Disintermediation of the Oil & Gas Industry, Part I

 People, Ideas & Objects will update the oil & gas community on the efforts we are taking to disintermediate the North American oil & gas industry. Progress in the marketplace supports our efforts and we appreciate that fact. There are many initiatives under way and our ability to communicate their status will be done in blog posts under this title and the disintermediation Label.

North American oil and gas producers continue to lose the faith, trust, and goodwill of all those involved in the industry. An inability to respond to investor demands for change since 2015. An inability to recognize the need for "real" profitability, what that is and why it's different, how to earn that, and the changes needed to make this a reality has passed them by. Excursions into unauthorized areas such as clean energy show they'll take any opportunity to divert oil & gas revenues from those who worked so hard to establish them. They have proven uncompetitive on the North American capital markets. Unaware that they needed to compete in capital markets, and believed that "building balance sheets" and "putting cash in the ground" would stand up against today's modern day shredders. They are fools and if we believe they'll leap tall buildings in a single bound, we are even bigger fools. 

Each week we see another loss of around 10 rigs in the United States. Why? Last week World Oil reported that producers were scaling back to accommodate global demand declines. Chronic lying continues. The reason these rigs disappeared is unknown to me and I cannot find an answer. Are they moving offshore, or are they being cannibalized to keep the fleet operational? The fleet is barely 25% of its high water mark. The DUC's (Drilling and Uncompleted) inventory has shrunk markedly. And all U.S. basins, including the Permian, are declining. The most tragic aspect of this is that the service industry has been completely destroyed by these producers in the past eight years. And producers can only "muddle through."

If there is one take away from this blog post today it would be this. We recently noted that we felt liberated by oil & gas investors' actions that favored People, Ideas & Objects. Our concern was that if we began developments and investors began financially supporting producers we would lose all credibility and have a failure on our hands. Producer officers and directors would have no reason to listen to us again. A detrimental situation we sought to avoid and one we now consider passed. A career risk that would have been catastrophic for those who followed us.

To ensure this risk has passed we are implementing actions we feel are necessary to begin the developments in the community necessary to force the issue. We are forcing the issue to ensure that investors never consider investing in oil & gas producers. This is unless producers are fully subscribed to and fund People, Ideas & Objects software developments and associated communities. When there exists a community of individuals who are actively working to resolve the oil & gas industry issues that investors have also identified, investors' actions would not be against us. This is the leadership position we are taking. This is the calling I'm asking individuals in the industry to consider. To become the solution.

Oil & gas investors want to participate in a dynamic, innovative, accountable and profitable oil & gas industry. They see opportunities in the market and are disappointed with the status quo's performance and inability to change. Undertaking a cultural change for officers and directors of this scope and scale demands a rebuild in the form of the Preliminary Specification. If investors saw progress in that direction, where independence and funding for this community was secured, would they return? Would that allow producers to reinstate their capital structures? Would this enable the rebuilding process to be more effective with People, Ideas & Objects? Would this enable the communities described here to be confident in their success? I see it as a win, win, win. 

Oracle

First up is the Oracle CloudWorld 2023 conference which will be held on September 18 - 21 2023. They provide an opportunity to participate in CloudWorld “On Air.” There are many worthwhile presentations and I would highlight all of the Keynotes as a must see. Any events that were oversubscribed for the “On Air” presentations, and you were therefore unable to see, will be able to be viewed in the next month through registration to the Free “On Air” conference located here. 

It was during Oracle CloudWorld 2022 that I saw Oracle's revised vision with its products and services. We noted these points in an October 21, 2022 blog post entitled “And Just Like That, Everything Changes” and subsequent posts. It also triggered our rewrite of the Preliminary Specification with Oracle's revised vision and changes incorporated into our product. Oil & gas producers would benefit from not only the Preliminary Specification but also the updated Oracle vision. Oracle was affected by these changes. Oracle's stock has increased from $67.02 to $120.68 since that conference. An 80% increase in share price for a company with a $327.24 billion market capitalization. This was a material event in their company's history. Check-in to see Founder, Chairman, and CTO Larry Ellison and CEO Safra Catz keynotes at a minimum. 

Our User Community

Our user community, research, and intellectual property are People, Ideas & Objects three distinct competitive advantages. Our user community is our priority and focus. That is for today and always. Our commitment to user-based ERP software development is unwavering. The only method in which to provide quality ERP software is through strong user community participation. ERP software traditionally has a committee representing users. People assigned to the task are asked to fill in an otherwise nonexistent vision. Budget and time restrictions soon generate demands for cuts and the first thing to be cut is the user committee. 

People, Ideas & Objects published the Preliminary Specification in August 2012. In March 2014 we published our user community vision with its three distinct characteristics. This ensures that quality ERP software is delivered to dynamic, innovative, accountable and profitable oil & gas producers throughout North America. Our user community includes:

• Exclusive licensed authority to the Preliminary Specifications Intellectual Property. Only our user community members can change the software. Producers and all others have one source to turn to and resolve their difficulties. 
• Only our user community members have our software developers' attention. They are licensed to look only at our user community for input. 
• And finally, our user community members are in control of their own budget. They are not “blind sleepwalking agents of whomever feeds them.”

How does the industry make the changes it needs to make to become the dynamic, innovative, accountable and profitable oil & gas producers that we need them to be? How will it remain able to accommodate changing business needs? We have structured our user community to lead the changes that are necessary. They’ll have the tools to define industry structure, processes and management through ERP software they develop. In addition, they will own and operate a service provider that will manage a process on their behalf. Participating in the development of the software will provide them with a better understanding of what the industry needs to succeed long-term. Through a long list of unique competitive advantages that include leadership, issue identification and resolution, research, ideas, innovating and automation user community members have the tools necessary to fulfill these tasks.

Confidentiality of participation is important to all early stage participants in our user community. We are all too familiar with producer officers and directors' retaliation methods. Application to our user community can be found here.

Whistleblower Program

Two weeks ago we announced the People, Ideas & Objects Whistleblower Program. What we know is that the Preliminary Specification has been actively discussed in the marketplace for over a decade. Some of our Intellectual Property has now permeated the industry in different ways. Primarily due to officers' and directors' disrespect for the Intellectual Property we’ve developed. This has obviously continued through their work with other ERP providers. Review of our Whistleblower program can be found here. The program maintains absolute confidentiality and proceeds from any actions People, Ideas & Objects take against producers will be shared 50 / 50 with Whistleblowers. 

Sales Commission Program

When we announced the Whistleblower program we also announced the Sales Commission program that we’ve put in place. Information regarding this program can be found here. It provides individuals in the oil & gas industry with the opportunity to participate in 15% sales commissions on the sale of the People, Ideas & Objects software. The ability to secure exclusive access to a specific producer is also available. 

Last Thursday People, Ideas & Objects completed the rewrite of the Request For Proposal and Discussion pages of our wiki. This is the information that fulfills the material differences in the Preliminary Specification compared to other systems. If an RFP were to be submitted by a producer the answers would be sourced from the RFP located here. The Sales Commission program should benefit from this, along with the Preliminary Specifications Wiki as sources.

The Whistleblower and Sales Commission programs are permanent additions to the way in which People, Ideas & Objects conducts business. We can affect change far more effectively through the opportunities we grant to oil & gas entrepreneurs who see them for what they are. Alternatively, sourcing, recruiting and developing capabilities in-house will deliver our software in the 22nd century. We reward performance and focus on the distinct competitive advantages we've developed in our Intellectual Property, our user community and research.

Establishing a New, Sub-industry

It’s one thing to start an enterprise. However, when the scope of the problem becomes as difficult as North American oil & gas, we will need a "bigger boat." People, Ideas & Objects have carved out the area where we can contribute the most. To suggest we'll build it is ridiculous. This will take the efforts of tens of thousands of people and we’ll be a relatively small part of it. Intellectual Property ownership and licensing, researching our IP's further development and using these tools to raise the financial resources to support the software development, its operations and our user communities needs is more or less the extent of our reach. Our user community consists of part-time members. They are well compensated for their work. However, the majority of their income and value is created in their service provider organizations which are a reallocation of the administrative and accounting resources of the producers. The long and short of this is, there are substantial money making opportunities involved in rebuilding the North American oil & gas industry. 

