the oil and gas assets. Access to the People, Ideas & Objects software makes the assets profitable is what is necessary and what we’re focused on building. There is substantial value in our business model over the base case. But there's one more thing we need before we get to the financial resources. The question of where the financial resources come from to build this is answered in these next few posts.

First of all I’m fully committed to the Preliminary Specification and the organizational principles therein. Particularly the need for user community based, quality software development and the service provider organizations our user community will provide. I believe my current market failure is a result of one absolute, proven, unimpeachable fact that has been consistent throughout my thirty years in this business. Our focus on a dynamic, innovative, accountable and profitable oil and gas producer, as the necessary foundation of a successful oil and gas producer and the greater oil and gas economy is inconsistent with the producers corporate objectives. And as with the experience of the first market failure in 1997 which I detailed in a recent post, our emphasis on accountability was not what Alberta based oil and gas producers desired regarding Alberta royalties. Today’s systemic lack of transparency throughout the industry, the lack of any tier 1 ERP systems are the natural growth from the seeds of these “successful results” of what those Alberta producers realized in 1997. Even though investors are demanding producers upgrade to tier 1 ERP systems, there has been no evidence of action and we can safely assume there will continue to be no action on that front. What I’m doing at People, Ideas & Objects is selling a tier 1 ERP system to enhance producers accountability and transparency. Doing the same thing over and over proves that I am crazy. Or, a level of accountability that is deemed to be the necessary minimum requirement of a successful business accountability is missing. And the cause of that is therefore subject to interpretation as to the motivation why oil and gas bureaucrats seek this obfuscation of their performance.

I am the beneficial owner of the Intellectual Property that makes up this body of knowledge. If the oil and gas industry is as interested in obfuscation why would any ERP provider subject their products' reputation to support that. Which tier 1 ERP vendor would step up to make that difference? Where will other ERP providers make their difference outside of our IP and how will they survive financially when they too have built their tier 1 solutions on enhanced accountability? Can they make a product viable in oil and gas or are they better off pursuing other industries? These are not my concerns and I only point to the fact that what is our IP and the reason it is fully respected by all other software companies. You don’t get far as a pirate in this business anymore. Our IP will also be adhered to by those boards of directors who are respectful of the laws, such as the U.S. Constitution, to ensure they’re not in any breach. 

It’s not just the 35 years that this overproduction issue has been present with all of that time being wasted. It’s also the trillions of dollars of sunk costs that are being added to daily. Unlike my prior market failures, I feel liberated and unconstrained or maybe uncaged would be a better description. 

It’s at this time I want to draw a parallel to today and a well known disintermediation that occurred late in the last century. The software tool that enabled the breakdown of the music industry was the distributed file sharing capability of Napster. It enabled anyone to serve up any part of their harddrive to be a universally accessible virtual hard drive to the world. Without respect to any file privileges, paywall or Intellectual Property constraints. Users employed this for the ability to share and download copies of music, movies and other entertainment for free. Ripping a hole in the revenue stream of mostly the music industry. Napsters business model was unable to generate any revenue for itself and it only attracted costs in the form of litigation and other trouble. Let’s for the purpose of this discussion call this the market failure phase of the music industries disintermediation. Along came Steve Jobs who had disintermediated the computer industry and understood the process principles well. He organized a crippled music industry around the use of iTunes and the ability for people, who were not seeking free music, only to purchase just the music they wanted without having to purchase fifteen other songs they didn’t, and generated a healthy business for Apple. People, Ideas & Objects are now at that same point in time as the market failure of Napster. 

So where do we go and what do we do? The first step taken by Steve Jobs in rebuilding the music industry was to have iTunes recognize and reestablish the Intellectual Property and revenues of the music industry. Therefore we need to go back and read in our new page Organizational Constructs on our wiki. These specific topics are the Specialization & Division of Labor and Intellectual Property organizational constructs inherent in the Preliminary Specification. Specifically, we're beginning that same first step to instil the IP of the engineering and geological resources to document and earn for themselves the Intellectual Property of the exploration and production processes for their benefit and the future of the North American oil and gas industry. Then read the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules as well as the Work Order section of the Partnership Accounting Module of the Preliminary Specification to understand how their IP is organized and monetized for its owners in our software. The capture of this Intellectual Property has never been conducted, is readily available, copyright only requires the act of publishing to earn it, and until such time as it has this secured the industry will have no foundation of understanding of its explicit knowledge or organization of its processes of innovation. It will be those engineers and geologists who capture this Intellectual Property that will have the rights to apply their tacit knowledge of how things are done with respect to the IP they’re able to capture in the market. And then… 

