Willful Misconduct or Negligence?

 The jeopardy that officers and directors of the producer firms find themselves in today is maybe unique in the history of business. Over the past twenty years they’ve had to tolerate many difficulties such as the financial crisis, Covid and Shale disrupting their business model to name just the highlights. Meanwhile there has been a lingering issue of production discipline continuing in the background. Production discipline challenges the practice of placing 100% of production on the market at all times, regardless of market capacity to absorb the volume or control commodity prices. People, Ideas & Objects detailed in our January 15, 2024, blog post the consequences of overproduction, or unprofitable production due to lack of production discipline, including repeated price collapses since July 1986.

A Summary of the Issue

Producers' assumption that the market can clear any level of production is incorrect. There are consequences and the primary one is that oil & gas commodity prices are determined under the economic principles of price makers. Any surplus production reduces the price below the marginal cost of all oil & gas, creating unprofitability. Creating a situation where today we can quantify the difficulty in the natural gas side of the business due to its breakdown from the standard heating value of 6 to 1 to as low a pricing as 40 to 1 per barrel of oil. As for oil prices, we can only assume they were sold at a discount, though the exact amount is difficult to determine.

• Overproduction is best considered to be production that is unprofitable. 
• Based on the financial status of the producers, the service industry and the greater oil & gas economy, nothing has been produced profitably for decades. 
• If not for the incremental investments made by investors throughout the 1990s, 2000 - 2015 period the industry would have failed long ago. 
• The destruction and incineration by unprofitably producing 780 TCF of natural gas over the course of this century. Why has so much damage been allowed to develop? 
• Involving the deliberate avoidance of recognizing, understanding and remedying what has become a $4 trillion dollar natural gas revenue hole in their operations. 
• Unquantified and much larger financial issues with oil. 
• An issue that was recognized, understood and a solution provided to them by People, Ideas & Objects in the form of the Preliminary Specification in 2012.
• Where producers investors abandoned their further support of producers capital needs in 2015. An act that should obtain 100% of the officers and directors focus to resolve, yet nothing was done.
• Where a 2016 opportunity began with the development of LNG export markets to realize a global price, and rehabilitate the domestic natural gas price, was lost and is irretrievable without People, Ideas & Objects.
• 2024 shows minimal opportunity now exists to enter the global market through LNG contracts until later this decade.
• Leaving only the Preliminary Specification available for producer officers and directors to institute the production discipline necessary to rehabilitate their domestic natural gas price. 
• And establish a marginal global oil price. 
• Attaining People, Ideas & Objects objectives of preservation, performance and profitability.

At this point what we’ve documented is that the decisions and understanding of the officers and directors, since at least 2007, have been incorrect and flawed. Overproduction due to a lack of production discipline is an existential issue to the industry. Assuming oil & gas commodities follow the price taker principles was absolutely incorrect. Therefore assets in the form of petroleum reserves, in this instance at least 780 TCF, were not managed appropriately for their shareholders. Secondly, the value of those reserves was not maximized. Revenues realized for 2023 averaged 26.4% of what the 6 to 1 oil price would have achieved. Our analysis shows approximately $4.03 trillion in revenues have been unrealized due to officers and directors inactions since July 2007. Reuters recently published industry could realize an incremental $2.6 trillion in revenues as a result of digitalization. ERP systems will be a foundation of that effort. Would these revenues have assisted industry in:

• Deferring the excessive investments being made by investors from 2007 to 2015?
• Maintain a profitable and prosperous North American oil & gas industry?
• Ensured a competitive, robust, capable service industry was healthy and prosperous?
• Maintained market participation in LNG.
• Investors participate in an undiluted share of the financial benefits of a well managed oil & gas and service industries?

Legal jeopardy in the form of willful misconduct has been attached to the officers and directors and they stand to lose their Officers and Directors Insurance coverage if they are found to have not responded to a threat in their producer firm. The threat has become a reality and as such there were material losses. People, Ideas & Objects warned them extensively and provided a solution, however it was counter to their best interests personally in the form of disintermediation. Additionally investors had suspended support for the past eight years due to their dissatisfaction with the performance of the producer firms. People, Ideas & Objects understood their actions to be significant. Damages have been and will continue to be realized until officers and directors decide to act to develop the Preliminary Specification. Therefore, is this willful misconduct or negligence?

It will be nine years ago that investors began the process of removing their support. Causing a variety of actions by the producers management to make up for the short fall in investor activity. Not in any specific order, the process involved seeking funding from the following. 

• Producer banks continued to fund them, however as investors did, banks have curtailed their exposure to oil & gas.
• Sales of properties to other producers was able to raise capital budgets.
• Reductions in field activity levels and offering only discounted prices on any field work reduced producers' capital costs substantially.
• Retroactively changing the terms of payment schedules with the service industry to 18 months.

Based on the financial status of the producers, the service industry, and the greater oil & gas economy, it appears that nothing has been produced profitably for decades. Without the incremental investments from investors between the 1990s and 2015, the industry would have likely failed. Petroleum reserves are only valuable assets if they can be produced profitably. Industry consumes cash, therefore it carries a net negative present value. 

With only 30% of the drilling capacity that was available to them in 2015. Producers announced in the first week of January 2024 that record production of both oil & gas was achieved. This occurs while others such as OPEC are removing several million barrels per day from the market. Production discipline is a business issue and not an engineering or geological issue. Officers and directors hold to their opinion that spending money is profitable. Therefore and in consequence, business issues can be "muddled through."

It's important for officers and directors to understand their legal obligations and the potential consequences of their actions. Decisions that significantly impact a corporation should always be made in good faith, with due diligence, and in the best interests of the company and its stakeholders.

Global LNG Markets Open

2016 saw the beginning of a substantial buildout in LNG facilities in the Gulf of Mexico and elsewhere in the U.S. As they stand today the export capacity of these facilities is 14.6 BCF / day. There are 10.8 BCF in incremental capacity under construction. 19.26 BCF / Day approved however not under construction. The existing capacity increase would have been a major benefit to the oil & gas producers over the past seven years. Except it was not realized. The value of taking the highly depressed North American natural gas prices from the Gulf of Mexico to the lucrative ports of Japan and the Netherlands does not appear to have occurred. Since we raised this point in a series of posts entitled “This One’s Nuclear, Part I,II,III & IV we have learned of Chesapeake and ARC Resources getting involved in the business of shipping gas overseas. Not to be outdone, on January 8, 2024 Shell announced they had signed an agreement with Ksi Lisims LNG for 2 million tonnes per annum. An LNG facility that doesn’t exist, isn’t under construction, hasn’t been approved by regulators or decided to be built. And now, Exxon and EQT have joined the party. 

Even they don’t have gravitas to secure space on anything but vaporware contract access to prospective LNG facilities. Confirming our analysis and proving that there are a multitude of business issues that prove willful misconduct. I’ll reiterate, the only method for producers to eliminate others from continuing to poach the value from natural gas production is to implement the Preliminary Specification.

Profitable, North American Energy Independence -- Through the Commercialization of Shale

July 4, 2019 People, Ideas & Object publish a White Paper with the above title. Detailing how North American based oil & gas producers could deal with their overproduction or unprofitable production and deal with the high cost of Shale based production. We received a wide distribution of this .pdf and engaged in a specific discussion around the application of the Preliminary Specification to the issue of overproduction or unprofitable production. No response was received from any of the producer firms in terms of participating in development. 

We’re aware of a group of oil & gas investors who had expressed dissatisfaction with the performance of the producers. Who had specifically asked some officers and directors about the Preliminary Specification, to which they received the following response.

Officers and directors responded with two specific comments. 

• The solution was crazy and would never work.
• They couldn’t shut-in production without seriously damaging the formations and its reserves. Making the comment that “the formation would fold over on itself.” 

April 2020 proved this was untrue when 25% of world’s oil production was taken offline. Upon resumption not one producer announced they had incurred any damage to their formations. Production eventually resumed as it was prior to the lockdowns. Why this reasoning was used is unknown. Producers frequently shut-in production for a variety of reasons.

• Production is shut-in during hurricanes in the Gulf of Mexico.
• During annual plant turnaround operations.
• Workovers and service rig operations. 

I'll reiterate that producers disregarded this solution without any direct conduct with People, Ideas & Objects.

