Who Will Prosper Now?

 If we take the situation being represented by the producer bureaucrats. That all is well and prosperity abounds. We should ask what brought about this environment, what did they do to bring this about? What behaviors can we expect to see from our good friends the bureaucrats now that they have the alleged well oiled machine operating so well? With respect to People, Ideas & Objects vision of profitable energy independence for the remainder of the century, are we ready to drive the North American economy forward in that possible and probable overall vision. What are producers' plans beyond last year's xeroxed capital budget and drilling plans? How will they address their issues, and begin to provide some profitable stability into the industry by proving, not declaring, they’ve eliminated the boom / bust cycle? Rebuilt the service industry and repopulated the university faculties?  Cash flow is nothing more than the return of previously invested capital. What value was created, where are those “real” profits?

Throughout their administration, and particularly since 2015, we’ve heard nothing regarding their positions other than they’d “muddle through.” Recognition of the fact there are material, existential issues in play, damage and destruction has been realized under their management yet nothing has been done to accept there’s even a problem. With the increase in commodity prices they’re feeling justified in their management and assume that now, things will resume as before. To engage People, Ideas & Objects as the irritant that we are, required nothing more than the effort to stop a mosquito from drawing more blood. Outside of this I see no desire for them to engage in their business in any manner that could be seen or interpreted as a commitment to that business. It was last year there were wholesale declarations that oil and gas would not be profitable and they were moving to clean energy. I fail to see how under their administration the industry would continue in any positive direction. I fail to see under these circumstances why they would be given another opportunity on top of all the other chances they’ve wasted before. So let’s look at this from the perspective of the people who’ve invested all they have in terms of time, energy, money and careers in the greater oil and gas economy. 

Investors

There is no greater signal to management than when your investors no longer support the firm. This only happened recently this century and therefore given time the message may yet still arrive. Cash flow in a capital intensive, primary industry is more than adequate to meet the bureaucrats' needs. What good are petroleum reserves if they’ve never, are or will be able to produce real profitability? The net present value of the firm is therefore zero and this is the protest message investors are sending. People from outside of the industry are looking at these bureaucrats with disbelief at their inability to grasp what it is that's wrong. 

Recall last year, actually just last month, bureaucrats discovered and declared “production discipline.” Now, EOG is saying increased production is the way to go… 

The company has yet to resume pre-pandemic levels of production, but that could change this year under certain macroeconomic conditions, EOG Chief Executive Officer Ezra Yacob said in a virtual energy conference hosted by Goldman Sachs Group Inc. The driller is monitoring global oil demand, inventory levels and unused production capacity within OPEC+, Yacob said.

Culture is unchangeable. Only a rebuilding upon a different culture will be accepted by investors. That’s the message that I’m reading. 

Bankers

There is a backdrop of a scenario where interest rates may be rising in the future. Some say that government interests are counter to them raising rates. That has nothing to do with rates. It is the market that determines rates and the Fed plays along like it has a role. If the market feels the Fed isn’t representing the market, the market will do what it thinks is best for itself and why the 10 yr Treasury Yield is up 61% in 2021. This has put a chill into the market in 2022 and could be highly detrimental to the producer firms who are extensively leveraged. Back when petroleum reserves were everything, banks bought the story. Loaning money to producers on the basis of the proven reserves. As we know, these led to the “ability” of the producer to include as property, plant and equipment any cost they incurred including overhead, interest etc. Inflating the balance sheet and attempting to emulate the value of the reserves. Conversely with higher asset values the proportionately larger, specious profits and cash flow of a capital intensive, primary industry gave the appearance of viability. What the banks have now learned is that without a steady flow of new capital to spend, producer firms are houses of cards in a hurricane.

The concept of a commercial operation, of a business or enterprise with the purpose of money being made and value created has not been the culture in the industry. The point of the exercise or activity is to acquire land, gain production at whatever cost and expand reserves. These, in addition to being fully focused on the latest trend such as shale, are what drive the “successful” oil and gas producer for the past number of decades. The past decade saw the majority of their primary capital sources, investors and bankers, withdraw and time has shown the desperate search for alternative sources subsequently travelled through decapitalizing the service industry, collapsing the commodity prices and now we believe cannibalizing their partners. 

This is the point where bureaucrats feel there's an opportunity for banks and investors to get back in. After they’ve done nothing to resolve, address or even recognize their issues. Just send cash.

The service industry

The service industry is wholly dependent on producers for revenue. There are no other customers of drilling rigs or frac operations. These are capital intensive operations, geographically diverse, highly skilled and labor intensive. Nonetheless, when there is a willing acceptance of the boom / bust cycle by bureaucrats the consequences are fully and completely felt by the service industry. The oil and gas producer generates the revenues that fuels the service industry as well as the bureaucrats. A healthy, prosperous and competitive service industry that is constantly expanding its innovation, capabilities and capacities is a concern of the producer firms. 

Except for now. The consequences of the actions taken over the past 40 years have created a culture that is known and understood throughout the service industry. We can discuss all the conceptual aspects of trust, faith, integrity and goodwill and know that none of these exist. The question that needs to be asked is who’s going to rebuild these field capacities and capabilities when their costs to the producer have now achieved record prices with only 25% of the prior capacity utilization? The second question is who would benefit from a rebuilt service industry and why? 

Staff

The best indicator of the status of the oil and gas industry's employment are Houston and Calgary office vacancy rates. Houston’s has a 23.5% vacancy from a total of 220 msf or 51.7 msf of available space. Calgary has a vacancy rate of 29.9% of a total vacancy of 46.5 msf or 13.9 msf of available space. Houston's vacancies are larger than Calgary's entire market. In terms of the reason why there is that vacancy my assumption is that 100% is attributable to the downturn in the industry since 2015 and nothing from the lockdowns. This assumption is on the basis that leases are long term and subject to the lessee’s long term requirements, not short term trends. Vacancy percentages are not largely changed from 2019. Though there are many firms who have chosen to now work from home permanently, the volume of real estate released as a result would be immaterial at this time, and unknown how much real estate that’s vacant, yet still being paid for.

In the service industry people have moved on to other more stable industries that enable an individual to raise a family and take on a mortgage. In oil and gas those that remain are not far behind in the renouncement of their pledge of allegiance to the corporate logo. It makes me nauseous to think in terms of the scope and scale of difficulties in just identifying the problems here. This may be the hardest of all the issues to resolve. A highly technical industry will regress in its capacities and capabilities for that there is no doubt. This was not necessary.

Tertiary industries. 

The betrayal of those that worked indirectly in the areas of operations and major cities where oil and gas exists were affected detrimentally by this downturn. I would leave the bureaucrats with the question of what it is they plan to do to address these areas. Granted oil prices are up but what have oil prices provided, and for whom, in the past? What’s the plan, how are they going to fix it? Another question that’s pertinent is why will they be doing it?

In contrast, the Preliminary Specification, our user community and their service provider organizations set down a foundation of five organizational constructs in which to begin rebuilding the oil and gas industry into the dynamic, innovative, accountable, profitable, productive and prosperous producer and industries they always should have been. 

