Our Value Proposition: New Growth Theory

 People, Ideas & Objects Preliminary Specification will take the administrative and accounting resources of North American producers and reorganize them for independent, individual service providers. This has allowed them to focus on one process and turn producers' overhead costs variable, based on profitable production. In turn none of the producer's costs are fixed in the Preliminary Specification. Creating at least six substantial value propositions that are tangible and clearly evident. Which include:

• Maximize producer profitability by not diluting corporate profits through the production of unprofitable properties.
• Save the producers petroleum reserves for when they can be produced profitably.
• Reserves would no longer need to recapture additional costs of previous losses as future profits.
• Reserves are seen as a cost-free means of inventory and storage.
• Removing marginal production from markets ensures commodity prices dictate market activities. 
• While shut-in producers can focus their innovative efforts on increasing production, reserves, and cutting costs to return their properties to profitability.

Secondly and perhaps more importantly in terms of building value for the greater North American oil & gas economy. Specialization and the division of labor which has proven to be the primary method of building all of the tangible value for western civilization since 1776. Is one of the service providers competitive advantages. Based on these principles, we have reorganized administrative and accounting resources to build value to ensure profitable operations, everywhere and always. The ability to further enhance the industries productivity through specialization and the division of labor will add unknown, unquantified and unqualified means to do so. We will facilitate this through our permanent software development capability, our user community, and their service provider organizations implementing these principles.

We have adopted an incremental method of building value on top of these two methods through Professor Paul M. Romer’s “New Growth Theory” of non-rival costs. In a December 1, 2001 Reason article he summarized his theory as “People, Ideas & Things.” I adopted this principle and named this initiative People, Ideas & Objects as we are object-based software developers. We’ve applied “New Growth Theory” and non-rival costs throughout the Preliminary Specification and elevated it to an Organizational Construct. Standing on the shoulders of giants and especially Adam Smith’s Specialization and Division of Labor. Professor Romer has elevated business thinking in this direction and it is the next frontier in building value for organizations through the mitigation of costs in substantial yet unquantifiable ways to enhance the performance of those that use these methods. 

Professor Romer’s theory is the basis of how cloud computing has brought value to our economy. Users can share the costs of the heavy capital investment in technology, the capacity, capabilities, resources, maintenance and support costs on a variable basis, based on usage. Conversely our user community’s service providers can enhance their service offering through specialization and division of labor that would otherwise be unavailable to individual organizations. We have extended this thinking to include not only Oracle Cloud ERP but also our Cloud Administration and Accounting for Oil & Gas Software and Service to the managed shared and shareable resource. Eliminating the need for each producer to build, resource and maintain the necessary non-competitive Information Technology, accounting and administrative infrastructure they need as dynamic, innovative, accountable and profitable oil & gas producers. Providing a standard, objective and value driven service that shares the sole objective of ensuring oil & gas producers achieve the most profitable means of oil & gas production, everywhere and always.  

The capture and implementation of Professor Romer’s theories is one of the seven Organizational Constructs of the Preliminary Specification. All seven are focused on building value for producers and providing tangible means to do so. Establishing a culture based on preservation, performance and profitability to replace the failed “muddle through.” In this configuration, they are available through the Preliminary Specification, our user community, and their service provider organizations. They’ll be established with permanent software development capabilities and a user community that will iterate on these principles to bring further value over time. 

Professor Paul M. Romer

Published in October 1990 “Endogenous Technological Change” became the foundation of “New Growth Theory” in economics that has developed and provides value throughout the economy through its application. In a Reason Magazine interview Professor Romer explained many of the points.

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a non-rival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth. S71.

Professor Romer won, or maybe best described as shared, the 2018 Nobel Prize in economics for these principles. They are an incremental value-add to the traditional specialization and division of labor that has carried that weight exclusively until now. It is this principle of sharing non-rival costs that will mitigate what we believe to be the secondary reason for the systemic lack of profitability in oil & gas. High overhead costs are currently at the corporate level. We have shifted those to charge the actual, factual overhead costs incurred by service providers' billings directly to the individual Joint Operating Committee. There they become a cost of the property's product that is captured in the profitable commodities sale price. Through the sale, these funds are recaptured and returned to the company, which are used for overhead costs for the following months. Currently producers capitalize their overhead and therefore sell their product below cost and are not recovering the cash spent on monthly overhead expenses. As they indeed state, they are “putting cash in the ground.” Having to source new cash to finance their overhead expenses each month.