This will be a race to see who can create the most value and established pedigree. The only asset of value anywhere in the world for the remainder of time is Intellectual Property. Those industries that exist today, who remain exclusively dependent on hard assets will have difficulty performing without access to the software and Intellectual Property that are owned and operated by those that own and manage that IP and which makes the hard assets perform and be profitable. It’s not enough to own the oil and gas asset anymore, without access to the software that makes the oil and gas asset profitable. And here’s the point of all this discussion. The Preliminary Specification organizes the oil and gas industry, including the means for those engineers and geologists that will secure and own the IP of the exploration and production processes to employ it, develop it and generate their revenues in the process of making these hard assets perform. People, Ideas & Objects, our user community and their service providers handle the organizational, accountability and profitability, whereas those that take this opportunity will provide the dynamism, innovation and performance. Ladies and Gentlemen, start your blogs. You are the future of oil and gas. 

Well the old boiler plate text just doesn’t cut it does it. Let's try this for a start. Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have 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. 

Our All Reward With No Risk Offer, Part III

 Granting the benefit of the doubt to producer bureaucrats I would say the following. Plagued by indecisiveness and dictated to by the variability of commodity prices. Bureaucrats are standing alone with little to no support in terms of what and where to turn. What has worked in the past, the standard rule book per se, has ceased to be valid and everything they’ve tried has not been able to reinstate their traditional business model of bringing a difficult, rare and limited commodity to market in adequate volumes to meet consumers demands. The disruption they’re experiencing is predominantly due to the transition to an era of abundance through shale. An era that they’re unsuited and incapable to deal with from a business basis. On a broad spectrum of possibilities this may be one scenario of an extreme. On the other is the critical alternative that I’ve been putting across here for the past number of years for the variety of reasons that I’ve documented. Producer bureaucrats seemed to me to be motivated by the self-serving ways in which they prospered financially. One lesson that we can all learn today from Afghanistan is that failure and defeat are clearly recognized by everyone. The bureaucrats' contingency plans to avoid the fallout of failure need to be clearly articulated before the point that they’re desperately needed. This has not been done as there is no expectation that their bankruptcy business model will fail. The only question to ask therefore is this by design or happenstance that the industry finds itself in this position?

We’ve heard the producers' expressions of profitability this past year. It is these same expressions they’ve made for many decades. If these producers have been so profitable for so long, why are they, as a primary industry, in the situation that they’re currently in? Why are they dealing with investors and bankers who are disenchanted? No one believes what producers are saying anymore. Having people believe you isn’t the issue however, it’s that no one trusts them anymore. People feel they’ve been betrayed. That is the point of no return, and what I think applies here. Therefore the question that needs to be asked is what is the responsible thing for them to do, how are they going to be held accountable in the future and what action can define them otherwise and allow them to walk the streets without shame.

Mine is certainly a different point of view isn’t it? What I’m suggesting is that directors take action to control the cash flow of the producers for the benefit of the shareholders and begin managing the producers in a profitable manner. End this cycle of destruction through the funding and development of the Preliminary Specification. Enabling them to establish the means to organize the industry in a manner that is in the best interest of the shareholders. Does anyone now doubt the value and need for an organization to be pursuing the objective of “real” profitability everywhere and always? The core foundations of our capitalist system. Otherwise, we all face what I suggested at the end of our earnings review to be a secure, permanent, independent and unaccountable bureaucratic state. Perpetuated through repeated bankruptcies. And failing in every aspect of their responsibilities. 