• The Joint Operating Committee

From an administrative and accounting perspective this is the long lost soul of the oil and gas producer. In its place there has become a focus on the corporation. There is a divide in producers that is very evident. On one side you have accounting and administration, on the other is geology and engineering. They have no understanding of one another, no communication and otherwise go about their business. When the SEC, Tax, Royalty, environmental, governmental compliance and accountability is needed it is demanded of the corporation. This is what occupies accounting and administration. Note I did not list performance, a key role of accounting. Partners and operations are handled elsewhere.

The Preliminary Specification identifies and supports the Joint Operating Committee as the key organization construct. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. Providing the producer with speed, accountability and profitability in their operations. Identifying and supporting this construct with its frameworks will integrate the accounting and administration under its natural culture.

• Specialization and division of labor.

To organize work within oil and gas demands bringing people from many different geographies together. With the Internet this is enabled and it is the Enterprise Resource Planning (ERP) systems such as People, Ideas & Objects that provide the ability to organize these resources. What we have found is that the existing ERP systems are structured to support and define organizations in the hierarchy. There are many issues with this and People, Ideas & Objects have designed our ERP systems and support to deal with the elimination of them.

The main issues here are. 

• Bureaucrats benefit from existing systems when they are unchanging and therefore keep the organization locked in proverbial cement.
• No growth or upside in organizational performance is attainable without additional resources. Bureaucratic nirvana.
• Locking producers and industry into the Preliminary Specifications definition only repeats these known existential errors.

What we’ve done is disintermediated the producer firms and used the Internet to establish specialization and division of labor as criteria to increase the productivity and performance of the producer. There has been no other means in which organizational performance has increased since 1776 than through specialization and division of labor. To enhance this through the implementation of the Preliminary Specification would be productive however, through our user community, their service providers and our revenue model we have adopted change as the means in which to avoid the return of today’s issues. Therefore producing greater organizational performance consistently from the producers same resource base. 

• Intellectual Property

Copyright was written in the U.S. Constitution On September 17, 1787 in Article 1, Section 8. It is one of the reasons that the Americans are what Americans are, their intellectual pursuits are protected. But please don’t tell any of this to our good friends, the producer bureaucrats. They have circumvented the IP of all their vendors and the service industry and distributed it through those industries in an effort to create excess competition and lower prices. With this they’ve created a situation where a) little innovation is now undertaken when it is distributed and given to everyone, b) duplicate efforts learned repeatedly throughout the industry, only to start all over again in the following years. This is unlawful, disrespectful, unproductive and a massive cost of relearning what we knew before but forgot, or someone new took over. 

By adopting the appropriate respect for IP in oil and gas we unleash the resources of those with the ideas to try and develop them. There are facilities in the Research & Capabilities, Knowledge & Learning and Resource Marketplace modules of the Preliminary Specification for these. By doing so we have adopted a self monitoring system where the copyright laws are protecting those with the ideas and therefore unnecessary duplication is eliminated. If we intend to solve the complex technical and scientific issues that exist in oil and gas for the remainder of this century, which model of treatment of IP is the appropriate one? Which one has proven effective in the past? In addition we’ve thrown the cat amongst the pigeons when we state that the application of engineering and geological IP of the producers was never subject to copyright laws either. It remains open and available for anyone to use. These are now being documented by those individuals in the industry who were involved in the process and have additional ideas beyond publishing to establish products and services in the future.

• Markets and the price system

There are few things in life that are predictable. However bureaucrats build redundant empires. This is best represented by their elaborate oil storage inventory systems that tell them what the world inventory of oil is at. Through satellite imagery they see the oil tanks floating roof shadow and therefore know the volume of oil in that tank. Then they have the global aggregate showing them an inventory number where each team can analyze, possibly in real time, the “situation.” No doubt this is what occupied their time when oil prices were negative $40. If they do this for the world inventory of oil, what else keeps them up at night and gets them out of bed in the morning?

People, Ideas & Objects, our user community and their service providers will be using markets and the price system. In order to determine whether to produce or shut-in a property. If the commodity price is adequate to earn a profit the Joint Operating Committee will produce, if not it will be shut-in ensuring that the corporate profits are maximized when losing properties are no longer diluting profitable ones. 

• Information Technology 

IT for IT’s sake is not what People, Ideas & Objects are doing. We are using IT to solve the business issues in oil and gas. Cloud computing is appreciated for its shared and shareable cost model that eliminates the cost and effort of maintaining non-competitive, technically difficult capacities and capabilities. We are expanding the shared and shareable cloud paradigm to include accounting and administration as a cloud like service to oil and gas, bringing about the same capabilities, capacities, features, variable costs and benefits of cloud computing. We believe that the secondary reason for chronic non-profitability in oil and gas is due to the excessive overhead incurred. Our cloud accounting and administration shares these overhead costs, eliminating the need to redundantly build the same fixed accounting and administrative costs, capacities and capabilities in-house. Capabilities that replicate exactly each and every other producer's functions and costs.

It is with these five foundational constructs and their frameworks that we are using to support, identify and extend the software and services that we’re building for the dynamic, innovative, accountable, profitable, productive and prosperous oil and gas producers and industry. None of these constructs are used in any area of oil and gas ERP today. As a result these systems are deficient and therefore depend on the bureaucracy in order to function. Which is redundant in a world where the Internet exists and the only thing stopping the transition from today to People, Ideas & Objects et al is the obstinance, arguments and self interest of the bureaucrats themselves. 

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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? We know we can, and we know how to make money in this business.

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. 

Just Who is it That You Think You're Fueling?

I’m using this title as another take on words. People, Ideas & Objects put out a vision for the broader oil and gas economy. One that defines the dynamic, innovative, accountable, profitable and prosperous North American producers and its secondary and tertiary industries. Defining the value proposition that oil and gas provides at least 10,000 man hours of labor per barrel of oil equivalent. One which sees North America achieving and maintaining energy independence for the remainder of the 21st century. This vision should be seen as business as usual, the purpose and role of what it is we’re here to do. Why we’re not is a failure of leadership of the producer firms themselves. 

There is a broader vision of the North American economy that needs to be considered with this oil and gas vision. One that sees the role of oil and gas providing the means in which to compete in the global business environment as it develops throughout this century. One that sees the North American economy compete against Europe and China. With the Asian tigers, India and other countries filling out specialized roles for themselves in terms of their comparative advantages. This broader vision deals with how North America will compete against its two primary protagonists Europe and China. The largest consumer of energy, of which oil and gas is 70% of, will be the most powerful economy.