Clean Energy

As odd as the 2019 declaration that the Preliminary Specification was crazy and unworkable. In late 2021 producer officers and directors declared Shale would never be commercial. Two years after the publication of our White Paper and not one response from a producer firm. Yet declared the frontier of oil & gas not viable? The movement of producer firms' financial resources would then be dedicated to clean energy?

• An industry of which producers have no strategic competitive advantage. 
• No firm in the world has commercialized any clean energy projects. 
• All firms are heavily dependent upon government subsidies. 
• Is lead by European wanna-be teenage dictators. 

Those people involved in pushing the technologies of Shale in the producers and service industry learned that producers were no longer committed to oil & gas. Why would rig operators invest in new rigs to watch them be cut up for scrap metal and producers chase solar farms? We were led to believe that this “investor demanded” initiative into clean energy was the direction expected. 

• Except no investor in their right mind would authorize or volunteer to invest their revenues and cash in unrelated industries of which no competitive advantage exists. 
• Especially after watching the producer argue with investors and refuse to earn a profit for decades. 
• Have consistently refused to listen to any discussion of the issue or alternative solution to deal with the lack of their commercial oil & gas operations. 
• Yet, overnight, and without shareholder approval, changed the direction of the firm into unrelated fields in which they held no competitive advantages. 
• Explicitly taking, in an unauthorized manner, the investors revenues that investors had built and would need to rebuild the oil & gas industry with. 
• To allow officers and directors to invest in some industry where we know accountability is substandard of the governments. 

This is best represented in this Forbes article that argues the Exxon Annual Meeting was a pretentious play worthy of Shakespeare.

‘The Vote’ (A Play In Three Acts By ExxonMobil Productions) 

Realizing clean energies evident folly producers return to “Shale” in the Permian and undertake a campaign of “consolidation” to “remediate” the industry. Is this a permanent commitment or until the Annual Meeting is over? At the beginning of 2024 we can’t be too quick to criticize their lack of action. Just as the switch to the clean energy industries opaque accountability, consolidation solves which mythical issue? 

Conclusion

This is un-qualifying on every level and in so many different perspectives for the officers and directors. There is a unique personal situation they’ve created for themselves. Where their personal financial jeopardy is at risk from officers and directors willful misconduct.

• Officers and directors are personally responsible for any judgments from lawsuits they may incur as a result of being an officer or director of a firm. 
• They pledged their personal assets before they became officers and directors.
• They carry Officers and Directors Insurance to cover the risk they are liable to their shareholders and others for judgments. 
• Insurance premiums are paid by the firm. In normal cases, insurance is maintained by the firm for a period of time (statute of limitations) after the officers and directors have left. 
• Insurance coverage does not apply to a situation where officers and directors knew, or should have known, of a situation that caused or will cause damage to the firm and its investors. It would be difficult to assert they were unaware of these damages considering the following:
• Would insurance coverage be maintained for an undetermined willful misconduct / negligence question that potentially leads to $4 trillion in damages?
• People, Ideas & Objects have been dedicated to resolving this issue since:
• The Preliminary Research Report was published in May 2004.
• This blog began in December 2005.
• The Preliminary Specification was published in August 2012.
• However, having a solution available only proves negligence.
• I have failed on two previous occasions to bring advanced ERP systems to oil & gas. Oracle and IBM made similar attempts. Prompting their exit from the industry.
• Our conclusion regarding these failures is that producers maintain old and inadequate ERP systems and accounting procedures to facilitate continued opaque accountability. 
• We were and are offering enhanced accountability, which was not what the market asked for.
• People, Ideas & Objects have repeatedly warned producers of the detrimental nature of overproduction and its consequences with our value proposition at $25.7 to $45.7 trillion over the next 25 years. We’ve calculated $4 trillion dollars for natural gas deficient revenues in North America since 2007.
• Reuters has published that there is an incremental value of $2.6 trillion dollars to be captured in the next few years through digitalization of the industry. We include ERP software in that digitalization as it would be the foundation. 
• If others are aware of trillion dollar issues in oil & gas why are officers and directors not. Therefore are they liable to their investors if they take no actions?
• Oil & gas investors have expressed dissatisfaction over the past nine years. With no action taken by officers and directors.
• Investors asked specifically about a solution, the Preliminary Specification, and were told untruths as to why it was not appropriate.
• When People, Ideas & Objects asserted oil & gas was never profitable. 
• Officers and directors made specious claims that are not supported by basic, common logic or understanding.
• During 2011 - September 2014 oil prices averaged approximately $95.
• In September 2014 oil dropped to $86.07. Producers announced they would be profitable at $70.
• In December 2014 oil dropped to $68.62 producers announced they would be profitable at $55.
• In February 2014 oil dropped to $43.85 producers announced they would be profitable at $35.
• In August 2015 oil dropped to $36.17 producers announced they would be profitable at $30. And so on.
• Innovation claims were the reason. What People, Ideas & Objects assert is this is nothing more than innovative historical accounting.
• However, innovations in historical accounting put Bernie Madoff in prison, even though he never reported a loss, either. 
• When a producer is able to drill at best 5% of their total producing well inventory in a year. How could that 5% reduce the capital costs of all their prior exploration and production costs in such a material way?
• Is there more to what has occurred in this willful misconduct by the producer officers and directors?
• Insurance coverage will be null and void as a result of willful misconduct for any lawsuits stemming from the trillions of dollars in waste they’ve caused. 
• They were warned, and didn't act. 
• Investors raised concerns, yet officers and directors did nothing.
• Opportunities to rehabilitate markets were not realized.
• Untruths, blaming and viable scapegoats were used to deflect any fault. 
• “Muddle through” is standard operating procedure.
• The lack of production discipline continues. 
• Today officers and directors may be able to ensure their insurance will not be canceled by acting to resolve the issue.
• If steps are taken today to mitigate the issue and correct the error by moving forward with funding and the development of the Preliminary Specification. 

To summarize, in my opinion legal jeopardy has been attached to the producers officers and directors on the issue of willful misconduct. It is material and will need to be addressed within the following deadlines. This is an industry wide initiative and I will not be participating in the messaging or promotion of the following deadlines outside of this blog and X. The producers are able to encourage their working interest partners to participate in these developments and organize themselves. For People, Ideas & Objects to cold call after we’ve been ostracized for two decades from the industry, would demand another century or two of effort to complete.

Deadlines

People, Ideas & Objects have set February 16, 2024 as the deadline for producers to exercise their $30 million U.S. option of keeping the Preliminary Specification available to them for the purposes mentioned today. 

April 12, 2024 is the deadline for their participation in the development of the Preliminary Specification. This will provide the producers with the opportunity to go before their investors during their Annual General Meeting and ensure they have sought to correct the problem. 

People, Ideas & Objects will not commence any developments until such time as all the proceeds are secured by the April 12, 2024 deadline. If either deadline is missed we will defer back to our Profitable Production Rights method of financing. Budget information and a producer's individual share can be determined there.

There is a sense of urgency and enough time has been wasted. The consequences of what has occurred we feel are tragic and few options exist. Action is required. Expectations upon us will be difficult to manage and we’re beginning to meet those expectations with these deadlines. Effective February 19, 2024, or potentially April 15, 2024, assuming producer officers and directors pass on People, Ideas & Objects deadlines. If officers and directors do not fulfill their fiduciary duty in meeting these deadlines. Would that bring about a different set of legal consequences they would have chosen to pursue.

Potential members of our user community may want to take note of the progression of these activities.

This One's Nuclear, Part IV

 People, Ideas & Objects observed North American oil & gas producers exhibiting disconcerting behavior. In October and November 2023, I highlighted how natural gas mismanagement and lost market development opportunities impacted pricing. Prices plummeted in July 2007 from a 6 to 1 ratio against oil to as much as 40 to 1 in 2023. We discussed how producers lacked production discipline. Suffered from chronic and systemic overproduction, and could resolve these issues through our Preliminary Specification. Since November 2023, the natural gas crisis has worsened. Reaching a magnitude of over $4 trillion in lost revenue during that 16 year period. A critical shortfall in LNG contracts is hindering producers' ability to stabilize the market for the foreseeable future. Their sole solution is to implement the Preliminary Specification's decentralized production model's price maker strategy. Enforcing production discipline based on the only fair and reasonable basis, profitability of the Joint Operating Committee. It is necessary for them to adopt People, Ideas & Objects, our user community and their service providers drive towards preservation, performance and profitability.