Closing Remark

Producer officers and directors will get less support from software companies if they continue to deny and abuse People, Ideas & Objects Intellectual Property. Even though they may have benefited up to this point. I don’t think they fully understand or appreciate the consequences of their actions regarding Intellectual Property. Who will provide better software products in the future when they see other vendors' Intellectual Property treated so poorly? Just a thought.

OCI Partnership Accounting, Part I

 Introduction

The Partnership Accounting module is a pure “accounting” module in the traditional sense. However, I think there are many attributes and concepts in this module that make it unique and of interest to everyone in the industry.

The following is a summary of what a statutory list of required functionality and output requires. We’ll then discuss some of the novel concepts and differences of the Joint Operating Committee. This is the key Organizational Construct of a dynamic, innovative, accountable and profitable oil & gas producer.

• General Ledger
• Account Payable and Receivable Detail
• Payments
• Revenues and Royalties (Gross & Net)
• Capital and Operating (Gross & Net)
• Statement of Operations
• Statement of Expenditures 
• Gas Cost Allowance (Unique to each Joint Operating Committee participant)
• Trial Balance
• Balance Sheet
• Income Statement
• Statement of changes in financial position.
• Field data capture.
• Material balance c/w inventory control. 
• Nomination and contract fulfillment.
• And many, many more

This is the standard fare for oil & gas software providers. And our user community will fill this list with many more. Oracle Cloud ERP provides many of the accounting features and functionality used in these processes. And there are several processes and features that are standalone Oracle products and services that will be delivered to producers. As we will see in subsequent discussions the value proposition from the People, Ideas & Objects software application is substantial in the use of the Joint Operating Committee as the key Organizational Construct of the Preliminary Specification and is treated as the partnership that it is. It also recognizes that the costs of the property for each producer within a Joint Operating Committee are as unique as individual producers' strategies.

When we talk about the scope of operations managed under Partnership Accounting, we find that it includes everything necessary to support North American producers' accounting needs. The cut-off would be at the refinery inlet. Therefore the total scope of any upstream oil & gas operation. Let me be more specific about that from the point of view of geography and the type of operation managed by the People, Ideas & Objects application.

If we look at the North American oil & gas infrastructure we see a variety of oil & gas installations designed to serve both producers and consumers of oil & gas. Wells, gathering systems, gas plants, pipelines, storage facilities etc. At each point along these systems there may be additional deliveries of product, or sales of product or products inventoried. What seems to be an obvious and straightforward business becomes incredibly complex when it's realized that each asset may be owned by a Joint Operating Committee itself. It may also hold products on behalf of other Joint Operating Committees. This summary glosses over the incredible complexity of this business when the volume of transactions that occur in these businesses makes it a significant part of the oil & gas operation.

Critical to controlling the business is the Material Balance Report, part of the Preliminary Specification. It is the central document that so much of the subsequent process activity is based upon. If someone is to be charged for storage of butane for example, or if someone is to be charged a marketing fee for delivery of product to a customer. Or simply if a sale of a raw gas stream is deemed to have occurred at the wellhead. The Material Balance Report captures these transactions and initiates the flow of generated documents. These documents also need to be fully automated through the Material Balance Report. They are generated from the People, Ideas & Objects Preliminary Specification. To state this as simply as possible, the Partnership Accounting module includes all of these activities for all of these facilities as its purpose. Each Material Balance Report must balance. Reporting inputs and outputs balances to other Material Balance Reports. Material Balance Reports are inter-industry and continent-wide balanced.

As we explore the Partnership Accounting module further we see the reasons why we take such a broad scope of operations into consideration. It would be an understatement to state that these areas are poorly served by IT. To approach it from a global perspective that includes production operations, accounting and the other areas that depend on this information would be "ideal." However, the complexity of the business has always been in the way. Software engineering has never been available to approach the type of problem this area presents. The cost would be unreasonable and of limited value for one producer. And no software vendor could justify the work on speculation. I think it exists now in the form of mature technologies represented in Oracle products and services. Our seven Organization Constructs include the Joint Operating Committee, Professor Paul Romer’s “New Growth Theory,” specialization and the division of labor, markets, Intellectual Property, Information Technology and Innovation. People, Ideas & Objects aggregates the industry's resources. Making this process cost effective and valuable across the industry. And I think that the Partnership Accounting and Accounting Voucher modules of People, Ideas & Objects provide the vision and opportunity of how this software engineering solution solves these issues to ensure we provide the most profitable means of oil & gas operations, everywhere and always.

Pooling of Technical Resources

The first Partnership Accounting issue addressed in this module is related to earth science & engineering resources being finite. It is asserted here in People, Ideas & Objects that the “operator” classification may become a thing of the past as firms will find it difficult, and in fact no longer commercially viable, to staff the engineering and earth science capabilities necessary to meet all of their firm's needs. People, Ideas & Objects enables producers on a Joint Operating Committee to pool their earth science & engineering resources. This is to ensure they have the required engineering and geological needs. Pooling won't be a convenience or desirable addition to the Joint Operating Committee. Partners within a property will need to ensure adequate staffing of technical resources. That it will become commonplace that each partner contributes technical resources to the property.

People, Ideas & Objects use specialization and division of labor to address the mid- to long-term shortfall in these resources. Specialization and division of labor are the only tools that will enhance industry throughput from the same volume of resources. If a producer wanted to maintain “operator” classification the scale of their operation would demand such technical diversity that the burden would overwhelm any performance their team could attain. We believe that producer firms have unused and unusable surplus capacity today and that it cannot be deployed due to organizational constraints. Therefore, every producer should focus on high-level, value-added geotechnical and engineering capabilities. Each producer contributes their specialized skills to their Joint Operating Committees when and where they can. Lower level, or standard-fare engineering and geology can be conducted through service providers.

If partners are contributing human resources to the Joint Operating Committee then the systems that the partners use should be able to cost these resources, charge them to the joint account, and have their costs recovered by the Joint Operating Committee the resource was provided to. In addition, if the operator classification has disappeared, operator overhead charges should also cease to exist. If three different producers are providing engineers and geologists to the Joint Operating Committee each should be able to recover the direct or standard costs of these individuals for the time they spent working on the property.

Within the Preliminary Specification, Industrial Command & Control (ICC) provides a means in which the resources within the producer companies represented within the Joint Operating Committee, can organize a chain of command through these pooled resources to deal with property governance. In addition to this governance, producers can allocate finite earth science & engineering resources more efficiently. This assumes that during the building of the Preliminary Specification, our user community can determine a somewhat standard chain of command for all members of the industry, standard rates for the people in the industry, and detailed job descriptions for the work that each role within that chain of command is responsible for. Please also see the Research & Capabilities and Knowledge & Learning modules for the development and deployment of the firm's and Joint Operating Committee capabilities.

Today the bureaucracy builds silos of engineering and earth science capabilities that can deal with any and all contingencies their operated properties demand. This is a reasonable approach to a difficult business. With the inherent risk profile of oil & gas, safety is a priority that can be handled in this manner. The problem arises from each and every producer replicating the same capabilities within their organizations. As a result the industry has developed unused capacity that is unavailable for use at any time and at any place in the industry. At a time when engineering and earth science talent is at a premium in demand. Accessing this unused capacity, reorganizing the manner in which resources are used, and taking advantage of specialization and the division of labor are the ways that People, Ideas & Objects Preliminary Specification has solved this problem. 

To approach the mountains of earth science & engineering work that needs to be done. Demands such as the ever increasing volume of science required for each incremental barrel of oil produced. The need to obtain and sustain true energy independence etc. These require an innovative approach based on the tried and true division of labor and specialization principles. By breaking down the work into smaller more specialized components the process can be managed in a way that is faster and more efficient. The productivity of this process would be an order of magnitude more efficient than what is done today. The business management of this process would be managed through the Partnership Accounting module. Industrial Command & Control maintains the chain of command and authority from the producer firms. What took 6 engineers and geologists full time may now be done by 35 specialized engineers and geologists. These engineers and geologists may be assigned to over 100 properties or Joint Operating Committees. As shown in People, Ideas & Objects et al Cloud Administration & Accounting for Oil & Gas, management of the process falls to the software.

And there is another issue. If we use division of labor as the solution to today's limited technical resources. Without the Partnership Accounting module pooling or specialization. The enhanced productivity from the division of labor being the objective of the exercise would require that each producer hoard even more earth science & engineering resources in order to cover the entire scope of earth science & engineering effort. Causing the market for these finite resources to skew the industry's economics. This point is critical in any solution to this problem.