China believes with its form of organization and volume of people they will come to dominate the world economy. Their Belt and Road initiative seeks to leverage their global reach and influence. To date this seems to be effective however there are issues arising from countries being co-opted politically and economically that seems untenable. The scope and scale of the Chinese manufacturing base is impressive. According to the UN statistics reflected below, in 2019 they were the dominant manufacturer. Note the Asian tigers are formidable in this area as well with 15.2% share just from those in the top 10 list. The base of Chinese manufacturing is not something that can be looked at as being too threatening. The two issues I see are they are a low value commodity like manufacturer of goods and they have not developed their own innovative culture. Taking others' ideas will help you get up off the floor and into a standing position, will it make you capable of running a competitive race such as the 21st century? Once you’ve created the culture of using others IP how do you change the culture to rely on one in which you can then compete based on your own ideas? It comes down to how you change culture, and as we’ve learned in many instances, a change in culture is not possible. We may see the optimal performance of the Chinese economy today with serious symptoms of difficulties on the horizon when real estate and other inefficiencies start to come into play. With a population of 1.4 billion people and a GDP of $14.7 trillion U.S. dollars. All numbers are pre-covid 2019.

Europe is the sleepy, self-absorbed and satisfied long lost uncle. They will continue to do well with not much effort with Britain being a standout performer. It’s always interesting to see Italy’s manufacturing performance being second on the continent. Theirs is a stealthy manufacturing capability based on design and innovation. Hidden mostly in the smaller rural areas where communities work together to manufacture pieces of larger products with high levels of craftsmanship. The essential counter to the Chinese mass industrialization policy, and one that I would suspect would continue to prosper, politics aside. Europe has lost substantially in terms of its standard of living in comparison to the Americans and seem to be unconcerned with that and otherwise satisfied. Great difficulties need to be addressed in the area of defence and the sources of basic resources. Areas that will cost more in terms of their standard of living in the future and take more of their focus. With a sizable population of 510 million people and a GDP output of approximately $16 trillion U.S. dollars.

In comparison the North American economy is far more robust than either China or Europe. 

GDP

• US GDP = $21.4 trillion
• Canada GDP = $1.7 trillion U.S.
• Mexico GDP = $1.3 trillion U.S.
• North America = $24.4 trillion

Population

• US = 331.5 million
• Canada = 38 million
• Mexico = 126 million
• North America = 495.5 million

Speaking individually of the three components of the North American economy we see the United States holds an outsized role due to their unique nature, culture and characteristics. Their dominance in Intellectual Property has and will continue for the foreseeable future. This is the critical element that I see in ensuring the competitiveness of this continent's economy for the remainder of the century. As we move into a software and Intellectual Property environment, the value earned through this will be substantial and dominant. The American political environment has accepted that American based companies dominating the country are not monopolies and are needed to compete on the larger global stage. Dollar for dollar their second place in manufacturing is not an accurate representation of their capabilities. In reality the manufacturing base is worlds apart from where the Chinese are participating. Comparing Chinese widgets and trinkets to American advanced devices, granted with many parts sourced from China, is not a one to one comparison. American understanding of the holistic nature of products and business shows that no one has successfully cloned an iPhone from China and succeeded in earning any value. 

Canada could have a role to play in the larger picture of the North American economy. Whether it should choose to do so is a question that will need to be asked and answered in a short period of time. First, Canadians like Europeans are satisfied with their lot and are not complaining about the situation. Currently Canadians attain only 69% of the standard of living of Americans. We should be unquestionably the wealthiest people in the world based on the size of the country and small population. Secondly the politics of the country are deeply distorted and contrary to an appropriate industrial policy. We seem to focus on labor intensive industries in the Ontario (38.3% of the countries population) and Quebec (23% of the countries population) provinces where the value of the country is funneled to devise means of creating work in industries that can’t compete and to satisfy what are called “strategic voters.” Statistics from the Fraser Institute and the Federal government, in 2019 Quebec received $13.1 billion in incremental support payments. Comparing 2019 total Federal payments to Quebec are $25.5 billion ($3,010.00 per person) and Alberta received only $6.3 billion ($1,464.00 per person). In addition to the bias in benefits paid to Albertans, predominantly higher individual taxes makes it a profitable endeavor for the government.

If that’s not all, the oil and gas industry has come under special focus by the Federal government in addition to the bias shown to individuals. From here.

The Canadian oil and gas sector has been a model of shared prosperity for all Canadians. Alberta’s cumulative net contribution to the Federal government from 1961 to 2017 is in excess of $600 billion[5]. Alberta has always been a ‘giver’ within confederation and never a ‘taker’ [6].

This amount seems low to me when we consider three of the most detrimental and abusive policies that were aimed at oil and gas. 

• A direct, and illegal, Federal tax on oil and gas production of 12.5%.
• Royalties paid to Alberta and Saskatchewan for title to the oil and gas were not tax deductible. All other industries, including oil and gas royalties to Native Bands were.
• In the 1980s shipments of oil to Quebec and Ontario were not priced at what was the “world price.” But were heavily discounted so that those provinces could afford to also purchase oil offshore at the “world price.”

This style of lunacy was the product of the prior Trudeau government. Therefore is probably the only reason we now have a Trudeau government. For example even with the downturn of the oil and gas industry, and throughout covid, it’s interesting to point out that Alberta did not receive any of that support outside of environmental groups to assist in the abandoned well clean up. Any American needing to have justification or understanding why they have two Senators who represent each state should learn the counterbalancing effects of such a feature. Without those two Senators they too would be subject to the tyranny of being ruled by the majority. 

This political influence was at its worst in the 1980’s. Today there is a much fairer deal. That is wholly attributable to the Stephen Harper government that preceded Justin Trudeau. Harper’s acceptance was tolerated by Ontario and Quebec until they got their political act together. Harper was instrumental in the Reform Party movement that came out of Alberta who’s claim was “we want in.” At least Canada can look back to Harper’s administration and understand what good government consists of. I don’t expect it to return. I do expect the 1970s and 1980s scenario of papa Trudeau playing out again. As a result Canada’s contribution to North American economic development will remain, at best, what it is today. 

Mexico as part of the continent is a strong export market for oil and gas. Mexicans are hard working people with very good values. Their economy is ripe to facilitate the movement of manufacturing from China for the purposes of this North American future. This is also the role that was seen in the recently signed USMCA which is the replacement of NAFTA. The details of that agreement are in favor of this vision coming true for Mexico with Rules of Origin which gives them advantages and particularly the Mexican people who are now subject to minimum wage requirements, collective bargaining and the elimination of Child, forced or compulsory labor. Whether the political will to commit to a North American policy exists in the corrupt nature of the government will need to be determined by the Mexicans. They have the opportunity in hand and the tools to make it so, I would hold out their role as described being more constructively implemented than what Canada will be able to do. 

Therefore what is the North American vision? From a population standpoint we are the weakest of the three trading blocs. Decidedly so against China. What is a weakness can also be used as a strength and it is here that North America excels. The mechanical leverage of oil and gas is determined to be at a minimum of 10,000 man hours per boe. We can expect that this mechanical leverage will continue to increase as it has throughout history. It will be in the extension of this mechanical leverage through the physical leverage of robotics and the intellectual leverage from software automation that industries will be able to compete on different criteria that neither Europe or China can. Europe and China are not seen as the dynamic participants in high tech industries. This could be for a number of reasons such as the monopoly that the U.S. currently holds. Or the more likely alternative, they can’t compete culturally. China does not protect Intellectual property. It is a culture of reverse engineering and copying of others. These work to a certain degree in industry however we see that the more complex systems are unable to be copied. Why is it that GM, Ford and Fiat / Chrysler are unable to produce commercially acceptable electric vehicles? “Bigger” is no longer better for anyone except the bureaucracy. It is a form of organization that long ago passed its best before date. GM’s establishment of its Saturn division to emulate Japanese manufacturing shows their record of cultural reform. Post Soviet Union, how are communist countries doing?