By sharing the administrative and accounting infrastructure, turning these costs variable based on profitable production, applying specialization and the division of labor and returning the cash consumed by monthly overheads to the administrative and accounting areas. As is done through the development of People, Ideas & Objects user communities and their service providers. And delivering to industry our Cloud Administration & Accounting for Oil & Gas Software and Service. People, Ideas & Objects are adding real value to North American producers in terms of resolving what can be described as their largest impediments to profitability. Chronic overproduction, or unprofitable production as we describe it and high overhead costs. Which leads to their unique characteristic and phenomenon of “putting cash in the ground” and “building balance sheets.”   

Oracle CloudWorld 2022 & 2023 Conference

It was during this conference that it became apparent that Oracle was pursuing the incremental value adding process that Professor Romer defined in his paper “Endogenous Technological Change.” Augmenting their generic business processes with service providers such as banks and logistics companies with fully optimized and integrated services with Oracle Cloud ERP, just as People, Ideas & Objects are approaching the unique oil & gas attributes. We all have an extensive software development workload ahead. I see at least 20 years of work in this area. Incrementally and iteratively building value upon prior innovations in the service industry, earth science and engineering, the Preliminary Specifications development and Oracle Cloud ERP. 

The most impressive example provided during the 2022 Oracle conference was the expense reporting features with J.P. Morgan Chase. If the user uses their credit card for business, they can choose the type of expense charged to be classified into an account within their employer's system. Oracle Cloud ERP would evaluate the charge based on the company's policies and determine its eligibility. If eligible it would be processed and payment made to the employee or the credit card company. Eliminating the massive number of hours and costs incurred in expense reporting by organizations during the year in their current systems. This is reduced to a few milliseconds of processing time. While the cost to the organization to use Oracle Cloud ERP is incidental in terms of the time spent on Oracle Cloud Infrastructure. In addition, the engineering costs to develop the specific system, these software engineering costs are amortized across the global population of Oracle Cloud ERP customers using the feature. To a lesser extent People, Ideas & Objects provide this level of service to North American producers for their unique oil & gas attributes. The lesser extent is due to the smaller population of oil & gas users for which this development and implementation, and its costs, will be targeted. As such, North American producers have the opportunity to realize both Oracle and People, Ideas & Objects innovations concurrently and at substantially reduced costs. These are due to Professor Paul Romer's theories. 

Increasing the value that oil & gas producers gain from the use of Oracle Cloud ERP and incorporating it in our value proposition. Their 2023 CloudWorld Conference built upon the innovations they introduced in 2022. Generative Artificial Intelligence is now generally available throughout the Oracle Cloud ERP suite of applications. This takes these automations and their incremental capabilities to a more substantial level with tools that users were unaware of that will be able to generate incremental revenue from. If we consider just the producers Research & Capabilities and Knowledge & Learning modules, how they will be enhanced through Generative AI this is the method People, Ideas & Objects feel that the scope and scale of the issues and opportunities that oil & gas are presented with can be approached. 

If we consider the timeframe, the technology and the state of the industry. The scope and scale of the repair becomes untenable in the hands of those Keystone Cops who seem to have few original ideas and then go about proving them wrong in the public market. My example would be the recent discussion of production discipline where it was uniformly interpreted to mean they needed to sign new LNG export contracts. Indicating that traveling in unison ensures no company is singled out for their accountability in the matter. 

When it comes to resolving these issues we therefore have three options. 

• The first is to continue to repeatedly travel down each and every blind bunny trail in unison. Only to discover the bandit the Keystone Cops are searching for is now at the bank.
• Have each individual producer deal with the details of the development of their own Intellectual Property. Then undertake the scope and scale of software development that is commensurate with People, Ideas & Objects Preliminary Specification at each producer location. 
• Or share in the cost of development and focus on our user community to deal with the specific issues and opportunities as their distinct competitive advantage. Where they’ll have the understanding and resources, including access to the Intellectual Property and developers to make changes to the software code.

Seeing the broad scope of this challenge and the approach of “muddle through” makes sense to the officers and directors. 

Professor Romer’s "Endogenous Technical Change" leverages specialization and the division of labor in material ways. It is revolutionary and applied throughout the Preliminary Specification to the benefit of the oil & gas producer and greater oil & gas economy. To choose otherwise in this highly technical and complex society. Where the speed and pace of business has proven to be far beyond the capabilities of the officers and directors. Where the scope and scale of the issues are existential in their magnitude, such as what the industry has been faced with over the past few decades. To misunderstand the business, the direction, the vision and strategy of what to do, when and where to do it. As displayed by the officers and directors in 2024. Leaves one asking how is it that consolidation will do anything but accelerate the demise of the oil & gas industry in North America?