I’ve sustained the People, Ideas & Objects initiative in an attempt to ensure that things could continue without a disruption in the capabilities and capacities of the industry. I don’t think that’s possible now. The consequences of the damages realized by bureaucrats willful inaction will be that consumers will once again have a dependence on foreign sources of oil for what I believe to be an unnecessary period of time, until the industry can be reconstituted. I entered this business in 1991 with the opportunity to bring the systems into place where the data was to be captured down to the well level. What would be necessary as a precursor to the adoption of the Joint Operating Committee. Even today this ability to determine profitability at the property level has not been attained. Reporting at the well level was one of the reporting requirements of the then Alberta government's Royalty Simplification initiative. An initiative that ended in my first market failure of attempting to bring a solution to this market. The initiative was contaminated due to the obstinance and desire for producers to be unaccountable to the Alberta government. 

There will be consequences if directors decide not to adopt the business models inherent in the Preliminary Specification in the direction being offered. Just as there have been consequences as a result of the impact of shale in natural gas in 2009, oil in 2013 and 2015 when their investors began leaving. Producers can not sustain a viable, healthy existence without change to their business model. Not going forward after August 31, 2021 will have been a willful decision based on the facts as presented. Facts based on the thirty five year existence of a critical, terminal issue that has been unaddressed and destroyed producers' performance in a now failed industry. Directors' decision not to proceed with the development of the Preliminary Specification will indicate they’ve decided against profitability everywhere and always in North America. Unless they have other plans, outside of consolidation, clean energy, or the space race they’ll need to define the direction they’re headed. What logic, common sense, where are the business principles being applied and what is the plan in this, the thirty sixth year we’re entering that this issue has dominated? Or do they just need more time?

I don’t think anyone would consider that after sixteen years of my public dissertation of this issue that it would have somehow gone unnoticed. I don’t think that after thirty years of bureaucratic abuse someone continues a futile effort without knowing where there’s smoke… I am persistent and obstinate, and for that I would have qualified as a bureaucrat, I just don’t qualify for any of the negative attributes. And don’t think that there’s just me out in the distant field screaming by myself. There are many of us who are now thinking this way and I’ve always resonated with the great unwashed, as the bureaucrats like to derogatorily call us. Access to the oil and gas revenues in a somewhat similar way that bureaucrats have been able to divert them for their cause are not going to be freely capitulated by the bureaucrats. We’ve now put it to the directors. And next Wednesday we’ll know for certain that our future is or isn’t destined through that method. (Hat tip, don’t put money on it happening.) People, Ideas & Objects et al will need to begin the process of how we’ll make the changes that are so desperately needed in the industry. Completely outside of the industry. After August 31, 2021 we’ll move on with those. There’s no one else in these firms for us to deal with now. We’ve exhausted the list and I’m betting they’ll all have said no. It’s not that we didn’t give them the time. It seems to me that we’re the last ones to leave.

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. 

Our All Reward With No Risk Offer, Part II

 People, Ideas & Objects established the issue of overproduction of oil had been well defined in July 1986. The participation of chronic overproduction of natural gas didn’t manifest itself until 2009 with the overwhelming effect of shale. The next defining event the directors need to concern themselves with was the publication of the Preliminary Specification in December 2013. That is when I had the People, Ideas & Objects product defined as the comprehensive solution to both the oil and natural gas overproduction issue and its associated destruction we’ve all been seeing and living with. Why it's such a comprehensive solution is due to the scope of the issue. To solve the issue involves the Joint Operating Committee and by doing so everything within the producer firm and industry needs to be oriented towards the organizational culture of the industry. The industry was established to mitigate risk through the use of partnerships. The industry was also configured to deal with multiple partners due to the myriad of ways in which producers need to interact with each other. Different ownership of surface lands, spacing units, formations, partnerships, financing etc all defined the demand for the Joint Operating Committee. The culture is represented in the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. The bureaucracy has been distorted to focus on the corporation through the introduction of computers in the 1960’s. First they did the accounting, then tax, royalties, compliance and governance soon followed. To where the administrative and accounting are concerned about the corporation and the business of the business is unknown by them. On the other hand, the earth science and engineering resources who are the business learned they could not understand the focus and desire of those on the administrative and accounting side. And as a result we have what we have, two disparate silos within the firm pursuing different organizational objectives. This has led to the need for the Preliminary Specification to move the compliance and governance frameworks of the bureaucracy into alignment with the seven frameworks of the Joint Operating Committee. By doing so, everything within the organization changes. The alternative is a continuation of the failure that we see today.