The level of automation and robotics that are driven by software and Intellectual Property may seem impressive in today’s market. That is by the efforts that have been made in the past. When I think of what software has achieved to date I consider that it has achieved little to nothing. Information Technology's increase in productivity has created what is called the productivity paradox. A minimal and negligible impact on the development of GDP. Application of IT for the wiz bang feature of the day will do little for the productivity or profitability of the oil and gas producer. Yet the pursuit of these wiz bang features has been the only activity bureaucrats have applied IT to. This has led them to believe that IT is a futile effort and pursuit which will yield little benefit. Which is true in their hands, not until IT is used in application to disintermediate, organize the firm to support profitable business models and other uses will IT show its real value. Read the Preliminary Specification and you will find that little to nothing in there has to do with wiz bang technology. 

China’s dependence on other countries for IP will soon be limited to just the low level manufacturing that they’re currently conducting. The treatment of foreigners as second class citizens, such as EverGrande defaulting on their foreign investors. These have set a new tone for how to deal in China. They are a bureaucratic, communist culture that copies others and wholesale betrays their foreign investors. The consequences of these attributes will not allow them to move to the higher quality robotic and Intellectual Property industries that North America will be able to compete upon. 

Europe has had a tendency to depend on the Americans to come to their aid when they’ve failed to tend to their business. Such as NATO, WWI, WWII and recently with Germany’s policy of foreign energy dependence. (See graph below.) This attitude permeates the minds of those that are willingly accepting the European Union dictates. Britain is an exception to the European attitude. Britain has always had a propensity to be able to punch above its weight and works well with their American counterparts. There is an opportunity to include them in trade pacts with North America and join in this overall vision now that Brexit is complete. They would be a valuable draft choice for the North American team. 

The vision that is seen for the greater competition by North America is to establish its oil and gas with profitable energy independence everywhere and always. Allowing the mechanical leverage to grow under the base of what is already established. To have Mexico undertake the transition of key, higher level manufacturing requirements from China and build upon those as critical parts of the continent's labor and supply chain. Where the continuation of the pursuit of the higher level products and services fuels the economy to leverage our throughput through automation and robotics throughout the continent. This is the possibility, how much of it becomes reality depends on the leadership that comes about in the next few years. It is not a woke agenda, it threatens the bureaucrats through disintermediation. It is the culture of the United States that was originally written into the U.S. Constitution. Combining this continent's comparative advantages in constructive and productive ways is the possibility to achieve substantial increases in our standards of living. Oil and gas needs to undertake their responsibility here and fulfill their role of profitably fueling this opportunity.

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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? We know we can, and we know how to make money in this business.

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. 

A Dynamic Oil and Gas Industry

 People, Ideas & Objects make the claim that we instill the oil and gas industry with the capability to be dynamic, innovative, accountable and profitable. Today we’ll isolate and discuss specifically the dynamism developed within the Preliminary Specification and user community. Today it’s clear to see the lack of a dynamic culture and begin to question why isn’t this mindset being used more often. I’ll describe how it is that we’ve approached and resolved this issue in providing our solution to the greater oil and gas economy through the Preliminary Specification, our user community and their service provider organizations. 

In Alberta the government has successfully implemented what I would call a checkstop program “where you have to show your papers!” Using the old German WWII analogy without the accent doesn’t necessarily translate well to text. Today they’re called vaccine passports and they’ve made it fairly simple to use to verify you’ve had your shots. As a member of a few clubs and organizations that control who can and can’t enter without an account or authorization through an RFID chip or other means of verification these checkstops are nonetheless dutifully manned by the current authoritarian who has the right of refusal of passage. These are powerful individuals that then ask for the person's photo ID, which would be redundant from a verification to the systems record on hand, and if masked allow the person to proceed. At some point in our lives I believe we’ll have to turn to productive work again. I can understand that this is done for the first time the member or individual passes through the gatekeeper. But why are we relegated to the constant monotony of doing this over and over? It would seem to me to be a simple update to their systems to recognize that if someone verified they were duly vaccinated, then their membership or authorization would be recognized as such and they could be verified at the point of entry through their membership or authorized security protocol and skip the rest? I understand that there would be the risk of someone having their membership lost or stolen. Or in the case of a membership, someone loaning it out to someone who may not be vaccinated! 

Whether this covid approach is a feature of being uniquely Canadian. A Chinese communist takeover or as I suspect, the fact that systems have been highly rigid and unbending, an organizational albatross that has overtaken what an organization is and how it functions. Where the person you need to see to make these systems changes remains secluded, unknown and invisible five miles away and obscured with multi-colored paper forms. Teaching everyone to accept what the situation is and to forget about reality and start the process of feeding the machine the output from that other machine. Such is the world we’ve created. We can choose to live in it, or we can say something not politically correct, and fix it. These are symptoms of all software systems. We have created an unchangeable environment that has locked us down from innovating and to the greater need of being dynamic throughout society.

The means and method that People, Ideas & Objects have used to resolve the issue in the ERP market of oil and gas is through the implementation of our user community. In doing so the first thing we did was shut off all our contact with the producers themselves. Our developers will seek and receive information exclusively from our user community. Our developers are deaf, dumb and blind to all others. Producers and others needing to have changes made to the systems of the Preliminary Specification will seek out the appropriate user community member authorized to deal in that specific process of concern. This may be directly through whatever means of communication, or it may be indirectly through the user communities work and ownership of the service providers that are implementing, managing and operating the software and services on behalf of the specific industry process the user community members are authorized. It is only the user community members that are authorized and capable of making changes to the underlying Intellectual Property of the software they’ve designed, developed and are managing in their service provider organizations. They have a vested interest in fulfilling their objective of providing producers with the most profitable means of oil and gas operations everywhere and always on the North American continent. 

I tell people that software is the worst business to get into. All the costs are upfront and all the revenues are on the back end, if you should happen to ever get there. Which sounds like some other businesses like mining and such. What mining has is a resource that’s known, it will at some point generate revenues, the question remaining is will it be commercial? With software you have something that might be a dud. And not from a commercial point of view but a revenue point of view. It’s therefore a hard slog to get to the point of revenue and very few make it beyond the point of greater than $0.01 in revenue. Once the software company achieves revenue in the form of product sales then the secondary difficulties of code and customers occur. As sales increase the number of customers, features and time increases the volume of code making it difficult to conduct changes to the application. Change demands extensive work on the code, which no one wants to pay for, see the first software business issue. Secondly the deployment of the software in terms of implementation and training of any changes at the clients becomes a greater challenge with the larger customer base. Which is another budgetary item that is debated between the vendor and customer. In oil and gas ERP this model is broken. 