If we pooled the technical resources of each producer representing the Joint Operating Committee. Then we break down individual silos and technical hoarding. One of the key advantages of using the Joint Operating Committee is that all partners are financially motivated. Consensus is easily achieved because of this, and it will continue to be so.

The perception that “our” capabilities are better than “theirs” type of comparison. The problem, however, comes down to the fact that, in a hoarding situation, no one is left to do basic engineering. This should have been done two weeks ago. Life is one percent inspiration, ninety nine percent perspiration. Engineering and geological tasks need to be handled. How this work gets done is the focus.

The solution to enhanced engineering and geological throughput comes from division of labor and specialization. But first let me reiterate that in this day and age, managing a process, or changing a process requires that the software to manage that process be built first. People, Ideas & Objects Preliminary Specification builds these processes for the industry so that these changes can be made and altered as the industry requires. 

We’ve discussed the way the division of labor and specialization could increase the throughput of the engineering and geological capabilities of the oil & gas industry. How the mountains of this type of work could be approached by pooling the technical resources of the producers represented in the Joint Operating Committee. We now want to discuss how the cost of those resources would be recognized and recovered in the Partnership Accounting module of the Preliminary Specification. This discussion is also about the multitude of equalizations each month for each producer. This is to calculate their working interest share in the property. And how the Joint Operating Committee authorizes these funding requirements.

We need to determine who charges for work done at a Joint Operating Committee and why? For that we need to revisit the Work-Order system part of the People, Ideas & Objects application modules. Work-Order charges are based on the AFE, partnership lease or overhead accounts of the producer and are therefore pre-approved, tried and tested methods of controlling costs. Without an authorized Work Order, no one can charge any work to an AFE, lease or overhead account. And with a Work Order, only work authorized through an AFE, lease or overhead account will be completed, approved and charged to the joint account.

Charges for individual engineers and geologists will be based on a factor of the Revenue Per Employee of their producer firm. Discussion regarding Revenue Per Employee can be found in the Background section of this wiki. Revenue Per Employee establishes the approximate level of capability the producer firm has taken their earth science & engineering capacities and capabilities to. It reflects their organization's value. Therefore a factor, based upon agreed upon industry standards of what percentage of Revenue Per Employee a Senior Engineer should be charged to the Joint Operating Committee at etc. Revenue Per Employee is an objective criteria calculated in the Preliminary Specification and is directly comparable among peers. 

The combination of the Work Order and Pooling of Technical Resources within the Joint Operating Committees allows industry to deal with resource constraints. Specialization and the division of labor are the only tools that can materially increase organizational productivity. It will need to be the solution. Applying this solution to the organization employed in the industry will only cause more serious consequences in terms of the economic viability of North American producers. There are many other aspects to these tools and we will discuss them here in the Partnership Accounting Module and throughout the Preliminary Specification.

OCI RFP Discussion, Part III

 Intellectual Property

Intellectual Property, research and our user community are the three competitive advantages that People, Ideas & Objects have defined and built our offering upon. The configuration is designed to accelerate the development and implementation of our software. It is also designed to achieve user-based software quality and continuously improve and enhance our software development. This community evolves and resolves issues and opportunities based on Intellectual Property. Providing a dynamic, innovative, accountable and profitable means of oil & gas operations everywhere and always. Setting the foundation for profitable, North American energy independence. This is the strategic position we’ve taken in this market. We have defined and resolved oil & gas industry issues and opportunities in the Preliminary Specification. This is to capture a substantial twenty five year value of $25.7 to $45.7 trillion due to our focus on profitability. We recently identified $660 billion in incremental value available to investors in the short term. The Preliminary Specification focuses on the Joint Operating Committee as the key organizational construct of the oil & gas industry. Which holds the legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks. When we move the compliance and governance frameworks into alignment with the seven frameworks of the Joint Operating Committee, we achieve organizational speed, innovation, and profitability in producer firms.

Commercialization of this Intellectual Property is licensed to People, Ideas & Objects. It is focused on profitability and accountability in oil & gas and resolves the issues present in the industry today. With this IP supporting our user community through its license, our software and service providers can continually adapt to oil & gas needs. This is done through Cloud Administration & Accounting for Oil & Gas. This created substantial conflict between our firm and the producer's officers and directors. We feel our conflict with the producers has grown and expanded to include their investors and bankers. In addition, the service industry, producers' staff and the energy consumer are all disappointed and frustrated with producers' performance. Are all disappointed in the lack of profitability, accountability, action on these issues, deprecated capacities and capabilities and the loss of North American energy independence available only a short time ago. The handful of people who personally prospered financially at the expense of all these others are now identified as the individuals who did nothing but “muddle through.” Who had the responsibility and authority to ensure these things didn’t happen but didn't care and refused to consider the criticism of People, Ideas & Objects and the Preliminary Specification. A solution they know is appropriate however eliminates their ability to personally prosper disproportionally and exclusively.

Investors expect Tier 1 ERP systems to be implemented to alleviate profitability and accountability concerns. We suspect producer officers and directors are orchestrating a move to meet investor demands. Through the implementation of SAP systems, we believe they are unprepared and inconsistent with industry needs. SAP, which lacks an oil & gas vision and specification of "what, how, and why," has been selected due to its ability to fit into the current methods of poor accountability and profitability used by these officers and directors by way of its custom implementation at each producer firm. SAP held their 11th annual oil & gas conference on September 12, 2022. Highlights of SAP's oil & gas materials include.

Companies will work together in meeting production, profitability, and safety targets (possibly as “pay for outcome.”)

Ultimately, they are shifting to core profitable and sustainable value pools and minimizing their exposure to the market volatility.

I see these as one of three potential SAP alternatives. 

• It may be an extension of their Performance Management feature set that’s been available in the marketplace. Indicating no change in the status quo of the prospective SAP users or oil & gas investors.
• To suggest that SAP is offering a solution to the oil & gas industry that caters to the definition and needs of the officers and directors, as People, Ideas & Objects allege, as the reason for this potential selection process proceeding. They are in fact offering themselves and will become blind sleepwalking agents of whomever will feed them. However, SAP also needs to walk both sides of the streets in this transaction. If they’re not promoting and providing a methodology of enhanced profitability then I would see that as problematic for many reasons. Knowing producer bureaucrats as I do, SAP would only be setting themselves up as a future viable scapegoat of the producers' officers and directors as to why they subsequently failed, post SAP integration. For example, the viable scapegoat of “SAP did not implement appropriate profitability and accountability methods, they failed.” (By mentioning this alternative one can see how much I’ve personally enjoyed the interactions and the experience I've gained from the officers and directors of these producer firms.)
• Or, someone devised a method of oil & gas profitability that “borrows” heavily from the Intellectual Property being commercialized by People, Ideas & Objects. Under the name of “pay for outcome” or “sustainable value pools” and “minimizing their exposure to the market volatility.” 

Regarding the last option, as a software company People, Ideas & Objects would never violate any Intellectual Property of any other software or service-oriented company. When software firms depend on the pristine nature of their Intellectual Property, they are above reproach and maintain a historical legacy evident throughout. An example of this is the legacy on our blog and wiki. We know that those dependent on IP for their revenue streams are of the same mindset. 

I am also convinced that the officers and directors of the producer firms are wise to the needs of innovation and development in the software field. They also need IP to succeed in the marketplace as a science-based business. That producers would evaluate software offerings on the basis of the origins and pedigree of the IP proposed to be employed in their organization. To ensure that it does not infringe upon others' Intellectual Property. And can therefore continue to use those products through their appropriate life cycles. Ensuring that their reputation of being upstanding, law abiding citizens that would never use others' property would not need to be mentioned here. This may be seen as a feature of the producers today. Their inability to access People, Ideas & Objects Intellectual Property by ignoring it is another viable scapegoat as to why they can’t attain that desired accountability and profitability. 

Why "Just" a Preliminary Specification

We noted earlier that the eight-year-long cash and working capital crisis in oil & gas led to the cannibalization of producer business processes. Oil & gas producers and service industry deal with layoffs at the beginning of the business development process to avoid disrupting production. However, eight years of officer and director inactivity have cut into these industries' capabilities and capacities. There’s been a proliferation of advanced processes as noted in this World Oil article. This trend won't end there either. The move to the Internet of Things will open new opportunities for capabilities that would have seemed impossible and unimaginable eight years ago. For example, Elon Musk's Swarm network. Which enables access and control of oil & gas remote facilities via the Internet of Things (IoT).