Oil & gas prices in North America have worsened because of chronic overproduction. Adopting our decentralized production model will introduce the most equitable means of production discipline available to producers. If the Joint Operating Committee earns a “real” profit, then it produces; if not, it’s shut in for these business benefits:

• Shutting in unprofitable properties prevents the dilution of a producer's profitable properties' performance, leading to their highest corporate profitability.

Reserves, safeguarding the firm's assets is a role of officers and directors.

• Producers keep their reserves in order to produce them profitably at a later date.
• Producers reduce operating and storage costs by leaving overproduction of oil & gas as reserves.
• Reserves do not need to cover the additional costs from prior losses.

Deployment of their strategic competitive advantages of their earth science & engineering capacities and capabilities.

• While shutting in a property, producers will work to innovatively restore the properties profitability.

Performance & Profitability.

• Making independent business decisions based on actual, factual, standard and objective accounting which determines a Joint Operating Committees profitability. Does not constitute collusion, despite what officers and directors suggest.
• North American producers benefit when they produce all their properties with marginal prices.
• Prices will reflect the replacement value of production. Price makers only initiate new production when profitable.
• Markets provide one thing: the price, which incorporates all information buyers and sellers need to make effective decisions.
• Producers with profitable operations will have their capital repeatedly returned when recognizing depletion in the price of the commodity. Investors in effect were subsidizing the consumer's energy consumption by paying the capital costs of the commodity.

Overhead burden is reduced, shared and made variable, based on profitable production.

• Our Cloud Administration & Accounting for Oil & gas Software & Service will be a shared resource for all producers administrative and accounting needs. 
• Reduces the need for each producer to build redundant, unshared and unshareable administrative and accounting capabilities. 
• With the Preliminary Specification, shutting in production results in a null operation. All producer costs, including overheads, become variable based on profitability.
• Producers recoup overhead costs as cash in the subsequent month when they include these costs in the commodity sales price. In today's producer business model overhead is capitalized and cash is recovered over a twenty year period.
• Creating the dependence on outside sources of capital.

Future capital needs will exceed any expectation that the past “investor-funded model” could finance. The Preliminary Specification provides the financial resources to support dynamic, innovative, accountable and profitable oil & gas producers. 

It’s crucial for producers to broaden their competitive scope in capital markets, leveraging innovative strategies outlined in the Preliminary Specification. Investors have alternatives in other industries, and oil & gas must offer competitive returns. 

• Competing in capital markets will foster the production discipline necessary across the industry.
• Producers who continue to neglect profitable production, dilute earnings with incurred losses. Continuing to fail to compete in the broader capital market and against peers.
• Why continue to lose money when significant capital demands are on the horizon.
• Profitability drives value creation, supplying the financial resources necessary for the producers. 
• But also generating value in the secondary and tertiary industries that support oil & gas.
• Businesses and industries operate on profitable business models. 
• Oil & gas producers have relied on investors to generate the cash they needed.
• Investors were deceived by the specious financial reporting that were conducted for several decades throughout the industry. 
• That’s over, they need to admit that and realize that profitable operations will provide them with all the money they need.
• However, today we can state unequivocally that the culture doesn’t know how, where or what that would involve for their organization to begin to earn profits. 
• Operations of the industry on this basis, for four decades, has diminished the assets performance criteria to well below standard.

People, Ideas & Objects, our user community and their service providers enable producers to restore oil & gas market prices and capture replacement costs as cash for reinvestment, dividends, and debt reduction—consistently and repeatedly. Only then can they tackle the next 25 years, a period that will be the most challenging in the industry's history. Instituting a new culture based on the seven Organizational Constructs of the Preliminary Specification. 

Producers firms' officers and directors have not engaged in any material or exceptional activity in retirements or resignations. It’s important to note that People, Ideas & Objects received no contact from the producers about our product since raising the LNG issue in November 2023. Clearly, they feel in control and will continue with their regular operations, despite facing a serious existential crisis with no support for their capital structure. Operational field capacities are at best one third of prior years and diminishing. From the eia.gov

They see consolidation as the solution to their unidentified and unexpressed issue. They have a culture that does not generate value, no plans or vision, or understanding of how to generate profit. They only mock those such as People, Ideas & Objects and now Reuters for raising trillion-dollar issues. And when issues materialize, officers and directors will “muddle through.” What will “muddle through” do with the higher cash flows necessary to meet the future capital needs? Will they begin using them prudently or revert to their cultural propensities?

Eighteen months ago, producers renounced shale's commercial viability for their clean energy adventures, only to be corrected. And in late 2023, finding that $4.0 trillion in natural gas revenues passed through their fingers. That non-participants of the oil & gas industry in fact have realized their revenues. Revenues that were available to them since August 2012 through the publication and development of People, Ideas & Objects Preliminary Specification. A decade lost! What will they say in their defence?

Or perhaps officers and directors realized they can’t leave now. If they do, their officers and directors insurance will be null and void as a result of not doing anything. The threat existed and now it’s real, and without the Preliminary Specification it will be lost on a prospective basis. The warning was being made on this blog and our Preliminary Research Report since May 2004. They can not say they were unaware. If they did, their officers and directors insurance wouldn’t cover them. Their fiduciary duty assumes they knew of the risk. And would therefore be subject to having their personal assets used to compensate investors.

People, Ideas & Objects rewrote the Preliminary Specification in 2023. I adhere to the U.S. dollar budget requirements detailed in the Profitable Production Rights model. If industry wishes to engage, People, Ideas & Objects is keeping the following option open until February 16, 2024. 

• Industry will need to send a non refundable option of $30 million U.S. to extend the offer until April 12, 2025. In time for the Annual Report season.
• Then pay the development funds by April 12, 2025. These funds support the development of the Preliminary Specification.
• If they miss either of these deadlines, they’ll face consequences by holding themselves personally accountable for the destruction we warned about, has manifested and they’ve disregarded for nearly two decades. 
• Accountability demands they do something to correct this. 
• None of that means anything to them. However, if they don’t they’ll only make their personal situation more complicated. It's the officers and directors' decision. 
• If they miss the February 16, 2024 deadline, we will reinstate the full Profitable Production Rights funding method. 
• Officers and directors will then need to explain to their shareholders the loss of an extra 5% or more in future revenues through that method of software development financing.
• Consistent with the Preliminary Specifications value proposition. Reuters stated that $2.6 trillion in incremental revenue is on the table in the next few years. This demands action from those who have the responsibility, accountability and resources necessary to deal with it. 

People, Ideas & Objects deadlines are structured to deal with the sense of urgency necessary for industry to resolve its issues and realize its opportunities. Time is of the essence. Our value proposition of $25.7 to $45.7 trillion dollars over the next 25 years is now recognized elsewhere, is valid and available through development and implementation of the Preliminary Specification. The argument we’ve put across in support of our business model has been met with consistent lies, blaming and what we call viable scapegoats from the officers and directors of the producer firms. They thought we were seeking attention by putting out ridiculous numbers to gain attention to what we were doing. On the contrary we were doing our job and had a clear handle on the scope and scale of what was not being managed appropriately. Today the oil & gas and service industry are in shambles. An active rebuilding is necessary on an all hands basis. Any rebuild, particularly one in the 21st century, needs to be organized first and foremost. And doing so outside of an ERP system would fail. This development needs to be outside the control of the current officers and directors for two reasons. 

• To avoid their cultural influences and establish the seven Organizational Constructs of the Preliminary Specification as the replacement culture. 
• It appears since the LNG contracts and the opportunity to remedy the prices in the past decade were missed. Officers and directors did not know or understand the issue.
• If they don’t understand the issue, how will they solve it?
• If they have to avoid the Intellectual Property of People, Ideas & Objects what will they use?
• Who will conduct the research over the next decade to build that business model?

I’ve been seeking to resolve this since the July 1986 oil price collapse. Organizing my first approach in May 1991. Undertaking the necessary and difficult decade of research to resolve the issues and exploit the opportunities in oil & gas. A task that has not been undertaken by producers or any of People, Ideas & Objects competitors. 

Please contact, and join me in making North American oil & gas producers dynamic, innovative, accountable and profitable. Only through profitability can the industry continue and obtain the preservation, performance and profitability we need from these two critical products. Everyone in oil & gas clearly understands why profits are necessary and what happens when they’re not earned. Oil & gas has its most challenging and demanding future ahead of it. It will demand the best of everyone and no one can be left out of this rebuilding process. If someone is looking for urgent, challenging and important work they’ll need to look no further than here.