If we look at the manner in which producers have dealt with what could be formerly called the service industry. The approach that was used by the producer bureaucrats to raid the value from that industry was developed during the 1990’s with the ERP software vendors. As of 2000 this more or less left IBM in the game who subsequently sold out in 2005. Today you can imagine the dynamism. Which has worked wonders for the bureaucrats in terms of the enhanced accountability to their shareholders. And why producers investors are currently demanding that the industry undertake the use of tier 1 ERP solutions such as People, Ideas & Objects use of Oracle Cloud ERP. This ERP solutions sub-industry has been the deadzone for the past sixteen years and was the walking dead for at least that long prior to that. 

Which brings me to the last point of being in the software business. Investors look at the overall situation in oil and gas, understand the proclivity of producer bureaucrats, see the small number of producer firms and they say they’d never invest in oil and gas ERP systems. I am unable to provide anyone with a return on their investment and therefore choose not to offer any equity. It’s futile. Tier 1 providers also high tailed out of the industry as they found producers incomprehensibly difficult to deal with. And banks never loan money to software companies. Our budget demands are excessive and must consider these points. In my preparation, I fail to understand any expectation that I would build the Preliminary Specification and manage an unmanageable organization's capital structure.

We’ve taken these facts and formulated a different approach to funding People, Ideas & Objects and our user community. To avoid these issues and achieve the dynamic nature that the oil and gas industry needs to attain; demands that the software and most specifically the ERP software must be designed to change. And therefore our revenue model, outside of standard operations and maintenance costs, will be based on the changes that are made to the software base. An additional cost for the implementations, maintenance and operations plus the anticipated development costs will be assessed for each year once the commercial software is complete. An equalization of those costs and an assessment of the next year's costs would be done at the beginning of subsequent years. The producers or the production of oil and gas has to have some skin in this game. No one else is going to come to their aid. (Please note the service provider organizations are wholly independent from People, Ideas & Objects.)

As we anticipate, expect and are building our solution for the entire North American based industry's use, we’ve therefore achieved the definition of crazy when we state such things. However we have to ask, who will be providing the industry with solutions? Will the industry continue without a radical change and where will the focus come from to do so, bureaucrats seem to be focused and busy on their personal lives? And who would be able to develop other, workable and new ideas to deal with industry's issues? A solution that needs to ensure they don’t use any of the legacy of Intellectual Property that has been posted on this blog and elsewhere for the past number of decades? 

The budgeted costs of our initiative are dispersed amongst all of the producers based on their North American barrel of oil equivalent capacity. Instead of each producer developing their own software solution, building their own accounting and administrative capabilities and capacities. What People, Ideas & Objects, our user community and their service provider organizations are offering is to establish the software and service providers on the same basis of the principles that underlie cloud computing. Making oil and gas “cloud enabled ERP software, accounting and administration.” Turning all of the producers' costs variable, based on production and enabling our price maker strategy to be employed. In addition we are using specialization and the division of labor to increase the industries throughput from the same resource base. The extensive overhead costs that are incurred by the industry today are therefore reduced by efficiently combining the budgets of all producers in the software development, administration and accounting processes. Redundant duplication of these same capabilities and capacities in each siloed producer are the secondary reasons for a lack of profitability. These areas are not distinct competitive advantages of the producers. Our value proposition eliminates these destructive costs being incurred by the inefficiencies currently employed by bureaucrats that are in addition to their uncontrolled overproduction. That’s how we define our success and how we’ve determined this software company makes it to the revenue side of the software equation, by building substantial value for the industry and all its stakeholders. 

The bigger picture may be lost in the details of what it is we’re doing. Software rules the world and more than anything it is locking us into the status quo. We have to break out of this in a deliberate act to avoid the pitfall of what I describe is a modern day software bug. We will establish the user community as it is configured in People, Ideas & Objects with the exclusive right to control the development of this Intellectual Property. They therefore are the only ones our developers can turn to. They are the only ones that producers can turn to. They are the only ones who will have the rights to establish service providers. They are the ones that are on the ground with the day to day activities in the industry with the service provider organizations they operate. They will be seeking and receiving input from producers. Developers will be at their disposal to make the changes they need and producers want in order to ensure that the industry does not fall back into a situation where the software is dictating to us what to do. Their objective is to ensure that we achieve profitable energy independence on the North American continent everywhere and always. So that everyone involved in the greater oil and gas economy benefits. As we see without “real” profitability everything just dies. User community members have distinct and valuable competitive advantages unique to the 21st century. These include quality, specialization and division of labor, automation, innovation, leadership, integration, issue identification and resolution, creativity, cooperate in the use of conflict and contradiction to conduct real collaboration, research, ideas, design, planning, thinking, negotiating, compromising, financing, reasoning, observation and judgement to name just a few. Leaving computers to manage the data and processing. These are the costs of doing business in the 21st century. I think we’ve established that our costs would be lower than what is offered today. That an appropriately funded community such as this would not just be dynamic but also lead the industry in terms of the accounting and administration of oil and gas. Where it would actively anticipate and drive change to ensure the industry remained dynamic, innovative, accountable and profitable. And this is what People, Ideas & Objects, our user community and their service provider organizations propose as the alternative to what is provided today. An altruistic and possibly naive vision that has been ostracised and vilified by the bureaucrats due to their disintermediation in the process, all while they’ve whittled away the value for everyone of everything.

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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? We know we can, and we know how to make money in this business.

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. 

A New Year

 2022 will be our seventeenth year of writing here, what we affectionately call the ugliest website on the Internet, and in May we’ll begin the thirty-second year that I’ve been pursuing this, whatever this is. Marking time is the most significant and only achievement that I can lay claim to; therefore please be tolerant of my overt boasting. During the same period of time, our previous post documented the road producers travelled in terms of sourcing and expending the financial resources of others in their zeal to do nothing constructive. Where investors, bankers, the service industry, rampant overproduction and now working interest partners have and are being exploited for the value the producer bureaucrats desire for their personal betterment. Who’s next is the big question? I don’t know as I’ve always believed they would have been denied their bounty at each phase along the way. So far I’ve been wrong, or is it that we’ve all been wrong? To say that I see things in the industry differently is an understatement. Persistence is the key to People, Ideas & Objects success and we will succeed at some point. I just can’t for the life of me understand how the industry has become so distorted from reality today. In the act of marking time, investors began leaving the industry in 2015 which was seven years ago. And still nothing is done to recognize their investors' fatal lack of faith and address the specific issues they’ve raised. What we do have is a capital intensive, primary industry. Hence the cash flow will always be exceptional due to the history of prior investments. In addition these cash flows are representative of the industry holistically. The service industry provides oil and gas the ability to extend their organizations across vast geographies and specializations that would otherwise be internally necessary and impossible to attain. These cash flows were hijacked for personal bureaucratic purposes, and now with diminished financial performance and capabilities, pale in comparison to their demands.