The first advantage of having a Preliminary Specification is that we can set the direction we’re headed with a vision and viable business model. However, we cannot lock that into the 2012 environment that existed at the time of the initial specifications publication. And this is why People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP are configured to provide the industry with permanent software development capability for oil & gas through our Cloud Administration & Accounting for Oil & Gas service to ensure a dynamic, innovative, accountable and profitable industry.

Within producer firms today, officers and directors expect investors to provide the financial resources to “build balance sheets.” Similar assumptions were made with respect to business in general, the service industry and other vendors providing producers with market solutions that spontaneously appear on command. As a participant in the ERP market space I am witness to these assumptions and methods used throughout the producer population. It’s incumbent upon producer firms to ensure that any competitive advantage that a supplier had, would be extracted and distributed to their competitors in order to sponsor price competition in that product or service. This is a well known fact and is now one of the impediments to the industry standing on its own two feet and innovating. It is why it can’t, won’t and will not ever under the current administration. We’ve seen the game played too many times to know the outcome. It is for this reason that People, Ideas & Objects depend on Intellectual Property to safeguard and protect our efforts against this behavior. This is in the short to long term. 

The long and short of it is that nothing will be done while this culture exists. It must be ripped and replaced by a culture with the following characteristics. 

• It needs to respect the participation of others in order to secure a dynamic, innovative, accountable and profitable oil & gas economy. 
• Everyone in the industry now knows and understands why “real” profitability in the industry is such a critical necessity, everywhere and always. Profits fuel growth and prosperity for all throughout the greater oil & gas economy.
• Provide generic, aggregate producer information to vendors in terms of the anticipated capital expenditures by region, product or service classification as detailed in producer reserves reports. 
• It needs to pay its suppliers as if they were business partners and not extend accounts payable schedules to the ridiculous levels we’ve seen recently. All to provide officers and directors with the chance to continue their foolish endeavors.

These are just a few of the functions of the Preliminary Specification as it stands today. I could go on but the point is that it's just basic business and culture! Everyone points to the producer's responsibility and undertaking. The current culture fosters a behavior where officers and directors sit atop a primary industry and hand out the pennies to those that will beg the loudest and provide the greatest (personal) favors. A culture where “power tends to corrupt and absolute power corrupts absolutely.”

Coil tubing providers and Packers Plus are exemplary examples of another phenomenon in their struggle for producer acceptance. Being denied entry into the industry for decades due to their ground breaking technologies. A lack of funding has prevented ERP development over the past few decades. The protracted argument over People, Ideas & Objects over the ideas contained here. Which began with enhanced profitability and accountability, which were consistently argued against as if profits didn’t matter. That is why there’s been nothing beyond a Preliminary Specification developed. Therefore, Intellectual Property is all that’s needed to seize the higher ground from those who thought profits were irrelevant. Imagine an industry that utters the words “profits don’t matter!” In ERP you’ll only get what you’ve paid for and producers have paid for nothing and therefore achieved their objective of abysmal accountability ensuring their unprofitability. 

There’s no capacity and capabilities in the oil & gas ERP tier 1 marketplace. Producers are left with two development choices that meet investors' basic demands, SAP or People, Ideas & Objects et al. Only we have an oil & gas vision, understanding, plan and Preliminary Specification. Most significant of all, is our nine years (as of 2023) of user community development based on a compelling and powerful user community vision. A product offering that may be jeopardized due to producers' "compliance" with investors' demands for tier 1 ERP providers by selecting SAP. Eliminating People, Ideas & Objects and our user community from the market due to our pursuit of accountability and profitability for producer firms. Which is the primary point of friction between us and the producer's officers and directors.

What will happen in oil & gas when SAP needs replacement in ten, fifteen, twenty or thirty two years? Who will provide solutions at that time? Will they have spent the time and effort necessary to solve the industry's issues? Regardless of who it is, their IP will need to be spectacular to avoid the Preliminary Specifications and its derivative works, while also building value for the industry as a whole. Just as SAP is expected to do at the moment. Will that person or group focus on accountability, profitability and energy independence in North American oil & gas? Or follow SAP’s lead by providing producer officers and directors with exactly what they want, unacceptable levels of accountability and continued specious profitability. Producers can make their own ERP selection decisions and I’m pleased with my actions over these years in taking the fight to them. I’ll leave you with these quotes from Joseph Schumpeter and Milton Friedman about the importance of “just” a Preliminary Specification. 

The first thing to go is the traditional conception of the modus operandi of competition … in capitalist reality as distinguished from its textbook picture, it is not that type of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization … which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives … It is hardly necessary to point out that competition of the kind we now have in mind acts not only when in being but also when it is merely an ever-present threat. It disciplines before it attacks. The businessman feels himself to be in a competitive situation even if he is alone in his field. 

Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy: 84–85.

And

Can capitalism survive? No. I do not think it can … Its very success undermines the social institutions which protect it, and “inevitably” creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent. 

Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy: 61.

Milton Friedman stated.

Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

OCI RFP Discussion, Part II

 Radical  Surgery vs. the Band Aid Approach

I trust my interpretation and perspective on oil & gas and its resolution are not misconstrued. It would be foolish and naive for anyone to believe that the human nature of self-interested individuals would reach so far as to define a scheme such as what I’ve accused producer officers and directors of. That’s not at issue, in my opinion. What is at issue is the unchecked pursuit of self interest by officers and directors has traveled too far along the scale of what is acceptable. And this is measured in the form of a status quo pursuit of damaging and destructive management methods. Due to its wide scope of effects, I find the damage itself to be unacceptable, as well as the fact that only the officers and directors have benefited financially from it. Not that I believe this is some anomaly of human nature or behavior. The structure of our user community and their service providers, indeed the entire sub-industry as I call this environment necessary to resolve this issue, is structured around self interest as the motivation to get things done. The key difference is our motivation is to provide for the most profitable means of oil & gas operations. The risks associated with this damage are too extreme to continue. Each barrel of oil contains the equivalent of 10 to 25 thousand man hours of equivalent mechanical labor. An amount of labor 27 to 68 times today's total population from today’s global production. An irreplaceable resource that powers our economy, life and civilization. It is my opinion that some things are better left within a range of acceptable standards and tolerated levels. 

Oil & gas producers are dealing with standard business issues when overcapitalization of this scale is undertaken. It’s no mystery that we’ve traveled down this road. Officers and directors would have known this too. Their problem is that they’re culpable and liable even if they were unaware. As they were well aware of People, Ideas & Objects et al’s solution which we’ve been offering in the form of the Preliminary Specification for the past decade. In addition, they had a specific request almost a decade ago from their investors to upgrade to Tier 1 ERP systems. A history that reflects a risk that any further loss of faith (by consumers) in their administration would be costly. An administration with that deer in the headlights look, incapable of action, heading into the most difficult energy generation mankind’s ever known. Singing the praises of solar and wind. Ours is not the solution to this difficulty in the short term and that is the reason we began this process so long ago. We can now only restore the industry from what’s left.

Therefore the question becomes what is the resolution? Do we resolve this through radical surgery to save the patient? Or will a bandage and a slap on the back do? What’s the diagnosis? Is there an issue? Everyone has an opinion, and People, Ideas & Objects et al's are as follows. It is the 2015s that signal failure and the subsequent refusal of investors to support the capital structures of industry participants that mark this stage. Banks think similarly. An inability to conduct the appropriate level of business activity and diminishing capabilities. This is in the field through the service industry and through internal recruitment of earth science and engineering professionals. Maintaining production deliverability in this constrained environment is the next “potential” shoe to drop. As serious as each of these issues is, the one that is the root cause of all of them is the obstinate, persistent and failing strategy of “muddle through.” Nothing’s been done to deal with these when they were timely. 

We’ll now discuss why a wholesale rebuild of the industry brick by brick and stick by stick will be necessary.