It’s late December 2013 and the board of directors could for the first time balance the overproduction issue in one hand, and the solution in the other. But that was eight years ago, nothing has been done, and we can assume that shareholders have not only subsidized producers directly with hundreds of billions of dollars in direct support through additional investment, but given up trillions of dollars in opportunity costs that slipped down the drain while the bureaucrats party has carried on without a hitch. And the bureaucrats are 100% correct when they say that the money being discussed here has been washed away and is unretrievable. It’s a sunk cost. People, Ideas & Objects concern is that the total amount of these sunk costs only grows larger each and every year. Responsibility, accountability and transparency (RAT) is not the bureaucrats' forte’ is it? These sunk costs are not recoverable in the sense that they can be recaptured but it is retrievable in terms of skin. What we currently have is an issue that has been well defined since July 1986. The same issue developed on the natural gas side of the business and destroyed prices there in 2009. A solution in the form of a comprehensive approach to these issues which has been available since 2013. And the wholesale shoring up of directors and officers liability insurance in 2020 when I identified these related points.

The aggravating cat amongst the pigeons is the different treatment of directors and officers in the process of bankruptcy. Shareholders as we know are sent on their way in this well defined process, what is it that should happen to their direct representatives? The directors are tossed out as well. Bureaucrats are usually maintained through bankruptcy and are established in the subsequent company in their prior roles. In other words they lose their shares but will be getting new and better ones, but nothing else really changes for them. Directors lose all connection to the firm. And in some cases the officers and directors liability insurance that was maintained on their behalf by the company needs to be either funded by themselves, or in rare cases it’s cancelled or seized by the bankruptcy judge as an asset. Making them particularly vulnerable in the event of bankruptcy being invoked. 

Which of course at $70 / boe bankruptcy would never happen? Ok, the perception that there has been no cumulative damage to these organizations and the industry is common, and absolutely false. These companies are beyond the point in which they could be rehabilitated into viable organizations. Maybe a handful could be, but the time and effort would be monumental, and with the current methods of management, with the issues they face, with so many contingencies outside of their control, or in other words commodity prices, who would be so bold to try. Until management can involve themselves in profitable operations everywhere and always throughout North America, which only the Preliminary Specification provides a viable solution to, the industry will continue it’s steep downward trajectory. The financial condition of the producers is not as represented in their financial statements and their hold on the future is at best tenuous. Big balance sheets mean nothing and do not represent any value. Property, plant and equipment represent the reserves that have been comprehensively proven unable to be produced profitably at any point in their past four decades. If anything they prove the valuation of these assets are outsized when compared to the very low percentage of revenues they generate. Neither higher prices or greater volume will be adequate to make up the difference. They mean these paper assets are being carried and offset by disproportionately high amounts of real, tangible debt incurred through two decades of low interest rates and the producers recording every cost outside of operations as an asset. Producers' futures lie in their own hands through profitable operations that are attainable through use of the software from People, Ideas & Objects Preliminary Specification. Otherwise their reputations precede them. 

The point therefore of our July 2021 RFP Response was to highlight the organizational reasons that the producers need to make this change. In order to deal with any situation demands that you organize the solution first. Running around with your hair on fire is ineffective. ERP software is how organizations in society are organized and operate today. They define, support but also constrain “what,” “how” and “why” things are done. What we can assume in 2021 is that if the bureaucrats had a solution that would have meant they identified the issue and resolved it by now. Which doesn’t seem to have happened. Therefore I don’t see profitable operations ever becoming the norm in the industry under the current bunch. 

As we slip further into the oatmeal of all things progressive in 2021. Maybe it’s best that we realize that the oil and gas bureaucrats' acceptance of their limitations is the far better choice for all concerned. Disintermediation exists for a reason. The status quo’s inability to make the necessary changes to continue in a prosperous way is certainly fact based. A good example is the bureaucratic malaise that’s facing NASA, its prior and current contractor Boeing. This article from Reuters proves one aspect of People, Ideas & Objects' claim, it’s now more than anything a software world. Three entrepreneurs, on a part-time basis, or maybe that would be better classified as hobbyists, Elon Musk, Jeff Bezos and Richard Branson have had little difficulty at times launching rockets and retrieving them safely and undamaged here, there and everywhere. The old school bureaucracy, also known as Boeing, can't get their rockets into the proper orbit. Or here’s a question, since it returned early, did it make it into orbit? It is these issues that are being faced everywhere and in every business. If oil and gas is to perform in the future, it will never be at the hands of bureaucrats. 