We’ve chronicled the behavior of the bureaucrats to engage in a list of excuses, where they’ve sought to blame the difficulties they created on the basis of some contrived, as we call them, viable scapegoat. This list has been comprehensive and few have avoided the scowl of the chorus of bureaucratic allegations. What we do know is that it’s not the bureaucrats' fault. We must be close to the end of the list as it’s the investors who have become the chosen ones to fill the current category of viable scapegoat. This according to Harold Hamm of Continental Resources in a World Oil article entitled “Hamm says privately held drillers have more freedom to ramp up oil output.” 

The Oklahoma billionaire is acknowledging what has become a defining characteristic of the U.S. oil industry as it recovers from the worst effects of the pandemic. While publicly traded companies are pressured by investors to keep production flat and prioritize dividends and stock buybacks, private operators are adding more drill rigs across the country, responding to tight supplies and this year’s rally in crude prices.

Hostility abounds from these once proud producer bureaucrats. In another World Oil article entitled “Shale drillers face record cost pressures as banks shun the sector” it documents the banks are avoiding the sector and service industry costs are at record levels. 

HOUSTON (Bloomberg) --Oil drillers in the biggest U.S. fields are shouldering record costs at the same time that some banks are increasingly reluctant to loan money to the sector, according to the Federal Reserve Bank of Dallas.  

With what we’ve anticipated for well over a decade, expected and has come to be. The service industry has been severely deprecated as a result of the chronic abuse and treatment they received from producers over their entire history. Figure 4. from the IEA showing the Capital Expenditures for 62 U.S. oil companies reflects the level of field activity does not justify the “record” prices being paid. It reflects the extent of the damage that has been realized there. Field service capacities and capabilities are diminished. Their financial resources are extinguished in a manner that the producers should study to understand they are the precursor to their own financial future. Why would an investor put money in the oil and gas service sector to watch them cut up their equipment for scrap metal? The first time it happened they didn’t have a choice, the second time they’re not going to participate. This will only be resolved in a process where the oil and gas producers begin to understand the benefits and responsibilities of running a primary industry. Bureaucrats have fully comprehended the benefits. Now someone will have to show some responsibility by having the producers finance the rebuilding of the entire oil and gas infrastructure. And to do so at their expense. Everyone else has gone. This is a key part of the Preliminary Specification, our user community and service providers. For details please review the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules. 

Throughout 2021 commodity prices have been healthier than at any time in the past seven years. The key to understanding producer bureaucrats' performance is they’ll always mess it up somehow. 2021 saw the trend of what People, Ideas & Objects call “profit hedges” that defined producers' performance as acceptable at prices that are substantially lower than what today’s commodity market offers. Hedges that state to an organization “not to conduct any risk or innovation. The company’s future is set and there is nothing that can be done by anyone to increase our performance, only decrease it by mistakes, so do nothing.” Unaware of any other thoughts outside their groupthink mindset that rules the oil and gas domain. We’ve seen the effect of the service industry being forced to cannibalize their equipment to survive. Producers will be paying the consequences of these (in)actions for this irresponsibility. We now believe producer bureaucrats have begun the process of cannibalizing their own working interest partners share of the properties they manage as operator. Not handing over the monthly cash proceeds of their net profit operations. In essence taking the cash flow of their partners. People, Ideas & Objects are otherwise incapable of explaining the record balances and rapid increases in accounts receivable and accounts payable over the last two quarters since the material nature of these hedging offsets began. We believe bureaucrats are seeking to harbour cash to pay their recognized, realized and unrealized hedging losses.

Luck favors the prepared mind. What is it that the oil and gas industry is prepared for? I’ve been working to resolve the issues that I felt were material to the financial and operational health of the North American producers since 1991. This effort was on the basis of the chronic overproduction of North American producers that caused the collapse of oil prices in 1986. An issue that has repeated itself many times since then in both natural gas and oil. Producer bureaucrats are the only ones who have personally benefited financially throughout this time at the expense of every other stakeholder in the industry. They’ll continue to do so until it becomes untenable even for them. There is no evidence in their actions to suggest otherwise. There is no preparation being made to do otherwise. There is no consideration of anything other than business as usual, a shift to clean energy to participate in a non-performing sector of the economy where accountability has never been expected because they’ll be saving the planet. Even in the face of absolute and total collapse of the financial support of the industry. Where the field capacity and capabilities are deprecated to the point where the current activity level of 25% of 2015 levels invokes record costs. If only someone would have suggested a solution to all of this! History shows that People, Ideas & Objects identified these specific issues many decades ago and published our solution in the form of the Preliminary Specification in August of 2012. Based on a decade of research into “what,” “how” and “why” the oil and gas producer and industry would need to be organized to function and operate to resolve these issues. What was seen as radical surgery and deemed crazy by the bureaucrats now pales in comparison to the radical surgery that is needed to fix the oil and gas industry. And to quote Forrest Gump, crazy is what crazy has done. Or something along those lines. What everyone now has is proof that producer bureaucrats can’t make money and can only destroy value in all its forms. Bureaucrats don’t care. People, Ideas & Objects, our user community and their service providers are prepared to implement the Preliminary Specification where we know we can, and we know how to make money in this business.

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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. 

Leadership Capitulation, Part V

 What right do we have to steal oil and gas production from future generations? We have an obligation to our future selves to ensure that we use these resources responsibly. By producing them profitably, everywhere and always, and handing down a profitable, prosperous and viable industry similar to the one which was handed to us and destroyed by these bureaucrats. Why is it that a handful of bureaucrats have chosen they can ignore these needs to personally benefit instead and so willingly cause so much damage and destruction? To the point where they claim they can’t make money in oil & gas and therefore clean energy is the future. Would profitable oil and gas exploration and production everywhere and always lead to higher energy costs for the consumer? Possibly, which was the caution bureaucrats stated was their concern that renewable energy may become competitive price wise. In theory then, to avoid the chance that renewable energy became viable they financially crippled oil and gas? And now in the ultimate hypocrisy, after decades of feigning the boogeyman of renewable energy, it is they who are the ones that are diverting the oil and gas revenues to fund their clean energy investments. Is there any clearer separation that oil & gas and clean energy are two separate and distinct industries than these words of the past bureaucrats? Investors who financed the development of oil and gas are not going to have the revenues from those investments now diverted to another industry in an unauthorized and unaccountable manner. This story hasn’t been written yet, as the investors will begin with chapter 1 very soon. Diverting revenues of a primary industry is the ultimate betrayal of all those who participated in establishing them. If there will be higher commodity prices they’ll be taken into consideration by consumers to make the more effective decisions as to how they’ll use them. Oil and gas’ value proposition is at a minimum leveraged to the point of 10,000 man hours per barrel of oil equivalent. At $72.38 / bbl that means the energy cost per man hour is $0.00723 / hour. If the U.S. consumes 35 mmboe / day, oil and gas provides the labor equivalent of 43.75 billion eight hour man days, at $0.0578 per day for each one of those many billions, each and every day. If bureaucrats are unable to make money in a business with that value proposition, are we not witnessing the pinnacle of incompetence and corruption ever known? They should immediately step aside. People, Ideas & Objects, our user community and service providers know that we can, and we know how, to make money in this business.