X Hits the Spot

I'm attempting to reignite the passion I once found on Twitter, now on X. Back in 2018, I faced a shadow ban for expressing skepticism about clean energy, which, unbeknownst to me at the time, severely limited my visibility. This type of ban makes your tweets invisible to your followers, essentially silencing your voice without you knowing.

However, the real challenge isn't just the invisibility. It's the aftermath—when the algorithm interprets the lack of engagement as disinterest, making it increasingly difficult to reach an audience. Despite having over 480 engaged and high-quality followers in the oil & gas sector, my activity and reach took a significant hit. Now, with 309 still-valuable followers, the vibrancy and interaction I once enjoyed have dwindled. Despite my efforts, regaining my former algorithmic favor seems an uphill battle.

With Elon Musk at the helm, Twitter has transformed. It's now a platform ripe for lively discussions and open exchanges, offering a valuable opportunity for meaningful dialogue. My persistence started to pay off in January 2024, when I welcomed my first non-spam follower since the ban—a small yet hopeful sign of reconnection.

I'm eager to broaden the conversation and engage with a wider audience. If you're interested in the intricacies of oil & gas ERP systems or the broader energy sector, I invite you to join the dialogue. Let's revitalize the discussion together at https://www.twitter.com/piobiz

Our Value Proposition, Intellectual Property

 There are two undeniable truths that producers state in unison.

• They’re profitable.
• They’re innovative.

It takes significant imagination to comprehend the points being made here. I believe the meaning is implied in “muddle through,” if they state it then it must be true. People, Ideas & Objects find these statements particularly offensive and part of the motivation as to why we’ve been developing our solution. However, these have taken on a more deliberate and devious meaning these past few years. First we were treated to their summary statement that Shale would never be commercial. Then secondly, clean energy was the industry's future. Bringing forward somewhat of an admission that they could not make a profit. Falling back on their cultural propensity to abandon what was “the next great thing” instead of attempting to commercialize the asset or make it perform. That would have required innovation in order to do so. 

I’ll add to these allegations that from a business perspective these officers and directors have absolutely no understanding of what it is they’re doing. When they continue to do the same thing over and over, possibly expecting different results, at least others hold that expectation of them. The most aggravating aspect of the proven $4.03 trillion dollar loss of revenues from the collapse of natural gas prices. Is their segue into clean energy due to Shale being “uncommercial.” When your shareholders are dissatisfied with your performance for almost a decade, and you did nothing to mitigate that revenue loss. When others were offering solutions to eliminate that loss, and you did nothing. It provides further evidence of officers and directors willful misconduct.

To the issue of this blog post and how Intellectual Property becomes an Organizational Construct in the Preliminary Specification. The 21st century business value is mostly derived from business models supported by software. That software is supported and ownership is determined by Intellectual Property. There are other forms of Intellectual Property involved in oil & gas since it is a science based industry. Much as anywhere you look in North American oil & gas, anytime you look behind the door, there are issues hiding in plain sight.

Oil & gas producers have maintained a poor man’s strategy in terms of how they access IP from vendors, their secondary and tertiary industries. They don’t recognize any claim and certainly will not attribute any value to IP, and as a result have not paid any monetary compensation for the hard work that has gone into any research and development. Outside of research and development in terms of geo-technical innovations and IP, producers are not responsible for any of the innovations that they’ve claimed in the past decades. All of their benefits have been gained as a result of the hard work of individuals, mostly, in the service industry. Once they do discover a product or service that generates significant value to the oil & gas producer. Their trouble begins. 

First it is not accepted until the vendor is willing to have the product or service reverse engineered to better understand the actions taking place. No commercial acceptance of this will occur until such time as the service industry representative capitulates on the point of reverse engineering. Then surreptitiously the product innovations are clearly discussed with the innovators competitors in order to sponsor competition of the type that will price their products with no inherent costs of the research & development. Forcing the innovator to compete based on price. Rendering further Intellectual Property development and innovation moot. 

People, Ideas & Objects finds this style of “innovation” particularly vile. The Preliminary Specification establishes a solid foundation for which the Intellectual Property of individuals within the greater oil & gas economy becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published in final form in August 2012. The interaction between these three modules is comprehensive and beyond this discussion. I recommend a full review in order to appreciate the implementation of our solution. 

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil & gas is based on earth science and engineering needs. To expand the industry's capabilities in science and innovation we will need to overcome many difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude greater than what is required today. These problems cannot be solved in an environment where there is no upside for individuals to solve them. Addressing the motivation to solve these problems and enabling people to earn the rights to their Intellectual Property through the People, Ideas & Objects application modules is the first step in making the necessary industry-wide changes. This will, in turn, turn the oil & gas industry into a more dynamic, innovative business.