Culture Shock

• Clean energy is not the message to be sending throughout the oil & gas and service industries. How can we leave oil & gas in the hands of those who don’t believe in shale's future, who have not safeguarded their investors' assets and diverted funds to unrelated industries that are commercially unproven and done so in unauthorized fashion?
• Software defines and supports the organizational structure of the producer firm, but also constrains it. In consideration should those who were responsible for this damage be the decision makers as to which ERP system to use? SAP is offering the role of a “blind sleepwalking agent of whomever will feed them.”
• Faith, trust and goodwill has been destroyed throughout the greater oil & gas economy. The need for producers to actively participate in rebuilding these is a necessity. Participate actively in the form of financial philanthropy. Producers broke it, Producers will need to fix it. Only then will they begin to respect what others built and not break it again. A.k.a. skin in the game. Capacities and capabilities are severely deprecated.
• A culture that is unaware of the need to earn profits, but also how to do so. A culture that is capable of spending money and can not achieve the higher level performance trajectory necessary to qualify as profitable operations. A culture that is fundamentally unaware of the difference or the point of this argument. 
• A culture that assumed “investors” supplied all the cash needed. One that asked for more money from investors while at the same time, when asked about the money raised two years ago, stated “that’s history and just accounting!” And “profits don’t matter.” Unaccountability is a subculture.
• What happens when the industry sees an initiative such as People, Ideas & Objects snuffed out for political reasons? What impact will be realized by those working throughout the greater oil & gas economy? Who will step up with any initiative on behalf of the oil & gas economy when the culture of “muddle through” is seen as permanent and intractable? This is not what an innovative industry needs.

These are just the highlights that come to mind at the moment. I like to think of myself as rational. Only a fool would enter a situation like this and attempt to resolve the issues this culture produces by working with this culture. This culture would consume anyone who tried. It would be an attempted mosquito bite where the mosquito's demise was certain. 

We detailed how layoffs have cannibalized the internal processes from year 1,2,3… 8 of the producers due to the 2015 investor strike and coincidental eight-year working capital crisis. The same applies to the service industry. Therefore these processes need to be rebuilt and provide the opportunity to do so without this culture attached in any way. One that starts with year 1 of the process from the Preliminary Specification vision. We provide the most profitable means of oil & gas operations everywhere and always. Rebuilding the industry and infrastructure on the basis of a dynamic, innovative, accountable and profitable producer, industry and service industry, brick by brick and stick by stick. The way I look at what the industry consists of today isn’t worth keeping. Our opportunity lies in the fact that we don’t have to scrap it. Officers and directors scrapped it for us. They can rebuild it with SAP’s blind, sleepwalking agents and their vision of clean energy. Or investors can be specific about their demand for Tier 1 ERP systems and choose the oil & gas industry they desire. This is done by selecting People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP. 

As a result of the state of "muddle through," the industry has suffered far more than producers, officers, and directors may realize. Assuming the Preliminary Specification is approved. It won’t be due to which Tier 1 ERP provider they’ve chosen. I’d therefore question what role they’d have in continuing. Why should they continue and how ideally to leave the place in a position to be rebuilt? That's naive of me, I know.

Investors Will Decide

 People, Ideas & Objects have identified a threat that we feel is terminal to our existence as an operational software organization. In this threat, the officers and directors of the producer firms intend to implement an SAP configuration of the producers' own design. Choosing an ERP system from Tier 1 providers is an oil and gas producer's right and a specific requirement of their investors. It would be bold and audacious for me to suggest that an independent decision is not what a firm is entitled to make. When the performance and accountability of these officers and directors led to the comprehensive damage and destruction we see today. Which I've detailed throughout the Preliminary Specification. No one outside of the rarified air of producer firms' officers and directors has benefited from oil & gas activity these past decades. These firms have been structured to “appear” healthy to facilitate enhanced and innovative executive compensation. Therefore the broader threat of this continued non-performant, “muddle through” process of “putting cash in the ground” and “building balance sheets” would continue as soon as the producers comply with investors' demand for a Tier 1 ERP system by selecting SAP for the next generation, and People, Ideas & Objects fade into the distance as an operational software organization. We can already hear the call for producers to stop listening to their investors.

The fundamental new impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates … that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

Joseph A. Schumpeter (1942) Capitalism, Socialism and Democracy: 82 - 84

And

According to Schumpeter, this disruptive process of creative destruction is the foundation of the economic progress of society through time. Thus, Schumpeter provides a road map to the policy environment conducive to economic development—jurisdictions that allow the process of creative destruction to unfold, rather than those that put up barriers to protect the status quo, are the ones that grow faster and have stronger economic progress and development.

— The Essential Joseph Schumpeter (Essential Scholars) by Russell S. Sobel, Jason Clemens

Producers' methods of management have refused to consider any change to the Preliminary Specification, our user community and their service provider organizations. People, Ideas & Objects et al's focus is on providing the dynamic, innovative, accountable and profitable oil & gas producers with the most profitable means of oil & gas operations. It’s not enough to just own the oil & gas asset anymore, it's also necessary to have access to the software that makes the oil & gas asset profitable. On a comparative basis our vision, methods and Preliminary Specification detail the value proposition of “what, how and why” we provide these values in detail. Throughout our history I’ve had many failures in my attempts to deliver ERP systems to producers. I’ve recently realized that my failures, as did Oracle in 2000 and IBM in 2005, were market failures. Due to the inability to attract producers' support. All of my and the other vendors' market failures relate to our proposed enhancement of the accountability and profitability of producer firms. Additionally, the history of abuse by producer firms towards their existing ERP providers extends beyond what could ever be considered incidental or inconsequential to today’s oil & gas industries' damage and destruction, or the actions to now select SAP and seal this industry in perpetual bureaucratic malaise. On the contrary they were and are deliberate.

These actions have obstructed and completely eliminated other forces aside from People, Ideas & Objects. These include disintermediation, decentralization, creative destruction, spontaneous order and serendipity. The lesson I’ve learned is what I described in May 2004. Software defines and supports an organization, but also constrains it. This statement supports implementing the Preliminary Specifications ideas and its permanent ERP software development capability. However, producers soon realized that if the software never changed, their unaccountable ways would continue. However they’ve failed to consider the consequences of their lack of accountability and profitability on the long term health of the industry. They have continued to destroy the industry and all associated with it. 

Today the game’s changed for these officers and directors. There is a direct and specific request from investors to change their ERP systems to Tier 1 providers. Through consolidation and the elimination of the startup, small and junior sectors of the oil & gas industry, their administrations will remain unchallenged for a generation, at a minimum. The establishment of their upcoming business ventures focused on clean energy will provide officers and directors with a clean slate of possibilities in terms of future obtuse accountability. If only they could secure software that meets their and investors' needs, SAP fulfills their dichotomy. They could then continue in whatever direction they choose.

Time is now a premium resource. What is necessary for the oil & gas investor is to be specific as to what is an acceptable solution for Tier 1 ERP solutions. We can only achieve this by successfully implementing People, Ideas & Objects, our user community, and their service provider organizations' Preliminary Specifications with Oracle Cloud ERP, or Cloud Administration & Accounting for Oil & Gas software and services. No alternative will be acceptable. 

Alternatively, if these decisions are made to implement SAP, others will realize the consequences. The consequences will be a continuation of the status quo level of unacceptable performance, accountability and behavior displayed here for decades. If anyone believes that the officers and directors' reformed behavior of the past year (paying dividends and stock buybacks) will be permanent. Then they should ask themselves, why have they not implemented any solution to these issues since People, Ideas & Objects pointed them out? Compliance in the form of dividends is temporary, trust me. Cash being paid out of oil & gas companies for any discretionary reason will soon be stopped as soon as producers can say "they have complied." This cash will then resume its direct path back into more “traditional” pockets. The quantitative analysis of the difference between the value proposition offered through the Preliminary Specification is easily understood when we look at the industry today. And ask, what quantity of financial resources will be necessary to bring the existing infrastructure up to the needs of a profitable, energy independent North American oil & gas industry? Today producers have already begun to warn consumers to take precautions! A despicable response.

The issues are clearly visible to People, Ideas, and Objects. We were fortunate to have foreseen them and prepared the Preliminary Specification to address them with a viable, workable business model. Forward thinking only a few years ago is now timely. The pace of change in the industry demands that our offering's associated components be available. This includes our user community and software development capability as industry-wide, permanent ERP capacity and capability. Operationally we do not understand how the bureaucratic performance and accountability that we’ve seen over the past decades with the industry standard strategy of “muddle through” will provide any value for anyone outside of the officers and directors in the status quo configuration. We should consider adding SAP to the status quo. With the issues and opportunities around the replacement, refurbishment and expansion of the infrastructure necessary to achieve profitable energy independence in North America. SAP's stated product vision of a clean energy transition and compliant implementation are failures made to order. Failures for all concerned except that fortunate small cadre of officers and directors of the producer firms who have had the requisite authority and responsibility to do otherwise.