Here’s my version of the history of how the bureaucrats have so financially damaged the industry and left it destitute. Where all the value that had been built up by prior generations, and all the incremental investment made in the past four decades has been mismanaged and destroyed by the bureaucratic methods we’ve discussed here at People, Ideas & Objects. These are just the highlights of course, there were many other missteps along the way. 

First it was their investors that “betrayed” the bureaucrats by cutting access to “their” never ending supply of cash which had become the only source of incremental value for the industry. This set the industry on a different trajectory where layoffs were necessary and changes to the way the firm managed its cash, in other words who supplied it. With the follow-on consequences of people looking to other industries for employment, clearing out the engineering and geology faculties in universities and generally giving up on the “boom / bust cycle.” Putting families and mortgages at risk was no longer considered a quality of life attribute. Therefore banks became the means in which to make up for any cash shortfall. The innovation of including the amount of remaining leverage on the lines of credit into working capital calculations made everything appear operational once again. That is until the banks began to tighten, unnecessarily bureaucrats say, with their six month reviews that eventually revealed they were in the same category as the investors. Nonetheless bureaucrats were well along in their “muddle along” strategy that involves them waiting out the investor and now their bankers inevitable return. Possibly stating “They’d be back soon, as they’ve always done.” What to do in the meantime with so much field work to be done and no capital. Other than to proceed with their “capital discipline” and pay the service industry when that investor and bank money arrives after they see the brilliance of what’s done. These actions devastated the service industry's financial core, crippling its capacities and capabilities, trust and faith in the producers. It was this past year it could be heard bureaucrats saying “That worked well for us but there’s no chance of it working now as the people in the service industry have become so difficult to deal with.” Production then became the way to go for that hard earned cash. The difficulty was and always will be to make sure the commodity prices remain in positive territory. And now with hedging contracts creating large offsets that are eating any cash like nothing bureaucrats have ever seen before. It’s time to have the working interest partners in the Joint Operating Committees give up their net profit proceeds from their shares of the properties bureaucrats operate for them. That’ll keep them afloat in terms of cash for the next few months, until the investors and bankers come begging to get back in. 

Who’s going to step up and save this industry? No one. There’s nothing to save as there’s no value left when the industry consumes cash in the process of production. The industry itself is going to have to resolve this themselves. Bureaucrats doing nothing but begging, borrowing and stealing are not attractive in terms of what the business community expects. Implement the Preliminary Specification. Rebuild the oil and gas industry on the basis of profitable North American production everywhere and always. Financially perform for a decade and maybe someone will show some interest. It is the height of laziness and sloth that the bureaucrats are still waiting for new investors and bankers to return with cash to their chronic mismanagement and lack of performance. Particularly when bureaucrats have done nothing regarding the issues these people raised as early as 2015. There’s nothing being offered and therefore no one’s interested. Especially when those involved are mostly interested in maintaining the status quo of controlling the oil and gas revenues for their own personal benefit, gave up on oil and gas as they declared they couldn’t make money, moved on to the clean energy business, feign they have no understanding what the issues are and have not performed for four decades in the two most critical commodities needed by the most powerful economy known to man. The Preliminary Specifications business model makes the industry perform financially.

I’m certainly on record by attacking with severe allegations I’ve made regarding bureaucrats, their lack of performance and inaction. There’s never been any deception on either side of our relationship with what each other is looking for from each other. The annihilation and obliteration of the other. To state People, Ideas & Objects case diplomatically, it is to disintermediate the industry. Calling them out is what I will continue to do for as long as they exist. I can’t accept the level of destruction and damage that has been realized in the North American oil and gas industry. It is the source of our substantial value proposition. It has passed well beyond the point of acceptability and the inability of the self interested parties to do anything about it is astonishing. It is only they who have the accountability, authority and responsibility to make the changes to resolve these issues and they who cease to defy the common sense and logic of the difficulties they’re creating for everyone but themselves. That I’m able to maintain the level of civility that I have is a miracle to me. That my readers have to look through my habit is appreciated and I know there is an understanding of these efforts. We’ve come a long way and the days of the bureaucrats continuing are fading quickly. Words that I’ve stated on many occasions but the scale of their difficulties is truly impressive. If we should hope to see the necessary organizational changes conducted by bureaucrats we understand their culture stands in their way. They know the end of the road is their destination and they’re just riding it out as long as they can personally benefit from it. They’ll take credit for the things of which they’ve had no involvement in and promote it as their own ideas and efforts. Such as this jewel I saw here late last week. 

As background to this jewel, it is within the Preliminary Specification that People, Ideas & Objects, our user community and their service provider organizations enable the producers and industry to obtain North American energy independence and profitable operations everywhere and always. We do this through the mechanisms that provide for “production discipline.” The two key components of this discipline is the capability gained from the comprehensive reorganization, systems development and processes to produce financial statements at the Joint Operating Committee or property level. A capability that can not be conducted anywhere in North America with the systems that exist today. A capability that converts all of the producer's costs to variable costs. Variable based on production. Therefore if a property begins losing money as defined by its specific financial statements, it can be shut-in and worked on from an innovative point of view to return it to profitable operations. Generating a null operation while shut-in with no profit but also no loss. It’s this ability to only produce profitable properties that provides the motivation, or production discipline, for the producers to ensure they no longer dilute their corporate earnings with any losses from losing properties. Maximizing their profitability under any production level of their production profile. Enabling them to perform in the capital markets. The complexity in which we’ve been able to achieve this change is complex and difficult, it is a foundation of the Preliminary Specification, our user community and their service provider organizations. And is unattainable today anywhere in the North American oil and gas industry without the People, Ideas & Objects et al.

In an article from World Oil entitled “Shale drillers’ newfound commitment to production discipline appears to be paying off as crude plunges toward a bear market.” Producers have discovered production discipline? People, Ideas & Objects would ask what is their motivation for doing so? Or is it just their poor cash management over these past decades, the lack of funds and of financial support causing them to appear that production discipline is under way? Unable to finance any field activity due to the lack of field capacity and capabilities in the service industry, the lack of staff in that industry and internally, with the fact everyone knows their game of never paying and that they have no money. That doesn’t stop them from making the claim of their “newfound commitment to production discipline” though. Recall their history of excuses, blaming and viable scapegoats. It appears to me that there must be a demand that this issue be addressed by the bureaucrats from someone they need something from? Someone like an investor maybe? In the same article they assert that production discipline is built to last and the 2022 drilling budget will be as the quote from some “investor” claims. 

“The latest market pullback comes at a fortuitous moment with respect to 2022 E&P drilling plans,” said Michael Roomberg, who helps manage $3 billion at Miller Howard Investments Inc. The slump “will likely give pause” to any explorer considering boosting production, which will keep returns robust, he said.

It's always something they’re forced to do. Spun as a feature, not a bug, with the promise of new found greatness down the road and riches for all. Promise the world, with no intent to fulfill the promise and no means to do so at some future undefined and unknown date. To claim production discipline legitimately would demand bureaucrats build the Preliminary Specification. And people wonder why it is that I’m so disrespectful when bureaucrats don’t even put the effort in to be honest. 