With the state of the industry as it is, its IP is in disarray, and the capabilities and capacities derived from it are deteriorating as we speak. Making this an IP gold rush in the industry, in order to save it. Producers' difficulty is that none of this is published and publishing is how copyrights are earned. Let me pass on one more pertinent fact that I have learned since I’ve been so reliant on copyright. Patents and trademarks are defensive in nature in that they protect your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Building on the shoulders of giants. Copyright does not secure rights to an idea. It only provides you with monopoly rights to expression of that idea. In other words, it must also be pursued and maintained in the same manner that I do here at People, Ideas & Objects. Until the Resource Marketplace and other modules of the Preliminary Specification are built I see this IP of earth science and engineering as unclaimed property. Therefore the first thing we must do for the dynamic, innovative, accountable and profitable producers in the oil & gas industry is change their competitive advantages. They'll now read: 

Coordination of the earth sciences & engineering markets' capabilities & capacities, as well as their land & asset base. 

One of the most promising forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of a producer firm as competitive advantages? This would generate revenues for producers and the people who developed them in the form of service revenues, license fees and royalties etc. Helping to establish the new and innovative oil & gas industry. Supporting that second source of revenue of the producer we’ve established through our Work Order system.

Business changes quickly. Intel's dominance in the chip market is now a constraint that causes them to lag in that market in consequential ways. As the dominant processor manufacturer, its processor architecture has been deemed redundant for future purposes. Business value is no longer in processor manufacture, it's in design. Contract manufacturing is a commodity business where others find profits and opportunities in that area where Intel does not compete. Design is now valued. Read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will run the Preliminary Specification exclusively on Ampere which will provide better cost / performance than Intel based cloud computing can offer. 

This is the changing business world and these are the revised business rules. It comes down to one word, the individual. If you don’t see what the Intel rebels did when they established Ampere. Your most promising opportunities may remain with the established organizations. Individuals in technology, oil & gas and everywhere are facilitated by that remarkable innovation, the door. 

The Internet demands one thing which is difficult to achieve. Software to organize. To organize society today, with its global reach, cannot be done spontaneously. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet. This is done through software providing them with the means to conduct their business. Software defines and supports an organization. Without People, Ideas & Objects none of this oil & gas vision will come about by sitting and waiting for the phone to ring. At least it doesn’t appear to have happened.

The question also needs to be asked: why does Apple innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovation they provide. They too rely on Intellectual Property as the basis of their value. They consider themselves a software company that sells hardware to bring about customer value. Software defines and supports organizations. 

It’s no longer enough to just own the oil & gas asset. You must also have access to the software that makes the oil & gas asset profitable. We now believe as a result of the Oracle CloudWorld 2022 & 2023 conferences that all firms in all industries will have distinct competitive advantages by using Oracle Cloud ERP. These benefits should be seen as incremental to People,Ideas & Objects et al. 

The importance of IP in the oil & gas industry organizes innovation. The most productive innovation is when it’s organized under a structure that allows the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in its Constitution. Copyright must be published to earn it. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that producers have created in the past to generate price competition in the service industry and elsewhere. Ensuring everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with producers sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? Will the oil & gas issues we are faced with going to be resolved on this basis?

The proposed organizational structure of the oil & gas industry, including People, Ideas & Objects, will be built with innovation as a core Organizational Construct. Additionally, it will be grounded in the law of the land, which will define the permissible scope of innovation. Since the law does not permit copyright violation, adherence will ensure the absence of violators. A self-policing mechanism will reduce the costs associated with unnecessary and endlessly repeated duplication of innovation in the industry. This approach provides incentives for those with original ideas, thereby fostering the motivation necessary for the challenging work ahead. Knowing their work will now be trusted and respected. To do so not just today, but always and everywhere. 

These copyrighted publications enable understanding of how things are done. Building upon that understanding with additional innovations elsewhere. Intellectual Property thus offers a robust legal framework that promotes innovation and eliminates costly redundancies and duplicated efforts. It educates and motivates us to do the difficult and challenging work we agree is the foundation of the industry. This applies across the greater oil & gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for leveraging Intellectual Property, or intelligence. Much as the last century was about the leverage of mechanical effort. Avoiding this reality or attempting to opt out would be foolish in the extreme.