A New Year

 People, Ideas & Objects had a good year in 2023, and since November, we documented approximately $4 trillion in lost natural gas revenues due to producer officers and directors' mismanagement. This validates the Preliminary Specification value proposition and proves our hypothesis, and is now the only method for North American producers to create future value. Their ability to close the price gap between North American and global natural gas prices hinges on the Preliminary Specifications decentralized production model's price maker strategy to enforce production discipline. Without it, they're producing gas at a loss for the century. From Henry Kissinger's 2022 book "Leadership: Six Studies in World Strategy."

Looking forward, the scope and scale of the difficulties and the amount of financial destruction being authored by North American producers continues. Recently Reuters Lee Cibis wrote.

Digitalization has the potential to unlock up to $2.6 trillion worth of revenue in the oil & gas sector by 2025. Upstream leaders and service providers alike need to keep up to date on the digital developments to seize this opportunity for increased production efficiencies and profits.  

Digitalization, trillions and profits are words that may cause Ms. Cibis difficulties, although I appreciate the company. Reuters calculations are going to be global for both oil & gas whereas ours focus on North America and natural gas for the period 2007 to present. 

Since we have revised the Preliminary Specification and we're now focused on the future we will blog less frequently in 2024 and we’ll be publishing more on X. Expect two blog posts weekly, Monday and Wednesday at 7:30 AM Eastern time. 

Our need for more time to enhance the firm's research capabilities causes our drop in publications. Last year, I investigated hyper specialization in service provider organizations and strategies to address related issues. We will accompany our recommendations with conclusions once the research is complete, expected in 2024. People, Ideas & Objects acknowledges our limited influence on the complexity of developing service providers. The market's invisible hand provides this, aligning with our philosophy. Our research aims to review and advise on service provider development only, leaving it to the market otherwise. Preparing and organizing our research, our third competitive advantage, requires time and precedes any output.

We found one issue: the vast number of research projects we need to undertake. We are evaluating tools and methods to manage the abundant information more efficiently and start adding value to the dynamic, innovative, accountable and profitable oil & gas producer—a task that will yield results in the future.

We discovered something valuable to enhance our user community vision. Examining ChatGPT 4.0 reveals a clear difference between two user classes. The Preliminary Specifications user community vision suggests the need for Intellectual Property (IP) rights to support gainful employment, obtained through education and experience, and one of three IP access levels. First, outright ownership of IP, such as copyrights, trademarks, patents, and trade secrets. Second, licensed access to others' IP via contracts. Third, employment with a firm owning or licensed to use IP. These tiers are prevalent across People, Ideas & Objects, our user community, and their service providers.

Custom instructions of Preliminary Specifications Intellectual Property enhances ChatGPT Large Language Model (LLM) for our user community and service providers, increasing the value of their work and the IP of People, Ideas & Objects. We plan to include not just the blog and wiki content but the entire user community's documentation in our software development. This will encompass developers' code and Oracle Cloud ERP tool documentation, enabling our community to iterate faster and quickly find answers to complex questions that might otherwise have been missed or neglected. ChatGPT and our LLM bring together the comprehensive details of this knowledge for our user community and service provider organizations. A fallout consequence of IP being a foundation of AI is that the focus will remain within the domain of concern. Limiting the distractions and unnecessary diversions. At the same time unlicensed access to this IP will fall under the copyright provisions. Fair use will allow ChatGPT to use however none of it will be publishable or otherwise usable of our user community.

ChatGPT’s progress promises many benefits in the future. Leveraging these technologies will benefit our user community. Moreover, I use over half a dozen apps that employ AI to gather vast information based on their features. The Preliminary Specification includes an Artificial Intelligence module designed to steer industry efforts towards productive AI. Focusing the resources of industry on one shared resource and spreading the costs per boe produced. Oracle's late 2022 automation initiative prompted our rewrite of the Preliminary Specification, followed by their significant Generative AI capabilities in 2023. We have integrated these into the Preliminary Specification. AI is here to stay, and its value will increase with use. It’s currently receiving a lot of attention, like the .com bubble, and may just be as consequential as the Internet.

The Preliminary Specifications Bibliography

I'm pleased to provide an updated Bibliography for the Preliminary Specification. And it's also a good time to wish everyone a Merry Christmas and Happy New Year. We'll see you in 2024.

Academic Research & Books

Bailey, Ronald. Post Scarcity Profit: Economist Paul Romer on Growth, Technological Change and an Unlimited Future. Reason Magazine. (December 2001). https://reason.com/2001/12/01/post-scarcity-prophet-2/

Baldwin, Carliss Y., Where do transactions come from? Modularity, transactions, and the boundaries of firms, Industrial and Corporate Change, Volume 17, Issue 1, February 2008, Pages 155–195. https://doi.org/10.1093/icc/dtm036

Baldwin, Carliss Y., Clark, Kim B., Where do Transactions Come From? A Network Design Perspective on the Theory of the Firm. Harvard Business School. May 2006. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=2f68bbe46c7392e726a1af85e1863c889eb44f66

Bryan, Lowell L., Joyce, Claudia. The 21st-century Organization. (2005). McKinsey & Company. https://michaelsamonas.gr/images/Mixalhs/resources/21st_Organization.pdf

Carrol, M., Rosson, M., (October 1998). Interfacing Thought: Cognitive Aspects of Human - Computer Interaction. Cambridge MIT Press, pp. 80 - 111. https://www.amazon.ca/Interfacing-Thought-Cognitive-Human-Computer-Interaction/dp/0262532212

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Dosi, Giovanni and Gambardella, Alfonso and Grazzi, Marco and Orsenigo, Luigi, Technological Revolutions and the Evolution of Industrial Structures: Assessing the Impact of New Technologies Upon the Size and Boundaries of Firms. Capitalism and Society, Vol. 3, Issue 1, Article 6, 2008. https://ssrn.com/abstract=2209120

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Harper, Stephen, Right Here, Right Now: Politics and Leadership in the Age of Disruption. Penguin (Oct. 9 2018). ISBN-10 ‏ : ‎ 0771038623 ISBN-13 ‏ : ‎ 978-0771038624 https://www.amazon.ca/Right-Here-Now-Leadership-Disruption/dp/0771038623/ref=sr_1_1?crid=FXTQS9S3553D&keywords=right+here%2C+right+now&qid=1702312851&s=books&sprefix=right+here%2C+right+now%2Cstripbooks%2C169&sr=1-1

Hayek, F. A., The Constitution of Liberty: The Definitive Edition (Volume 17.) University of Chicago Press. (April 2011). ISBN-10 ‏ : ‎ 9780226315393 ISBN-13 ‏ : ‎ 978-0226315393 https://www.amazon.ca/Constitution-Liberty-Definitive-F-Hayek/dp/0226315398/ref=sr_1_1?hvadid=667162488719&hvdev=c&hvlocphy=9001316&hvnetw=g&hvqmt=e&hvrand=18394470049021819216&hvtargid=kwd-323973891034&hydadcr=23307_13656903&keywords=the+constitution+of+liberty&qid=1702666371&sr=8-1

Hayek, F. A., (1945). The Use of Knowledge in Society. https://www.econlib.org/library/Essays/hykKnw.html

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Hood, Tom, Seven Skills Every Accountant Needs in the Age of Automaton. CEO Maryland Association of CPAs, Oracle Blog. https://blogs.oracle.com/modernfinance/7-skills-every-accountant-needs-in-the-age-of-automation

Jiang, J. J. & Klein, G. (2001). Software project risks and development focus. Project Management Journal, 32(1), 4–9. https://www.pmi.org/learning/library/software-project-risks-development-focus-2000

Jiang, J. J., Klein, G., & Chen, H.-G. (2001). The Relative Influence of IS Project Implementation Policies and Project Leadership on Eventual Outcomes. Project Management Journal, 32(3), 49-55. https://doi.org/10.1177/875697280103200307

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Klein, Peter, The Capitalist & The Entrepreneur. Ludwig von Mises Institute (Feb. 13 2019). ISBN-10 ‏ : ‎ 1933550791, ISBN-13 ‏ : ‎ 978-1933550794 https://www.amazon.ca/Capitalist-Entrepreneur-Essays-Organizations-Markets/dp/1933550791