OCI RFP Discussion, Part I

 How I See the Oil & Gas Industry Has Failed

People, Ideas & Objects see a window of opportunity to assert our solution to North American oil & gas producers' issues. This is in direct response to what we feel is a contrived and wholesale industry transition to SAP. This involves producers' officers and directors seeking to secure their management methods. Therefore, we would like to explain our advantages over SAP. We would like to make oil & gas investors aware of the $660 billion difference in value immediately if SAP is selected. People, Ideas & Objects Preliminary Specification provides a proven value proposition for North American producers. This is due to our focus on providing producers with the most dynamic, innovative, accountable and profitable oil & gas operations everywhere and always.

I have a distinct and original perspective regarding the North American producer population. Summarizing it as a failed, damaged and destroyed industry. The elements of that failure and why I can’t see the current administration doing much to repair its destroyed financial, operational and political frameworks. I fail to see how producers can continue without addressing these difficulties. Demands and expectations cannot be met. Another attribute of this perspective is that there’s no doubt as to where the fault lies in terms of responsibility for the damage and destruction. The producer's officers and directors. The amount of time it’s been in place. Our proposed resolution is to rebuild the industry under the vision of the Preliminary Specification with our user community and service providers. 

As far back as the 1980s, producers sought to record as much of their costs as capital costs. This was done with minimal operating and overhead costs realized in the current period. These have built excessively large asset balances that reflect equally overreported profitability. This attracts excessive amounts of investor capital which industry relies on to create a systemic, unprofitable production profile. Which is ultimately expressed as overproduction, which leads to the systemic and highly detrimental, long term erosion of global commodity prices. Accentuated by sharp and repeated commodity price collapses in both oil & gas since July 1986. As an example, Alberta-based natural gas producers paid customers to take product off their hands. Or the COVID lockdown induced negative $40 oil in April 2020.

Producers have hardly anything on their financial statements except large volumes of property, plant and equipment and their supporting debts. Collectively these large balances across the industry do not generate, even at today's prices, the volume of revenues necessary to operate “real” profitable operations of a viable industry. It is reasonable to assume that oil & gas investors agree with that assessment as additional capital investment has been suspended since 2015. Since that time a mad scramble for cash has sought to make up for chronic working capital deficiencies. Seeking to alleviate the capital needs of their annual capital budget. Each year, it becomes more desperate and destructive to producers' long-term financial health and integrity. Producers have no capital structures, no support from the financial or banking communities, no faith, trust or goodwill from the service industry. An industry that they consistently and repeatedly destroyed. This process resulted in shortages of capacity and capability within the service industry, as well as short-long-term staff shortages within oil & gas itself. 

When an industry is faced with difficulties like those presented, management usually resorts to layoffs to resolve the issue. And many have been conducted. There is a point to be made here about layoffs. The first round of layoffs should preserve the firm's capabilities. The long lead times for securing land, drilling and equipping a property for production can take up to ten years. To ensure this continues you only cut in the first year of this process, the assumption being these resources can be reclaimed next year when things improve. And if the difficulties continue they’ll cut those involved in the second year of that ten year process. The third and fourth years etc. Due to the investors' strike and critical cash shortage over eight years, it is reasonable to assume that the operational capacities and capabilities have not provided the necessary pipeline of new opportunities. The cupboards are bare. Those resources needed in the first year of processes may have been outside the industry for seven years and will be difficult to recruit. This deprecation and destruction will not be evident on a financial statement but will show when the need to resume operations is demanded of the organization. Extension of this thinking to the service industry makes it a particularly difficult aspect of producers' financial and operational difficulties. If these resources are lost, replacements will not be able to take advantage of the experience of the best of breed forerunners, which is an unnecessary tragedy. Then we need to add shale's steep decline curves. Rebuilding oil & gas is not a luxury, it’s a necessity.

Politically the producer officers and directors have taken a back seat to managing the industry for decades. They've left it to others such as governments and environmental groups to define their role in society. Producers have failed to provide any practical value or need for their products. They are therefore relegated to "muddling through" politically to ensure no one sees who they are. Frequently pointing the finger at others to redirect the focus.

What’s surprising is that nothing has been done about these difficulties. People, Ideas & Objects et al’s Preliminary Specification has been vilified and ostracized for our attempts to increase profitability and accountability to deal with these issues. People, Ideas, & Objects are the only group outside the investors to express concern about the current industry state. If it is as we suspect that SAP is being used to establish the existing permanent means of unprofitability and unaccountability that we documented in our RFP, then the possibility of People, Ideas & Objects survival over the next decade or even a generation while SAP proves this hypothesis is very low. Is this what’s desired? Will they be able to avoid our Intellectual Property? Or will producers avoid People, Ideas & Objects as a feature instead of a bug? And who will spend thirty years or more asserting an alternative ERP solution for oil & gas to replace SAP? In similar ways to Oracle in 2000, IBM in 2005, and People, Ideas & Objects, will they focus on enhanced profitability and accountability in the years to come? How?

There are some who might say that the Preliminary Specification is too expensive, and I can assure everyone that it will initially be expensive. Producers could have done something about that, however those opportunities are long past. Besides, our value proposition makes it the most attractive investment producers, officers and directors could make at this time, and maybe in their careers. A budget where oil & gas investors will be assured that producers are committed to profitability and accountability and that the issues are being dealt with. Looking at SAP in terms of its cost, it may be initially less costly, however there will be no returns in terms of the quantifiable or qualifiable profitability and accountability set out in their clean energy transition vision. This will result in continued unaccountable and unprofitable cannibalization of the value generated by oil & gas investors' investments. SAP acting as officers and directors "blind sleepwalking agents for whomever feeds them."

Time is now a scarce resource. What is necessary for the oil & gas investor is to be specific as to what is an acceptable solution for tier 1 ERP solutions in oil & gas. A successful implementation of People, Ideas & Objects, our user community, and their service provider organizations' Preliminary Specifications in conjunction with Oracle Cloud ERP for oil & gas is the only way to achieve this. All of these will be packaged into our Cloud Administration & Accounting for Oil & Gas software and service. No other alternative should be acceptable.

A Fundamental Betrayal

This discussion is in response to an article posted by World Oil regarding comments by the CEO Ben Van Beurden of Shell Plc at a conference in Europe. He stated,

“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing and as a very, very quick build out of alternatives,” Chief Executive Officer Ben Van Beurden told reporters at a conference in Stavanger, Norway. “That this is going to be somehow easy or over, I think is a fantasy we should put aside -- we should confront the reality.”

I responded to the World Oil article through X with the following comment.

No!
Another viable scapegoat is unacceptable. The ultimate capitulation of accountability here. The individual with more authority and responsibility to have dealt with this long ago!  My pinned tweet above was refused by those in power. [Our July 2019 White Paper] Then in nine months they ran the price of oil to negative $40! Declared shale was a lost cause, sold it and focused on the ultimate unaccountability project in an unauthorized manner “clean energy.” 

Today’s failure started long ago and we published our solution in August 2012. #failure

First of all, this is not a betrayal by Shell Plc, its investors or employees at any time. This is a comprehensive failure by Ben Van Beurden and his cohort of officers and directors of their “muddle through” club. Rotten fish stink from the head down. The company’s been led off the cliff and now he wants to use the convenient excuse that it's Putin’s fault. Consumers should learn to go without. This is not Shell's history and culture. Investors, employees, and annuitants have built a company that reached the highest standards of excellence. They’ve been betrayed by these self-serving officers and directors who’ve used and abused the industry to the point where the consumer is told to go without?

In light of the history of People, Ideas & Objects since the August 2012 publication of our Preliminary Specification, the people that need to go without are those that caused this damage and destruction. To blame this catastrophe on someone like Putin, who will only take advantage of any situation he can find, is ridiculous when it’s Ben Van Beurden and his cohorts who gave him the gold-plated offer to do so. Who has had the Preliminary Specification available to them as the solution to these specific issues since August 2012. 