What Boeing's rocket failure documents is the complexity of software development, as an addition to the role that it now plays in organizations and its importance in society. Which is now assumed to be something that can be easily undertaken in the bureaucratic business model. And that’s not all. Excessive overhead costs are what we believe to be the secondary cause of a lack of producer profitability and working capital leakage. Excessive overhead costs are wholly attributable to the complexity of the environment that exists today, and the unshared and unshareable manner in which each producer approaches the development and provision of their administrative and accounting capabilities and capacities within each firm. Building bureaucratic, redundant silo’s of exact replicas of each other's administrative and accounting functions is unsustainable and unnecessary with the availability of the Preliminary Specification. People, Ideas & Objects converts the fixed cost administrative and accounting capacities and capabilities of the producer to become the variable cost, industry based administrative and accounting capacities and capabilities. Variable based on profitable and only profitable production. To continue with development of complex ERP software within each producer firm would be an extension of their failed bureaucratic business model. One that may be orchestrated by the bureaucrats as an alternative to People, Ideas & Objects to prove that software is not the answer to these issues. And therefore securing them in their roles for at least another generation. What we can discern from Boeing’s failure, in addition to many of the other failures we see today, is that bureaucracies have a ceiling in terms of their capacity and capabilities. Today’s societal demands far exceed what bureaucracies can competently deliver.

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. 

Our All Reward With No Risk Offer, Part I

 In regard to the Afghanistan situation. It is my opinion that OPEC countries, to continue to anticipate military support from the U.S., will need to fulfill Biden’s request for more supply. 

Short of reading the entirety of the past years' writings, many that may have joined us recently may not have an understanding of the work that’s been undertaken here at People, Ideas & Objects. I thought that it would therefore be reasonable to summarize what it is that is being offered in our August 31, 2021 deadline. The way the past year developed was unexpected and difficult for everyone. It was an interesting year for me as I literally stumbled into things that were discovered seemingly serendipitously through the summer of 2020. The first was with what I wrote on June 2, 2020 when the collapse of prices from a lack of demand were in full effect and producers were being forced to shut-in production as refiners were unable to take any feedstock. Recall bureaucrats' argument towards the Preliminary Specification was that production could not be shut-in without causing permanent damage to the formation. We’ve learned subsequently that this was not the case and that no damage, permanent or otherwise, was experienced in any of the shut-in formations. I noted in the June 2, 2020 post that insurance providers of officer and director insurance policies have at times forced exits of officers and directors of firms through the threat that if they don’t leave, as in the insurance providers opinion the firm posed too much risk for them, they’d cancel their policy. Leaving the officer or director fully exposed to any subsequent legal liabilities if they stayed. This posting hit the highest all-time views of the fifteen years that I’d been writing here. Subsequently on June 9, 2020 Reuters reported that shale producers had increased their coverage of officers and directors liability insurance by 75%.

I was doing some personal research in the July 26, 1986 Calgary Herald. My step-mother had died in a car accident on July 24, 1986 and I was subsequently able to download her obituary on July 29, 1986. The first page I landed on was page 33 of the 26th of July, or the first page of the business section, which had two articles quoting OPEC representatives regarding the price war they had commenced against North American producers. Oil had collapsed to $9.25 as a result of the abundance that was precipitated by OPEC’s price war and times in the industry had never been worse, except for now. This was the beginning of the consequences of the North American producers misinterpretation of SEC regulations that all costs are eligible to be included as assets and the follow-on consequences of over producing unprofitable production. A situation that has fundamentally destroyed the global oil and gas industry, its commodity prices, the service industry and just about everyone's lives that are committed to working in the field. But hey, the bureaucrats are fine and they thank you for asking. Reading the article from July 26, 1986 contains the same content that would be relevant and headline news in the oil and gas industry in 2021 and each and every one of the past 35 years. The article is eerie to read and shameful that this is the case. I can’t recreate or publish the document as newspapers.com is behind a paywall but is available to anyone with a membership. Here are a few quotes from the articles entitled “OPEC Minister Can See Economic Destruction” and “Return to Glory Days Unlikely.”