Klein, P. G., Economic calculation and the limits of organization. Rev Austrian Econ 9, 3–28 (1996). https://doi.org/10.1007/BF01103327 or https://cdn.mises.org/rae9_2_1.pdf

Langlois, Richard N., The Austrian Theory of the Firm: Retrospect and Prospect (May 2007). Working Paper First Draft, George Mason Law School Conference, May 23 - 25, 2007, “Austrian Market-based Approaches to the Theory and Operation of the Firm.” https://www.researchgate.net/profile/Richard-Langlois/publication/228918886_The_Austrian_Theory_of_the_Firm_Retrospect_and_Prospect/links/0deec519e188f8b8bd000000/The-Austrian-Theory-of-the-Firm-Retrospect-and-Prospect.pdf

Langlois, Richard N. and Foss, Nicolai J., Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization (January 1997). Druid Working Paper No. 97-2, Available at SSRN: https://ssrn.com/abstract=77668 or http://dx.doi.org/10.2139/ssrn.77668

Langlois, Richard N., Capabilities and the Theory of the Firm (December 1994). https://www.academia.edu/51155727/Capabilities_and_the_Theory_of_the_Firm

Langlois, Richard N., Capabilities and Vertical Disintegration in Process Technology: The Case of Semiconductor Fabrication Equipment (January 1998). https://richard-langlois.uconn.edu/wp-content/uploads/sites/1617/2019/09/mesa97.pdf

Langlois, Richard N., Competition Through Institutional Form: The Case of Cluster Tool Standards (July 2004). University of Connecticut Economics Working Paper No. 2004-10, Available at SSRN: https://ssrn.com/abstract=594542 or http://dx.doi.org/10.2139/ssrn.594542

Langlois, Richard N., (2004). Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History. Enterprise & Society, 5(3), 355–375. http://www.jstor.org/stable/23700119

Langlois, Richard N., Comment on 'Technological Revolutions and the Evolution of Industrial Structures' (by Giovanni Dosi, Alfonso Gambardella, Marco Grazzi, and Luigi Orsenigo). Capitalism and Society, Vol. 3, Issue 2, Article 7, 2008. Available at SSRN: https://ssrn.com/abstract=2209176

Langlois, Richard N., 2009/01/01 “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.” University of Connecticut, Department of Economics, Working papers. https://doi.org/10.1093/oxfordhb/9780199552863.003.0022 https://www.researchgate.net/profile/Richard-Langlois/publication/46450875_Economic_Institutions_and_the_Boundaries_of_the_Firm_The_Case_of_Business_Groups/links/0deec519e189326c5c000000/Economic-Institutions-and-the-Boundaries-of-the-Firm-The-Case-of-Business-Groups.pdf

Langlois, Richard N., (2007), The Entrepreneurial Theory of the Firm and the Theory of the Entrepreneurial Firm*. Journal of Management Studies. 44: 1107-1124. https://doi.org/10.1111/j.1467-6486.2007.00728.x

Langlois, Richard N., The institutional approach to economic history: Connecting the two strands, Journal of Comparative Economics, Volume 45, Issue 1, 2017. Pages 201-212, ISSN 0147-5967, https://doi.org/10.1016/j.jce.2016.04.004 https://www.sciencedirect.com/science/article/pii/S0147596716300075

Langlois, Richard N., Modularity in technology and organization, Journal of Economic Behavior & Organization, Volume 49, Issue 1, 2002, Pages 19-37. ISSN 0167-2681, https://doi.org/10.1016/S0167-2681(02)00056-2 https://www.sciencedirect.com/science/article/pii/S0167268102000562

Langlois, Richard N., "Modularity in Technology, Organization, and Society" (1999). Economics Working Papers. 199905. https://digitalcommons.lib.uconn.edu/econ_wpapers/199905

Langlois, Richard N., "Organizing the Electronic Century" (2007). Economics Working Papers. 200707. https://digitalcommons.lib.uconn.edu/econ_wpapers/200707

Langlois, Richard N., "Schumpeter and Personal Capitalism" (1996). Economics Working Papers. 199605. https://digitalcommons.lib.uconn.edu/econ_wpapers/199605

Langlois, Richard N., "The Secret Life of Mundane Transaction Costs" (2005). Economics Working Papers. 200549. https://digitalcommons.lib.uconn.edu/econ_wpapers/200549

Langlois, Richard N., Transaction-cost Economics in Real Time, Industrial and Corporate Change, Volume 1, Issue 1, 1992, Pages 99–127. https://doi.org/10.1093/icc/1.1.99

Langlois, Richard N., "Transaction Costs, Production Costs, and the Passage of Time" (1995). Economics Working Papers. 199503. https://digitalcommons.lib.uconn.edu/econ_wpapers/199503

Langlois, Richard N., “The Vanishing Hand, the Changing Dynamics of Industrial Capitalism.” (2003/4/1) Industrial and Corporate Change. Volume 12, Issue 2. Pages 351-385. Oxford University Press. https://www.edegan.com/pdfs/Langlois%20(2003)%20-%20The%20vanishing%20hand.pdf

Langlois, Richard N., The Corporation and the Twentieth Century, The History of American Business Enterprise. Princeton University Press (June 27 2023).  ISBN-10 ‏ : ‎ 069124698X ISBN-13 ‏ : ‎ 978-0691246987 https://www.amazon.ca/Corporation-Twentieth-Century-American-Enterprise/dp/069124698X/ref=sr_1_1?crid=10T238PV16C7O&keywords=langlois&qid=1689618224&s=books&sprefix=langlois%2Cstripbooks%2C449&sr=1-1

Langlois, Richard N., “The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy.” Routledge; 1st edition (June 23 2014). ISBN-10 ‏ : ‎ 1138806226 ISBN-13 ‏ : ‎ 978-1138806221 https://amzn.to/3zJwpCk

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MacDonald, J., (1998). Systems Engineering: Art and Science in an international context. International Council on Systems Engineering (INCOSE). https://homepages.laas.fr/kader/se.pdf

McIntosh, M., Electronic Commerce and Enterprise Integration: Drivers for the Business in the New Economy. June 13 - 14, 1999. Saint John, New Brunswick.

Mills, Mark P., Why Chips Won’t Change the Game: Government Subsidies Can’t Overcome Regulatory Obstacles to American Industrial Competitiveness. August 2022) City Journal. https://www.city-journal.org/why-chips-wont-change-the-game#.YyPRiCL3Z6s.link

Mills, Mark P., The “New Energy Economy:” An Exercise in Magical Thinking. (March 2019). The Manhattan Institute. https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf

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Porter, M. E., (1998) Competitive Strategy Techniques for Analyzing Industries and Competitors. New York, The Free Press. ISBN-10 ‏ : ‎ 0684841487 ISBN-13 ‏ : ‎ 978-0684841489 https://www.amazon.ca/Competitive-Strategy-Techniques-Industries-Competitors/dp/0684841487/ref=asc_df_0684841487/?tag=googleshopc0c-20&linkCode=df0&hvadid=293006031037&hvpos=&hvnetw=g&hvrand=1210013701671932249&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001316&hvtargid=pla-432954142559&psc=1&mcid=15e505e921bd305085e6e9c51e492644

Porter, M. E., (1998). On Competition. Boston, Harvard Business Review Press; 1st edition (Sept. 9 2008). ISBN-10 ‏ : ‎ 9781422126967 ISBN-13 ‏ : ‎ 978-1422126967 https://www.amazon.ca/Competition-Michael-Porter/dp/142212696X/ref=sr_1_3?crid=2T5ZL6B63TCUR&keywords=On+Competition&qid=1702600221&s=books&sprefix=on+competition%2Cstripbooks%2C128&sr=1-3

Porter, M., (March 2001). Strategy and The Internet. Harvard Business Review 79 (3) 63 - 78. https://hbr.org/2001/03/strategy-and-the-internet

Procaccino, Verner, Overmyer, Darter (Jan, 2002). Case study: Factors for early prediction of software development success. Information and Software Technology, 44 (1) 53-62. ISSN 0950-5849, https://doi.org/10.1016/S0950-5849(01)00217-8 https://www.sciencedirect.com/science/article/pii/S0950584901002178