A Quick Note on our Whistleblower & Sales Commission Programs

 People, Ideas & Objects is pleased to see this blog's and our wiki's log activity levels increase over the past week.

If this is the beginning of the process for people's participation in these programs I can be contacted at paul.cox@piobiz.com if you have any questions.

OCI Request for Proposal, Part XI

 Recommendation

The Issue

The world has begun to understand and appreciate oil & gas's value. With 10 - 25 thousand man hours of equivalent labor in each barrel. Our global consumption level is 28 to 71 times the population's physical capabilities. To replace that in this century would be ambitious. What we can do, what we must do, and what we should have been doing all along is not waste one drop of these resources. This is done by ensuring they’re produced profitably, everywhere and always. Which ensures that we’re responsibly using these oil & gas resources and leaving future generations with proof that we did. This is done by passing on a viable, financially strong industry to manage that resource and an abundant, affordable and reliable resource itself?

Why would we produce oil & gas unprofitably?

What we know today is that none of the North American oil & gas produced in the past four decades has generated one cent in profitability at any time. It was a process of taking investor money to “build balance sheets” and “put cash in the ground.” Words spoken throughout the industry as if they had actual meaning. A misguided and deluded group of officers and directors that have been self-dealing for so long they know no difference. They have failed comprehensively in their role of generating profits for their shareholders. Now their organizations are likely to fail to meet consumers' long-term energy demands. Officers and directors who when faced with the challenge of making shale formations, or any part of their business, commercial decided to walk away. They pursued the green pastures of "clean" and unaccountable energy. August 2023 shows what was discussed at People, Ideas & Objects for decades is now the state of affairs. During the first half of 2023 the service industry's rig fleet lost 90 rigs. Natural gas volumes continue to grow despite depressed natural gas market prices. Producers will use "strict capital discipline" to resolve the issue. As has been repeatedly stated over the past decades. The only method of production discipline that will resolve natural gas and oil price issues is the decentralized production model of the Preliminary Specification. Which turns producer overhead from fixed to variable. Enabling the Joint Operating Committees to shut-in any unprofitable production and incur a null operation. Allowing the producer to realize maximized profitability when only profitable properties are produced.

These are not People, Ideas & Objects issues and we certainly did everything we could to mitigate these disasters we’re about to experience. They are not our responsibility as we chose to address the issue and were ostracized and vilified for it. Which if the officers and directors of the producers take note, did not deter us from doing our jobs. If someone suggests that People, Ideas & Objects et al Preliminary Specification is only “vaporware” they’d be correct. They’d also state the obvious fact that officers and directors have killed off a viable threat to their existence. An existence that has proven to be wholly unproductive and damaging to all concerned, and most particularly society in general. Our battle with these bureaucrats since the May 2004 publication of the Preliminary Research Report has been shameful. In light of the consequences for industry from this inaction, I repeat, not a single penny has been received from them towards the development of any aspect of this work. We've only received abuse like repeated beatings with baseball bats in the alley behind the dumpster. And now, with the desperate issues Industry faces, with no preparation or capacity to deal with them, what we’re seeing is what we’ve always seen “muddle through.” After eight years of their investors' refusal to continue being the “mark,” all we see in response from the officers and directors to their investors is that they’ll “muddle through.” Not one change in any method of their management.

People, Ideas & Objects recognizes the high upfront cost and makeup of our development and implementation budget. Our budget is based on 5,000 man years of effort. The issue we’re resolving is comprehensive and we’ve discussed both the necessity of the Preliminary Specification and its cost. Officers and directors' concern about these high costs is moot when the value wasted since its publication in August 2012 is tragic. These costs may have been considered opportunity costs, however the fact that these costs have now been incurred annually for decades and led to such evident destruction proves they were anything but opportunity costs. Saving a few pennies by not funding the Preliminary Specification is compared to the trillions of dollars of value they've destroyed since its 2012 publication.

Management of risk in business is a skill and it takes industry knowledge and understanding to mitigate it. Officers and directors of the producer firms are alleged to be motivated by such objectives yet have done little to deal with the associated risk of the oil & gas business. As far as hedging oil & gas commodities is concerned, our sample of producers represents approximately one third of Canadian and American production profiles. Reported hedging losses of $34.2 billion during a five-quarter period starting with the December 31, 2021 quarter. Therefore we can assume this would represent over $100 billion in losses for the broader population of producers. Such is the skill of officers and directors of producer firms. The arguments regarding our budget are specious and self-serving in light of the consequences experienced today and the time constraints officers and directors have imposed on themselves.

The selection of the Preliminary Specification may be seen as the producers' first step in reclaiming their integrity in the eyes of their investors. There would be incremental value beyond our defined value proposition in doing so. As the value differential in terms of the cash flow multiple vs. the market capitalization of our sample of 18 producers representing 11.52 million boe / day is $220.2 billion, which is potentially triple the number for the North American producers. It may be that the capital market predicts a decline in oil & gas producer firms. However, is the fact that this differential is consistent across many quarters more valid? Producers are among the most active traders on these firms' markets. In fiscal year 2022 $35.7 billion in share buybacks were conducted by our sample of producers. Without these share buybacks how understated are these differentials? To assume that producers will act on management issues reflects my naive optimism. The reality is officers and directors will “muddle through.”

What if the following scenario occurred? Producer officers and directors ceased to be subject to commodity price swings and learned to build value everywhere and always. This was done through the implementation of the Preliminary Specification. 

• How much of that $220.2 billion for our sample of producers and $660.6 billion for the industry valuation differential would be reclaimed in the current fiscal year by proceeding with People, Ideas & Objects et al? 
• Elimination of the need to hedge commodities occurs when profitability everywhere and always is being earned and the cyclical nature of the industry is worked out.
• How much larger would that valuation differential grow when and if producers select SAP? 
• If officers and directors choose SAP does that prove People, Ideas & Objects allegations of a deliberate and destructive lack of performance and accountability? 
• For those major producers who’ve used SAP, in some cases for decades, reflect that they’re part of the problem?
• These are clearly not concerns of producer firms based on their history. Will these ever become concerns of producers, officers and directors?

My argument is this: the development budget of the Preliminary Specification is a slight after taste in terms of the annual scale of revenue and profit losses, hedging and market valuation losses that officers and directors feel are acceptable. We certainly don’t hear any concern about these issues. We have a highly advanced society today that has many complex and difficult issues and opportunities. When points of view such as the Preliminary Specification are offered in 2012 should they not be looked at objectively and evaluated on the basis of their potential to mitigate risk in the long run? Or maybe even before then, such as our Preliminary Research Report in May 2004. We have a similar situation captured in a Winston Churchill quote that addresses the point.

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong - these are the features which constitute the endless repetition of history

Therefore the issue is the officers and directors of the producer firms who have personally benefited at the expense of all others associated with oil & gas. Officers and directors were responsible for ensuring none of this happened, had the authority to deal with it and the resources to correct it. They recently wandered into unrelated industries and businesses only to find oil & gas revenues weren't as available as they assumed. Unable to provide a viable solution to their difficulties. It was stated that shale would never be commercially viable. In order to rebuild the industry from the disaster producer officers and directors created. Oil & gas revenues will be needed by investors, employees, and the service industry. To add insult to injury, the one action they will take after eight years of not listening to their investors is they'll implement SAP instead of People, Ideas & Objects to ensure they won’t have to be held accountable for this damage and destruction, and no one will find any of the skeletons they’ve hidden in their closets.

Accounting for the Damage & Destruction

There is no doubt that many in oil & gas don't fully appreciate what I'm discussing when I talk about damage and destruction. Officers and directors do and they’ve clearly understood since the publication in May 2004 of our Preliminary Research Report. They’ve always seen it as a threat and know they would not personally benefit from its disintermediation and high accountability levels. We can all agree that the “endless repetition of history” is what we’ve been faced with for centuries in so many situations. As a society, we no longer accept those viable scapegoats. Today people are waking up to the folly of green energy and the imminent environmental Armageddon's entry into its seventh decade. Oil & gas is nothing like oxygen to the body. It’s analogous to blood that allows everything to function. 