Qatar’s oil minister has called on both non-OPEC nations and industrialized countries to cooperate with OPEC to work out a policy aimed at restoring stability to world oil or face grave consequences. 

But in Kuwait, the United Arab Emirates’ petroleum minister said OPEC has no alternative but an oil price war until rival producers agree to reduce output. 

Whether gasoline and heating oil prices will continue to drop or rebound instead, whether the devastated economies of oil producing states and provinces like Oklahoma, Texas and Alberta will continue to crumble and whether the debt problems of countries like Mexico will get more severe.

“I’m not aware whether the price war is the best policy to follow,” Nigerian oil minister and OPEC president Rilwanu Lukman was quoted as saying, “but as we’ve already started this approach, we must continue it until the market is stabilized.” 

July 26, 1986. Nothing has been done about this. In a world where the commodities you produce are dictated by the principles of price makers, where one incremental barrel of surplus production will detrimentally affect the prices realized on all production, nothing has been done for thirty five years. It’s not that this is unknown. It’s not that this is misunderstood. In a World Oil article of January 25, 2017 BP’s Chief Economist stated.

The world has about 2.6 Tbbl of technically recoverable oil reserves, with about 1.7 Tbbl located in the Middle East, North America and the former Soviet Union, BP said in the report. Cumulative oil demand out to 2035 is expected to be around 0.7 Tbbl, significantly less than recoverable oil in the Middle East alone, Dale said.

The world has enough oil reserves that can be extracted with current technologies to be able to meet demand two times over until 2050, Dale told reporters in London. As demand growth tapers, holders of these resources could potentially decide to produce sooner rather than later, he said.

Yes I can see now that consolidation is the answer as it addresses these points head on! Here is a list of the costs of production in the various countries. Which is inconsistent with the claims made by North American producer bureaucrats that Saudi Arabia needs $85 / boe for their budget. Which is true, and conversely the demands of just Biden’s next $3.5 trillion bill will be an onerous $737 / boe cost for North American producers. Let’s not compare North American production costs to Saudi Arabia's government budget. It may have been that BP’s Chief Economist and I were the only two people that were aware of the market dynamics over the long term. However, directors in the oil and gas industry know that doesn’t matter.

As I recall, this OPEC price war started the North American producers' now well developed and refined approach of blaming, excuses and viable scapegoats of why they were having such difficulty. They assured us however that they would “muddle through” which certainly satisfies, even still. This is the point that I argued that all that was required was to shut-in some production, rehabilitate the prices and move forward from there. It was the simplest solution to the most devastating and costly problem that the industry had ever faced to that point. Except there was absolutely not one possible way in which it could be done in the business model that existed at that time. And today, short of refineries stopping the intake of feedstock the producers remain unable to solve this. The two major issues that have stood in the way through 1986 to 2021 are the determination of which property should be shut-in. And the conflict between the operator and the Joint Operating Committee as to who has control and who has authority. 

To determine which property should be shut-in should be as simple as determining which property was profitable and which wasn't’. Shutting in the appropriate ones. (The unprofitable ones, if any bureaucrats are still reading.) Oil and gas accounting was and is very imprecise, which we’ll discuss the motivation for in this post. For example, for the province of Alberta natural gas royalties, in the late 1980s and early 1990s, for the second largest producer recorded their royalties in their general ledger at the district level. Which is fine and nothing at issue there other than they had five districts for the province of Alberta. Rendering any calculation of a properties profitability moot when we consider that royalties are by far the largest operating cost. In addition there’s no allocation of depletion or actual overhead at the property level. Overhead was from “allowances'' and both of these are still the practice today. To use anything but actual, factual accounting information in determining whether a property should continue to produce, or not, can not have accruals, estimates or allowances. 

It was May 1991 and anyone today would see this as a systems issue as I did when I started this. The company was Genesys Software Corporation and I was smart / stupid enough to assume that I needed another triggering event to enable me to get into the market. And then it happened, the Alberta government passed legislation and issued the regulations for what they were calling Royalty Simplification, a comprehensive re-engineering of the method and means of how royalties were conducted in oil and gas. Demanding, in my opinion, that accounting down to the well be undertaken. All my competitors were going to need to rewrite major parts of their systems and all producers were going to need a significant upgrade to ERP based applications when the government's system went live in 1994. Royalty Simplification was introducing high levels of systems thinking to the archaic government processes that had survived from the 1960s and putting into place an advanced well thought out requirement. This would be the foundation of our new system and the approach we promoted to Oracle Corporation. Which we jointly undertook from 1992 until February 1997. 