Paulk, M., Curtis, B., Chrissis Mary B., Weber C. V., (August 2002). Capability Maturity ModelS™ for Software, Version 1.1. Software Engineering Institute Carnegie Mellon University, Pittsburgh. https://insights.sei.cmu.edu/documents/1092/1993_005_001_16211.pdf

Robertson, Paul L.; Jacobson, David; and Langlois, Richard N., "Innovation Processes and Industrial Districts" (2008). Economics Working Papers. 200803. https://digitalcommons.lib.uconn.edu/econ_wpapers/200803

Robertson, Paul L., Langlois, Richard N., Institutions, Inertia and Changing Industrial Leadership, Industrial and Corporate Change, Volume 3, Issue 2, 1994, Pages 359–378. https://doi.org/10.1093/icc/3.2.359

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Sasser, W. Earl, and Josep Valor. "Information at the World Bank: In Search of a Technology Solution (B)." Harvard Business School Case 898-054, September 1997. (Revised October 1997.) (Knoop, C, I., Valor, J., & Sasser, W.E. Case 2: Information at the World Bank: In search of a technology solution (A). (September 1997) Harvard Business School Case 9-898-053.) https://www.hbs.edu/faculty/Pages/item.aspx?num=25473

Schmidt, Roy & Lyytinen, Kalle & Keil, Mark & Cule, Paul. (2001). Identifying Software Project Risks: An International Delphi Study. J. of Management Information Systems. 17. 5-36. https://doi.org/10.1080/07421222.2001.11045662 https://www.researchgate.net/publication/220591356_Identifying_Software_Project_Risks_An_International_Delphi_Study/citation/download

Schumpeter, Joseph A., (1942) Capitalism, Socialism and Democracy: 82 - 84. Harper Perennial Modern Classics; unknown edition (November 4, 2008). ISBN-10 ‏ : ‎ 0061561614 ISBN-13 ‏ : ‎ 978-0061561610 https://www.amazon.com/Capitalism-Socialism-Democracy-Joseph-Schumpeter/dp/0061561614

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Simmons, M. R., (April 2001). 30 TCF by 2010? Can North America meet its gas requirements? The Energy Forum. New York, New York.

Sobel, Russel S., Clemons., The Essential Joseph Schumpeter (Essential Scholars). The Fraser Institute (April 22, 2020). ASIN : ‎B087LSPQGY https://www.amazon.com/Essential-Joseph-Schumpeter-Scholars-ebook/dp/B087LSPQGY

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Westland, J. C., & Clark, T., (2000). Global Electronic Commerce. Cambridge, The MIT Press.MacDonald, J., (1998). Systems Engineering: Art and Science in an international context. International Council on Systems Engineering (INCOSE). http://www.incose.org ISBN: 9780262528474 https://mitpress.mit.edu/9780262528474/global-electronic-commerce/

Winter, Sidney G., Toward a Neo-Schumpeterian Theory of the Firm. Industrial and Corporate Change, Vol. 15, No. 1, pp. 125-141, 2006. https://ssrn.com/abstract=914693

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Yergin, D. and J. Stanislaw (1998). The Commanding Heights. The Battle Between Government and the Marketplace that is Remaking the Modern World. New York, Simon & Schuster. Touchstone; Revised ed. edition (April 2 2002). ISBN-10 ‏ : ‎ 068483569X ISBN-13 ‏ : ‎ 978-0684835693 https://www.amazon.ca/Commanding-Heights-Battle-World-Economy/dp/068483569X/ref=asc_df_068483569X/?tag=googleshopc0c-20&linkCode=df0&hvadid=293014791721&hvpos=&hvnetw=g&hvrand=6078239189220152082&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001316&hvtargid=pla-564388576043&psc=1&mcid=7a3a8d91189d3885a33307614ee85cb7

Yermack, David, Journal Article Corporate Governance and Blockchains (March 2017), Review of Finance, Vol 21, Issue 1, pp. 7 - 31, SN 1572-3097. https://doi.org10.1093/rof/rfw074 https://academic.oup.com/rof/article/21/1/7/2888422

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YouTube & Video

Botsman, Rachel, Ted Talks, We’ve Stopped Trusting Institutions and Started Trusting Strangers. https://youtu.be/GqGksNRYu8s?si=CTh4BxLIxttv9FMx

Catz, Safra, Driving Impactful Business Results: Oracle CloudWorld 2022. https://youtu.be/1QQO5yZw0Zs

Ellison, Larry, Keynote Presentations Oracle Corporation. https://www.youtube.com/results?search_query=larry+ellison+keynote

How does the Blockchain Work: Simply Explained. https://youtube.com/watch?v=SSo_EIwHSd4&si=BWxyrzJeODAZ3WbT

Oracle CloudWorld 2023. https://www.youtube.com/@Oracle/playlists

Project Open Wonderland. https://youtu.be/oyxbmjQivZI https://youtu.be/am_qWxc0tVs https://youtu.be/9hoOMZmyngI https://youtu.be/1xI04ZmSsvI

Tapscott, Don, Understanding Blockchain in Under 7 Minutes. https://youtube.com/watch?v=isuAPyuqS7Y&si=mzn-YrEB1rRWC0iO

Tapscott, Don, Ted Talks, How the Blockchain is Changing Money and Business. https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_business

Warburg, Bettina, Ted Talks, How Blockchain Will Radically Change the Economy. https://youtu.be/RplnSVTzvnU?si=LvdfZaV7Cw8nwDaz

Blogs & Articles

Boaz, Nate, Fox, Erica, A., Change Leader, Change Thyself. (March 2014). McKinsey Quarterly. https://www.mckinsey.com/featured-insights/leadership/change-leader-change-thyself

Borodovsky, Les @SoberLook (Twitter / X). https://t.co/5su7faaWB7 https://twitter.com/SoberLook

Wall Street Journal

Miss Your Office? Some Companies Are Building Virtual Replicas. https://www.wsj.com/articles/miss-your-office-some-companies-are-building-virtual-replicas-11590573600?st=6kza04nhx7khkoa&reflink=desktopwebshare_permalink

Big Oil’s Talent Crisis: High Salaries Are No Longer Enough. https://www.wsj.com/articles/big-oils-talent-crisis-high-salaries-are-no-longer-enough-194545be?st=d0wyewt94cbnvnp&reflink=share_mobilewebshare

Vendors

ARK Investments Cathie Wood. https://twitter.com/CathieDWood

Oracle. https://www.oracle.com/erp/

Oracle Cloud ERP. https://docs.oracle.com/en/cloud/saas/applications-common/23d/faser/index.html#COPYRIGHT_0000

Oracle Blockchain. https://cloud.oracle.com/blockchain

Oracle Sponsored IDC Whitepaper. https://go.oracle.com/LP=65050?elqCampaignId=117657&src1=ad:pas:go:dg:paas1&src2=wwmk170927p00089c0001&SC=sckw=WWMK170927P00089C0001&mkwid=sE7Ycdvy5%7Cpcrid%7C254634085580%7Cpkw%7Coracle%20blockchain%7Cpmt%7Ce%7Cpdv%7Cc%7Csckw=srch:oracle%20blockchain

Investopedia 

Price Maker Definition. https://www.investopedia.com/terms/p/pricemaker.asp

Price Taker Definition. https://www.investopedia.com/terms/p/pricetaker.asp

PriceWaterhouseCoopers. http://usblogs.pwc.com/emerging-technology/the-blockchain-challenge/

PriceWaterhouseCoopers blockchain validation. https://www.pwc.com/us/blockchain-validation

SAP

The Intelligent Enterprise. https://www.sap.com/documents/2017/02/c675c3b0-aa7c-0010-82c7-eda71af511fa.html

SpaceX and Swarm. https://www.starlink.com/

Wikipedia. 

Definition of Collusion. https://en.wikipedia.org/wiki/Collusion

Quotations

Friedman, Milton. “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.” https://mfidev.uchicago.edu/about/tribute/mfquotes.shtml

Simon, Herbert A., “In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.” https://www.goodreads.com/quotes/8502027-in-an-information-rich-world-the-wealth-of-information-means-a

This Concludes the Year 2023.

 A couple of quick points to note. This will be the last blog post for 2023 barring unforeseen circumstances. We will return in late January or early February 2024 with regular updates and the results of the work we're undertaking in the next three months.