Here is People, Ideas & Objects' recommendation for North American producers. Select the Preliminary Specification as the industry standard ERP system. Bold, audacious and justified on the following basis. Today producers may feel they’re sailing on for a good run and do not have to concern themselves with the past. What is evident in their financial statements is that there are legacy damages and difficulties ahead. The greatest problem I can see is the lack of trust, faith and integrity the capital market holds for producer firms. Cash flows are poor compared to the capitalization accumulated in property, plant and equipment. They barely support the “lofty” valuations producers feel they earned through their obstinate “muddle through” strategy. Comparing today’s performance to the past four decades doesn’t impress. It is important to note, however, that even these valuations aren't believed, and North American producers trade at half those prices. This performance needs to be put in the context of the past two decades' environment. Interest rates have never demanded competition among management. Yet, Treasurys would have been a far better investment over the same period.

The handful of producers that can perform at the level of their cash flow multiples should participate in the development of the Preliminary Specification. Those that are not performing will be desperate for revenue and put their entire production profile on the market. As proven thousands of times before, this will continue despite the implications for commodity prices. It might be wise to remember the negative $40 prices of April 2020 for which no single producer was responsible. The Preliminary Specification recognizes that the Joint Operating Committee and the integration of producers within the partnership will enhance collaboration and innovation. Having partners in their Joint Operating Committees operational on the same standard, objective basis through the Preliminary Specification will be beneficial.

Investors of these producer firms need to know that the only acceptable solution for them is People, Ideas & Objects, our user community and their service provider organizations. Operational through our Cloud Administration & Accounting for Oil & Gas software and service which includes Oracle Cloud ERP. Selection of SAP or any other ERP system should not be an option. This needs to be communicated in the same manner that the prior request for a Tier 1 ERP system was made. Otherwise there is much to lose for all concerned.

We’re kidding ourselves to think officers and directors will act contrary to their “muddle through” behavior. It has become a culturally systemic method of operation. There is no easier way to understand this than to assess the situation in terms of where the industries stand today. All of these points are the result of decades of mistreatment and abuse of their power, authority, accountability and responsibility. This is for personal financial gain. The cumulative symptoms and attributes that have led to the damage and destruction People, Ideas & Objects rant about include…

• Never selling the attributes of oil & gas that consumers gain from the use of their products. Losing the political agenda to environmentalists and woke politicians.
• Becoming wholly dependent on outside capital to support all business operations. Oil & gas has lost the ability to maintain commercial operations.
• Overreported capitalization due to “building balance sheets” and “putting cash in the ground” enabled producers to leverage their positions excessively during two decades of low interest rates. Creating a future crisis due to extreme levels of debt during a period of normalizing interest rates.
• Financial theory presumes that during times of low interest rates firms will invest in capital to increase productivity. During periods of high interest rates employment is the lower cost alternative to productivity. Productivity in oil & gas over the past two decades has been questioned.
• Creating organizations incapable of profitability, understanding of how or what to do to earn it. Culturally sealing the inability to determine profitable operations were ever necessary and assuming they were not.
• Never taking responsibility or accountability for anything. Blaming, excusing and creating viable scapegoats of others whose fault they’ve fallen victim to. Enforcing a culture of “muddle along” and inaction.
• Liquidating the value of the industry to the point where it has a negative net present value. Current operations demand that capital be consumed in day to day activities.
• Deprecating producers' organizational structure, operational capacities and capabilities. Cannibalizing the service industry as their last source of capital financing by extending a/c payable to 18 months. Fundamentally destroying the greater oil & gas economy.
• Capital structures of producers and the service industry are unsupported by debt or equity providers. Zero remedial efforts taken to address these concerns. Approaching one full decade of inaction and uncaring since investors began their withdrawal from industry. Continuing cash flow from a capital intensive industry sustains their personal aggrandizement, therefore what’s at issue?
• Losing the mid to long term capacity to meet the consumers market demands for energy. The most powerful economy will consume the most energy. Creating a distinct threat to the most powerful economy ever developed. Therefore what’s at issue?
• Incapable of standing up to teenage wanna-be environmentalists. Asserting the value add of the oil & gas products in the lives of the consumer. Turtling at any and all points of conflict. Leaving it to pipeline companies and others to fight their battles, while they pay the grift to the environmentalists not to protest producers.
• Employing their cultural propensity to abandon prior efforts which include their latest and greatest effort, shale, which they’ve now declared would never be commercial. Instead of remediating these assets they moved on to the next latest and greatest thing. Notice the slight of hand?
• Sauntering off the field in the direction of the unaccountable clean energy businesses where they’ll continue to prosper personally and never have to concern themselves again with being successful. Using the oil & gas revenues to support these activities through contrived boardroom battles. Listening to the “investors” concerns for the environment is the only issue of the investors they’ve ever responded to. Realizing their mistake they've returned to their post as if nothing ever happened.
• Therefore, the producers leadership has walked off the stage with the oil & gas revenues in tow to the land of unaccountability where their only accountability will be "they’re saving the planet!” 
• After all of this, what are producers offering oil & gas investors? A history, a legacy, a culture of failure, greed and “muddle through.” A theft of their revenues they invested to build. An inability to understand their primary role is to earn profits. A point they not only disagreed with, they laughed when I suggested it and have no clue about how to earn it. Culturally incapable of doing so.
• Seeking to seal this culture permanently in an implementation of SAP that emulates current management methods. 

In all of this there has been no response from oil & gas producers. From our initial Preliminary Research Report in May 2004, until the investors' strike began in 2015, nothing has been done. Producers and directors need to acknowledge that it is within their domain to deal with issues. Profitability is an issue. The solution is in front of them in the form of our Preliminary Specification. There will be no one helping them from now on. Adopting the Preliminary Specification, profitability would provide all the money they need to do as they please in the business. Do they need $800 billion to build LNG facilities in Canada? Make that money. The means are on the table. If they want to do anything in North American oil & gas, the only thing stopping them is their own obstinance. Build a profitable business and the world will be their oyster. I’ll explain it explicitly. Make oil & gas profitable if officers and directors want green dreams. And do so with accountability everywhere and always.

But no, they’ll outlast investors who officers and directors believe will return begging to get in. I mentioned that oil & gas ERP systems were abandoned by our investor class in the 1990s. This was due to our inability to perform financially because we could not convince producers to manage their business properly back then. Unaccountability was and is their business, or am I redundant here? If we assume that the Preliminary Specification et al is the appropriate solution. If we assume that the value proposition is as it's stated, it would be reasonable to believe that ERP investors would smash down my door. Two things stop this. 1) I won’t accept their money because I am unaware of how I can make money in this business without the producer buy-in that this RFP solicits. 2) ERP investors are not here. They know what the situation is and based on their 1990s experience, they left. Nothing has changed and they remain where they are. 

Producers need to understand that they’ll never attract investors or banks until they change their firms' performance trajectory. There are no signs of that, only their obstinate and stubborn “muddle through” strategy that destroyed everything and continues to do so.

These are the issues People, Ideas & Objects addressed in our Preliminary Research Report in May 2004. And became the basis of our research that led to the Preliminary Specifications publication in August 2012. An interesting quotation from Mark P. Mills of the Manhattan Institute applies directly to oil & gas history.

Brookfield’s CEO said that the strategy follows the same deal-making common in other capital-intensive industries. Companies will happily take any supplemental money, but the market opportunity, not the subsidies, underpins such big investment gambles. The key, to use the famous truism from Walter Wriston (the former, storied CEO of Citibank), is that “capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.”

Put this into the context of developments in North American oil & gas. Culturally, producer officers and directors believed investors became organizational subsidies. Not the means to pursue the market opportunity. 

To deal with this today requires only one solution and that is People, Ideas & Objects et al. This is defined in this RFP response. What this also proves is common knowledge that “organizations don’t change, people do.” The resistance to change that we’ve experienced, and that of the producers' investors, has originated in one area of each and every North American producer, officers and directors. Our final attempt to deal with them was sending an offer to the officers and directors in July 2021 which they ignored. This Response to a Request for a Proposal is highly derivative of the proposal sent to them. This proposal is not directed at them and therefore, no harm no foul, my abuse is inert. 

We are directing this RFP Response at those investors who have seen enough to know the situation today is not being addressed effectively. People, Ideas & Objects don’t need to tear things down to start over. That’s already been done. We need to rebuild the industry in the vision of the Preliminary Specification. In order to accomplish that, investors must direct producers' officers and directors to fund the Preliminary Specification. What will happen to North American oil & gas if this doesn’t happen? It involves a short-to-mid-term semi-permanent status quo. Or as long as SAP is around.