The painful and difficult lesson that I learned leading to my first market failure. The one that I think the investors and bankers have now learned as well. Is what I learned in those formidable days in my previous company. I believed then that accurate and timely royalties would enable oil and gas producers to reduce their royalty obligations to the lowest possible level based on a sound application of these new regulations. Knowledge is not a great defence, it's an awesome offence. Producers believe that obfuscation is the best remedy in any and all regulatory, compliance and governance matters. I believe this is a facade they've been able to hide behind for too long and at great consequence to the industry. Hence my initial market failure, as no producer wanted to be transparent. It’s maybe best to ask an investor if this is why they’re now calling for better governance systems? It was in October 1997 that the Alberta government asked software developer companies to meet and discuss their plans for the future. It was there we understood that producer pressure, mostly through comprehensive non-compliance, had forced the government to make severe changes to the initiative and cancel much of the work that was done by the software developers and start on a new one. Anyone still needing an explanation as to why People, Ideas & Objects needs the funds up front before any work is done should understand the propensities and behaviours of our good friends the producer bureaucrats. Maybe one day I’ll document the activities that occured in that October 1997 meeting, the one that I refer to as my “Dead Cat Meeting.”

Heading back to the beaten path of this post. We come to the other reason that producers could not shut-in unprofitable production, and are still unable to do so today. There is a distinct conflict between the operator of the property, usually the producer with the largest working interest and capabilities, and the operational decision making framework that exists exclusively with the Joint Operating Committee. This is commonly referred to as the rights assignment issue. Here Professor Richard N. Langlois’ research provides us with an understanding of its application and resolution for oil and gas.

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 

The Preliminary Specification moves the compliance and governance frameworks of the bureaucracy into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. Through the Research & Capabilities and Knowledge & Learning modules the knowledge is moved to where the operational decisions are made. It is the separation of the authority from the Joint Operating Committee that is causing many of the performance related issues today. Who’s responsible, who needs to account for this performance or failure? Well there is never anyone held accountable for anything in oil and gas. It all gets washed away in the “muddle through” song and dance. Nothing is learned that’s new, that wasn’t learned five times last year and will be learned many times again. Accountability doesn’t exist anywhere or at anytime due to the conflict between those with, and those who exercise the authority. If a property produces a loss in oil and gas, does anyone hear it? Sorry that’s a tree joke. This unaccountability framework extends all the way to the good old boys in the boardroom. Where no one is ever asked a difficult question. Is it that directors are naive and haven’t an understanding of these issues? I think it’s fair to state that my ostracised and vilified career in this arena proves the old saying that “bullies don’t fight.” They’ve turtled, assuming their traditional posture, to support their “muddle through” strategy at every and any prompting. I can not think of one occasion where they’ve ever engaged me directly. Possibly their investors are familiar with these tactics. The issue that I have is that I’ve predicted many things would be the outcome of their situation. These were always based on the historical actions of others, in other industries over the past century. As a result I’m batting about 1/1000 in terms of accuracy regarding bureaucratic behavior. What I’m apparently unable to conceive of is the dependence and reliance, but also the success that turtling provides. 

This all assumes that I had a modicum of understanding, logic and common sense when the Preliminary Specification was put together. However, all this has been done without the support of the industry and I’ve never generated a penny in revenue! I seem to be getting closer to the point where I can’t discern which is the more pertinent point! But seriously, looking back at the vision I painted in last Friday’s post, where the “normalcy” of a healthy industry that one would expect in oil and gas is not even in the conscious thought of any of those that have control of the industry, is its saddest testimony. That this is all acceptable and part of the day to day in oil and gas is just fine and it’ll all come out in the wash, when given enough time. No it’s not and should never have been accepted beyond August 1986 and this failure is 100% attributable to the directors and officers of the oil and gas producers who have done nothing about this since then. We’ll be continuing with this series to better inform the directors of their upcoming August 31, 2021 decision that we put to them in our RFP Response during the month July 2021. 

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.