People, Ideas & Objects' competitive advantages are Intellectual Property, our user community and research. Effective last Friday we completed a comprehensive review and rewrite of the Preliminary Specification and addressed some of its weaknesses. We incorporated recent developments in Oracle Cloud Infrastructure, and enhanced its readability. Since March 2014 our user community has been our priority and we have and will continue to work diligently on its development. In terms of research there has been nothing undertaken since the Preliminary Specification publication in August 2012. Research is a necessary element of our product's development and quality and we need to bring this aspect of our organization up to speed. I’ll set out our organization's approach to research and the areas of concern we'll look at. 

I have a few theories to develop in many areas. Service provider organizations have the highest priority. Being the result of enhanced, or hyper-specialization, and division of labor, this has reduced some work to mundane and boring activities. This does not resonate with our user community. Which is one of the last things producers need to ensure profitability in oil & gas operations. Therefore if it is an issue we’ll have to research to ensure that isn’t the case, and if so determine how to avoid it. These are opportunities to make the necessary changes quickly and effectively, at low cost.

Based on our sample of third-quarter reports. Over the years I’ve commented that their financial statements have homogenized. The only thing that sets them apart is the size of their production profile. Each producer then reports a cookie-cutter presentation of their balance sheet and earnings based on what is an acceptable template. Using only financial statements, it is impossible to determine which producer is winning and which is losing. All of them seem to report the same standard indistinguishable metric. 

It is evident today in these third quarter 2023 reports that the same can be stated regarding the boom / bust cycles. Whether the industry is prospering or struggling through difficult economic times makes no difference in producers' performance. Financial reporting homogeneity is now so comprehensive that it is impossible to determine any producer's performance or the state of affairs in the oil & gas community. They are just numbers from Pravda or MSNBC. And everyone knows and understands that. 

This One's Nuclear, Part III

 We’ve noted throughout our discussion the decline in natural gas prices since the financial crisis, and most recently, the further decline in early 2023. A fourteen year period in which nothing was done by producers other than to chronically and systemically overproduce hundreds of trillions of cubic feet of natural gas at discounted prices that provided nothing but destruction throughout the industry. Recent prices were barely higher than 1983. This occurred during a time when the ability to organize to realize a newly formed “global” natural gas price was available in the form of the newly rewritten Preliminary Specifications decentralized production models, price maker strategy. It has been available since August 2012. And the development of a natural gas export market since 2016 of over 13 BCF / day through LNG.

To take advantage of opportunities and avoid difficulties, every aspect of life requires organization and structure. Since 2009, trillions of dollars of waste has been realized due to a lack of organizational capability. The industry structure today cannot understand where it makes or loses money. It has never acquired the production discipline necessary to realize business benefits. Consequently, a much-needed chance to establish the natural gas industry on a profitable basis for the long term was not missed, but actively avoided by producer officers and directors. 

Realizing as little as one third of the value of natural gas produced since 2009 is tragic, however all is not lost. We stand today with this lesson learned and the newly rewritten Preliminary Specification available to us. This is to provide for organizational needs to realize the full value of future natural gas production. We also have a noticeable development in LNG export markets. The United States' current LNG export capacity is 13.44 BCF / day. There is additional capacity of 10.32 BCF / day coming online in the next two years. And there are regulatory approvals for an incremental 18.26 BCF / day beyond that. This brings incremental capacity of 28.58 BCF / day for a total capacity to 42.02 BCF / day. In terms of size that would be 40.2% of today’s total U.S. domestic production. A far more significant opportunity than what has been lost, or alternatively, in the "status quo" officers and directors, a far greater disaster if unrealized. 

Therefore it is incumbent upon this industry to focus on organizing itself to capture and realize this value. Otherwise we know and have seen what will happen. They fooled us once, and we’ve all suffered. If they do it again, who should we see then?

From the Preamble of the Preliminary Specification 

The following graph was provided by Les Borodovsky from @SoberLook. This graph represents the status quo perception of costs and production management in oil & gas.

Producer officers and directors perceive their total costs for each barrel of oil produced in the various shale formations are $48 to $54. Operating and royalty costs vary between $28 and $37. I would point out that the $20 to $23 in capital costs are based on an allocation of their capital costs across the entire reserves of the property. We’ve argued that this allocation is unreasonable in a capital market where the demands for capital performance are far greater than what can be achieved when a producer cycles their cash through their investments in a manner that retrieves their investment over several decades or more, or if at all. This is further aggravated when shale exposes prolific reserves and demands substantial incremental capital to offset shale gas' inherent steep decline curves. This is to maintain deliverability. 

People, Ideas & Objects recommends that producers retire their capital costs within the first 30 months of the property's life. This will allow previously invested capital to be captured and reused. In turn, it provides them with the means to meet their internal demands for future capital expenditures, shareholder dividends and debt repayments. In addition, they can better match shale's rapid decline rates to compete on North American capital markets. This can only be done if the producer sells their commodities at a price above their break-even point. This considers an appropriate accounting of exploration and production costs. And to reuse their assets repeatedly on this basis rather than every second decade. 

This graph reflects producers' current policy position on Well Break Even and Shut-in prices. At any point, and as long as the commodity price covers the operating costs, the property would continue to produce regardless of the impact on capital costs. If a dollar of capital costs was returned, or one dollar above the shut-in price, the property would continue production. Only at the point in time where the commodity price dropped below operating costs would the producer allegedly shut-in their production. This is a fundamental misinterpretation of the term break-even. It is the reason the industry struggles and why producers have lost money for four decades. Break-even is not what's interpreted here. The producer assumes that as long as there is cash flow above operating costs, they make money and continue to produce. What they’re stating is they may not be breaking-even, and as a result over the long term, stranding unrecovered and unrecoverable capital costs in abandoned properties is acceptable.

According to People, Ideas & Objects in our newly rewritten Preliminary Specification, the point at which the property would be shut-in would be at break-even or below, if we assume the accuracy of the graph numbers. (Note that our break-even point would be higher due to competitive recognition of all capital over a thirty month period. The reason for this being the production discipline gained through knowing that producing any property unprofitably only dilutes corporate profits.) Producing below the break-even point is unprofitable. Producing below the break-even point for one producer, in an industry whose commodities are price makers, will drop the price everywhere for all producers. When all producers continue to operate below the break-even price for four decades it exhausts the value of the industry on an annual and wholesale basis. Which I believe occurred in the 1990s and since then, times have only been " favorable " when investors were willing.

To avoid the allegation of collusion officers and directors would have us believe that they were operating the industry within the law. Losses of catastrophic proportions have been realized, displacing and disrupting producers' financial resources over the long term. Today the industry's financial, operational and political frameworks are in tatters. This is considered the normal course of business operations for officers and directors. Imposing the destruction of their firm's assets, the capacity and capabilities of the oil & gas and service industries is the price that they believed needed to be paid as a consequence of its acceptance of a “boom / bust” business by way of “muddle through.” This is unnecessary and unacceptable when the Preliminary Specification is available to operate the oil & gas business as a business.

Using Decentralized Production Models and Price Maker Strategies, the newly rewritten Preliminary Specification provides the inverse situation. In an environment where the Preliminary Specification will be operational, higher commodity prices would bring about production volumes that meet profitability thresholds. Therefore, previously shut-in properties would return to production. Enhanced commodity prices would allocate financial resources to innovative exploration and production methods. Providing the dynamic, innovative, accountable and profitable North American producer with the most profitable means of oil & gas operations, everywhere and always. 

The organizational objective is to satisfy consumer demand for energy with abundant, affordable, reliable and profitable energy. The value proposition of a barrel of oil equivalent is 10 to 25 thousand man hours of equivalent mechanical leverage. Living without oil & gas is impossible in the most advanced society with the most productive economy. Oil & gas producers' value proposition to their consumers is therefore the most substantial of any business.  

People, Ideas & Objects feel that oil & gas has distinct characteristics that need to be recognized and adhered to. These commodities are valuable and limited in the long run. How do we ensure that we can prove to future generations that we used our share of these resources appropriately? The first way is to show that all of them were produced profitably everywhere and always. As well as passing along a profitable and viable oil & gas and service industry. To do otherwise would be unwise and unjustified. When oil & gas commodities follow the principles of price makers, it is unnecessary to do so. Consumers know the only effective way to have secure, reliable and affordable energy independence in North America is when producers are financially successful. Why this hasn’t been done is a question that needs to be answered by those that have not done so. They had the alternative in the form of the Preliminary Specification available since 2012, and the LNG export market developing since 2016.