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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. We know we can, and we know how, to make money in this business. 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.

Leadership Capitulation, Part IV

 In business nothing positive ever comes about from everyone thinking in the same direction. The harmony and passivity of today’s bureaucracy throughout that peer group is a classic example of the theory of groupthink. And the reason oil and gas has quietly sailed over the oceans edge. Without the conflict and contradiction that I indicate in the user community vision being used as analytical tools to get to the truth of the facts. We will only be replicating prior or creating new failures of possibly greater disastrous results and consequences. People, Ideas & Objects are not creating a hostile environment in the user community. On the contrary, we’re building a collaborative environment with the appropriate tension that avoids the groupthink pitfalls that are created when everyone goes along to get along. With the toolkit of conflict and contradiction there is also the need for cooperation. That someone has raised a point with a different perspective does not make what you're suggesting wrong or inappropriate. Your perspective may need defending and the need to understand the other perspective is a necessity. There may be a hybrid of the two that can be reached and seen by all as the optimal solution. Or there could be another method. Innovation and progress are not linear. The search for the optimal method based on the Preliminary Specifications vision is the journey we’re pursuing. 

When the CEO’s learn they’re profitable in everything they spend they’re like surgeons taking on the god complex. Their commands to the CFO these past decades have been to pay the bills, raise the money and file the reports. There’s no other role asserted, there’s none appreciated and there’s no other role culturally acceptable, it's bookkeeping. The evidence of this is everywhere and those that feign financial control of the industry have themselves subscribed to the talking points of “building balance sheets” and “putting cash in the ground.” It is these officers and directors that lost the script many decades ago and we need to restart and rebuild the industry without them as soon as possible. What risk is there in doing that? What damage would ensue and where would that leave us? The CFO quite simply should have been saying, “No, we’re not going to do that.” and asserted the appropriate business environment through to the producer firms officers and board of directors of the necessary decisions. If the CFO’s recommendations were consistently not accepted then as professionals with a personal risk and obligation to the shareholders themselves they would have needed to resign with the understanding they were unable to do their job. Publicly mouthing the “building of balance sheets” and “putting cash in the ground” or going along to get along should never have been the role they adopted. 

The conflict that exists between the corporation and Joint Operating Committees in oil and gas has been generated as a result of the CFO’s being unable to stand up for the appropriate financial and systems requirements. The derogatory attitude and manner of consideration that accounting just needs to pay the bills is the final manifestation of the chronic weakness in these CFO’s. The ability to spend the financial resources on the appropriate tier 1 ERP systems and enhance the quality of accounting is a direct result. Taking cash to enhance the quality of accounting only diverts money from the drilling budget. People, Ideas & Objects have detailed the nature of the industry's home grown solutions and lack of tier 1 ERP providers in the industry. How it’s accounting and systems are purposely and deliberately deceptive. The specific investor demand for the past number of years to increase the producers accountability through implementation of tier 1 ERP systems, such as People, Ideas & Objects use of Oracle ERP Cloud, has been summarily ignored. Accounting is also treated derogatorily because of this lack of respect fostered by the CFO, accounting measures performance and needs to be communicated to the operational decision makers accurately and timely to inform them of that performance. This has not been done in the past four decades as the producers' systems have been incapable of providing them with any useful and usable information. The CEO’s who understand little of accounting are told they’re profitable at the corporate level and that is all they need to know to continue with the methods of what they deem to be a successful operation. That profit can vary is foreign to them and they believe it to be a factual number not subject to interpretation. 

There is no doubt in my mind that these bureaucrats will continue with their methods of personal financial betterment and destruction of the industry for as long as they’re allowed to when they “know” they’re profitable and successful. What future do bureaucrats promise and how do they propose it comes about? Investors will not be funding the next 25 years of capital expenditures and there doesn’t seem to be any acceptance of that fact, understanding of why that’s the case and what bureaucrats need to do to resolve it. This dumbfounded posture of theirs, after six years of their investors cutting their financial support would be amusing if it wasn’t so tragic. Granting them the benefit of the doubt would see consideration that they’re unaware there’s an issue. 

Based on their actions towards People, Ideas & Objects I can assure readers there’s no reason for giving them the benefit of the doubt. If bureaucrats wanted to have ample amounts of money to spend what would be the most effective method they could take to do so. “Building balance sheets” and “putting cash in the ground” as ludicrous as that sounds, is their contrived opportunity to gain access to vast amounts of capital. Under the pretense that everything a bureaucrat spends in the form of capital, overhead and interest is a capital cost that will stay on the balance sheet in property, plant and equipment for what seems an eternity. The offset for these excessively large capital asset balances is the imputed justification for high levels of equity capital that bureaucrats could raise in the capital markets. And in turn, this capital structure would provide higher levels of leverage. The sophistication of their three card monte worked until investors realized the game was fixed. Without investors' direct support the lack of real profitability shows no value is or has been generated, losses have eroded the capital structure and the short term assets have evaporated and are disproportionate. Now, producers stand with an asset that is incapable of generating any value and demands cash in order to produce. The producer's leverage is skewed by this inappropriate behavior and the past 20 years of low interest rates. With looming higher interest rates thrown on the pile of unresolved critical issues. With no plan or strategy other than “muddle through” it’s not that anyone ever questioned the motivation behind these bureaucrats' behavior. 

The Preliminary Specification sees that a capital intensive industry would contain a large component of capital in the costs of the commodities sold to consumers. Just as a labor intensive industry product would have a large component of labor costs passed to the consumer. Moving these costs to the consumer is inconsistent with the “building of balance sheets” and “putting cash in the ground” for the reasons noted. People, Ideas & Objects, our user community and their service provider organizations believe it is the commodities ultimate consumer that will be funding the next 25 years of capital demanded by oil and gas producers by cycling the invested cash through the producer in a manner that enables producers to perform in the capital markets. This would bring about a competitiveness in the industry where the producer with the proportionally lowest level of property, plant and equipment would be the most effective and competitive. And in turn would have the lower cost of capital associated with their organization. Therefore, since the Preliminary Specification has been available since August 2012, why it has not been developed by bureaucrats is not as much of a mystery when it is ourselves, the non-bureaucrats, who have misunderstood that the oil and gas revenues are, have been and will always be for the bureaucrats to do as they please. A review of their history solves this mystery and to have them continue to lead these organizations is contrary to common sense and logic. 2021 should be the end of them.

On the other hand we have no shortage of work to do. 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 as Intellectual Property and developed. New oil and gas firms need to be formed, capitalized and organized. Assets need to be transferred to these new producers in innovative, strategic and tactical ways. In this process we’ll all be helping the current producers to travel faster down their chosen journey to clean energy by disposing of dirty oil. This transition to the Preliminary Specification is something that must be done to deal with the financial difficulties the industry is plagued with from the current administration. This also needs to be done as preparation for the future. And 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. Please review our Production Rights to see how everyone can participate in making this new oil and gas industry happen. 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.