Operating the primary industry of oil & gas profitably, everywhere and always, will enable them to maintain the capacities and capabilities of the broader oil & gas industrial economy. That People, Ideas & Objects were subjected to abuse and punishment for this position and other content contained within the Preliminary Specification is evidence that officers and directors knew better, that our alternative was available and it was refused as it disintermediated the officers and directors method of management and personal compensation. They now need to live with their destructive legacy.

Production Discipline

Production discipline is the issue at hand. Today producers employ the high throughput production model which seeks to offset their high overhead costs across the largest base of oil & gas production. Maintaining 100% capacity is standard practice in the industry. Continuing to practice this for over four decades causes commodity prices to fundamentally collapse. Through a variety of natural gas or oil price collapses since the 1986 initial oil price collapse. Producers have employed their “muddle through” strategy and continue to produce at full capacity everywhere and always. For them to know and understand where and how they are earning profits or losing money is impossible using the current ERP systems they employ. One of the feature characteristics of the Preliminary Specification is that we provide detailed actual, factual, standard and objective financial statements for each and every Joint Operating Committee. Each property can be dealt with separately to determine profitability. If unprofitable, it can be shut-in to achieve the following benefits.

• Maximize corporate profitability by ensuring only profitable properties produce. No longer dilute profitable properties with losses from profitless properties.
• Save their reserves for when they can be produced profitably.
• Reserve costs don’t have to carry incremental costs of additional losses.
• Unprofitable production and storage costs are reduced if commodities are kept as reserves.
• Our method provides the current replacement value of the commodity. Price makers only increase production when it is profitable.
• By removing unprofitable production, commodity markets find their marginal costs.
• Making independent business decisions based on detailed actual, factual, standard and objective accounting that determines profitability is not collusion. 
• Marginal prices for all producers' properties across North America.
• Markets provide one thing, and only one thing, price. If the price provides profitable operations, they’ll produce.
• While shut-in producers will innovatively work the property back into profitable production. 

Production discipline is acquired through this process when producers compete for capital across capital markets. Diluting their earnings through the production of losing properties will not achieve the performance criteria that their competitors in the industry can attain. They will not maintain capital markets' overall performance expectations. Producer officers and directors will know the consequences of continuing to operate in that manner. Capital discipline which is claimed today is a dull instrument when used for production discipline. It is best considered the willing destruction of productive capacity over the long term. And that is all. People, Ideas & Objects decentralized production models, price maker strategy is the only fair and reasonable means of production discipline available. All others have been tried and failed when no one is satisfied with their allocation of production quotas. Production discipline is attained through performance and profitability. Achieve those and produce. Fair and reasonable which no one disputes. 

The standard and objective nature of the Preliminary Specification, our user community and their service provider organizations is critical in ensuring that each producer knows and understands that their assessment of profitability in our Cloud Administration & Accounting for Oil & Gas Software & Service is fair and reasonable. When a producer's financial statement reports a loss at a property, they will know that all properties in North America were assessed on the same accounting basis. As a result, they will shut-in their property to gain the benefits noted above. 

Bringing this production discipline to North American oil & gas producers is part of the People, Ideas & Objects value proposition. These are some of the quantifiable and tangible benefits necessary for the industry to undertake its difficult and significant role in society. As a primary industry producers must understand that the service industry is wholly dedicated to its needs. Without the service industry producers would lose flexibility, innovation, and speed in their field operations. Oil & gas producers generate revenues and profits through the service industry. As it is with their internal staff. To continue to have geographical and technical flexibility, a healthy and prosperous service industry is a critical foundation for the oil & gas industry's health and prosperity. It is these tangible benefits derived from an appropriate accounting of oil & gas exploration and production costs. These benefits will fund these industries' health and prosperity. 

In addition to the tangible benefits there are unidentifiable and unquantifiable benefits to the Preliminary Specification that are potentially as material as those already noted. The Preliminary Specification lists a defined and supported culture from our seven Organizational Constructs. These establish an understanding for everyone operating within the industry. And include specialization and the division of labor, the only means of generating value in any organization since Adam Smith published the Wealth of Nations in 1776. With our Cloud Administrative & Accounting for Oil & Gas Software and Service, we incorporate Professor Paul Romer's non-rival costs or "New Growth Theory." Relieving each producer from having to develop unshared and unshareable, in-house, non-competitive accounting and administrative capacities and capabilities within each producer firm. Rather than being a fixed cost for each producer. The Preliminary Specification makes overhead a variable cost of each Joint Operating Committee, variable based on profitable operations. When a property is shut-in, all costs are variable and it incurs a null operation, no profit but also no loss. Providing the production and capital discipline necessary. And subsequently, overhead is treated as a cost and not an asset as it is today. Therefore overhead costs are passed to the consumer in the current period, priced into the profitable commodity produced and therefore the cash incurred for these overheads is returned in the following month to establish and support a producer's “cash float.” Today, overhead is capitalized and realized over decades. Demanding that producers seek outside sources of capital to fund overheads and capital expenditures. 

Cash flow in capital intensive industries is strong, and these have been used to compensate oil & gas officers and directors handsomely. There are more roles and responsibilities that producers must undertake. In the service industry and providing an affordable, abundant and secure source of energy for the consumer. Therefore, the internal generation of these financial resources will need to be the source of capital for these roles and responsibilities. And although there were significant volumes of capital in the past, the inappropriate management of those resources is not what is required for the order of magnitude of resources being demanded. This will obviously be beyond the scope and comprehension of the current officers and directors. Producers will have all the money they want if they turn their organizations profitable. 

In Conclusion

What purpose would there be if we were sitting here in four years' time? A time when we can conclude, possibly, that consolidation is a failure. When no natural gas market price rehabilitation has taken place after the incremental 28 bcf / day of LNG has been brought online. Serially addressing the industry with one solution at a time is a luxury no industry has considered for decades. Yet oil & gas with their “muddle through” strategy can only approach one solution at a time. They need to pursue a multitude of solutions and have the results of each experiment determine the possibility of resolving their issues. Hiding in the crowd of those chanting "consolidation" ensures no accountability when failure occurs. With "muddle through" it's been that way for every meme, clean energy, shale, heavy oil, offshore… It’s never one individual that can be held accountable for past failed decisions. Accountability doesn't apportion blame. It intends to remediate the issue and determine how it occurred. It also seeks to resolve how to overcome it in the future. To avoid repeated mistakes.

Producers must provide vision and leadership for the marketplace and seed it with funding. In a paper written by Professors Richard Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization," they note.

The organizational question is whether enhanced capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 20.

Officers and directors must focus on where the producer can generate the greatest value, on finding and developing oil & gas reserves, otherwise...

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 20.

OCI Rewrite Complete

 I just wanted to drop a note that states for all intents and purposes the November 10, 2023 post was the last post involved in the rewrite of the Preliminary Specification. We began rewriting our product on November 1, 2022 due to Oracle CloudWorld 2022 conference contents. We were impressed with the impact it had on our ERP product and the incremental value it brought to the North American oil & gas marketplace. Further evidence of this impact was presented at the Oracle CloudWorld 2023 conference. We also wrote our Operations Management module. To coordinate these new technologies, data, and information with the Joint Operating Committee to ensure that oil and gas producers have a dynamic, innovative, accountable, and profitable operating environment. 

I am pleased to be involved in bringing this opportunity to the industry at this time. I feel the industry needs many changes to its administration, accounting, operations and management in order to ensure that we provide a profitable operation to producers' shareholders and the lowest cost oil & gas products to energy consumers. This can only be accomplished through a common sense approach that is comprehensive in nature. The short, medium and long term issues affecting the oil and gas industry are the focus of our approach. There is critical and difficult work to do. The Preliminary Specification provides a viable vision for people to follow. It is a comprehensive plan based on a workable business model that organizes the overall industry. An approach to this opportunity that deals with the issues we will fail in far more than just the oil & gas industry.

Today the Preliminary Specification stands at 14 modules. Although there has been a reduction in the wording for clarity purposes, the addition of the Operations Management module, Oracle automation and Generative AI has pushed the total word count to 383,492. It is comprehensive in nature and a lucid description of how our business model resolves the most pressing oil & gas challenges. More than anything however, is our commitment to our user community and user driven ERP software development. It is the only way to build a quality product, and quality will be the only product that People, Ideas & Objects delivers.