What motivates people to develop these 'ideas'? Is it not a blend of self-interest and the aspiration to contribute value to the industry? Officers and directors have been well compensated and the industry has been destroyed. A further contrast is the fact that they've not been motivated by discovering ways to generate value. Intellectual Property is therefore not only an Organizational Construct that can control the innovation process throughout the industry. The participants are motivated to build value through incremental profitability, cost reduction, improved production deliverability or reserve expansion. It is the law, and most importantly, it has been proven. The reason the United States dominates the global economy in terms of performance is because their Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are intelligent beings, not serfs like officers and directors assume. It is productive, constructive, focused on generating value and benefits society. As a science and technology business, oil & gas is second only to the space industry in terms of complexity. Under their business model, what have these officers and directors been doing?

The next 25 years will be comprehensively difficult for the greater oil & gas economy. By far the most challenging time period in its history. How will industry resolve these challenges? Are we structured appropriately to meet these demands? Who today is motivated to undertake the difficult task of approaching the multitude of issues and what will be their motivation?

Intellectual Property in Oil & Gas Today.

I believe the business model of producer firms is based on having a pool of knowledge readily available at no cost. They require this access whenever and wherever needed, aligning with their interests. Therefore they couldn’t have anything published in this environment as it would be counter to their interests in terms of availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of earth science and engineering science and technology. They are leaving themselves fully exposed to any author who publishes IP at this time.

Two other aspects of Intellectual Property are first, safe harbor provisions. Why don’t producers just turn around and sue the copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to comply with their every command. The safe harbor provision states that you cannot sue the copyright holder. Secondly, the division of tacit and explicit knowledge. Tacit knowledge cannot be captured or written down. Only explicit knowledge can. Therefore it is up to people to take the explicit knowledge they have, earn the copyright, and apply their tacit knowledge to generate their value as a service. Intellectual Property services are as critical as the IP itself. Just as People, Ideas & Objects have our user community heading up their service providers which will deliver our software and their tacit knowledge as services to the producer firms. As a consequence, the tacit and explicit knowledge underlying the Preliminary Specification can be delivered effectively and efficiently. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the August 2012 publication of the Preliminary Specification. A decade of rigorous research reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be the industry's largest cost of all. The time needed to generate a sustainable, viable, and workable business model. We enable them to yield untold value creation in the short term and not have to undertake the minimum ten years of research themselves. Our user community, research, and Intellectual Property make up our three strategic competitive advantages. Anyone offering similar aspects to the Preliminary Specification in their ERP software would violate our Intellectual Property and we would expect, as law abiding citizens, the oil & gas producers would adhere to these principles of law, recognize that and refuse to use any software that violates our IP. Any violators might be discovered through our recently announced Whistleblower Program. Therefore producers would have to invest the decade of research and avoid any aspect of the Preliminary Specification within their solution. 

It is People, Ideas & Objects, our user community and their service providers that channel these Organizational Constructs towards innovation, productivity and profitability through software. Software defines and supports an organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations' implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are directly promoting the status quo behaviors that are and have been proven to be disastrous. This has been the motivation behind the officers and directors lack of action. Avoidance of their disintermediation in order to maintain their creative personal compensation continues.

Our Value Proposition, Specialization and the Division of Labor

 Since 1776 the only basis for increased value generation has been the expanded definition and use of specialization and the division of labor. Adam Smith proved in his research that by reorganizing a pin factory around specialization and the division of labor between individual workers, augmented through proficiency, automation and mechanical advantage, the factory output increased 240 fold. Today the opposite is true. Software and most particularly ERP software has sealed organizations to a definition that is unchangeable through any means other than changing the software’s process definition. This aids producers' status quo configuration when they don’t sponsor or initiate any change in ERP software. Instead, focus on engineering tasks such as cost cutting to generate business value. If we are to achieve profitable energy independence and meet consumer energy demands in the 21st century it will be the result of an “all of the above” energy strategy. For the next several generations the largest component of energy makeup will be oil & gas. Therefore, dealing with these issues and opportunities demands that we increase the industry's throughput substantially in order to meet the increasing demands of the North American marketplace. 

It is therefore necessary to ensure that we proceed from this point forward with the defined capability and capacity to enhance the ERP software used in North American oil & gas. And to do so to facilitate an increased level of specialization and division of labor that is iterative and constantly evolving. People, Ideas & Objects provide for this and are configured specifically to ensure this. Our business model depends on change. We generate revenues from software development changes initiated by our user communities interactions with industry. Our user community will be available everywhere and always to work with our developers to make the changes they’ve identified while working in their service provider operations. These service providers will be configured to deliver the explicit knowledge captured in our software and the tacit knowledge provided by their services. Our user community members are therefore on the ground in the industry on a day to day basis in the administration and accounting of producer firms. They are the exclusive, licensed individuals authorized to change our software's Intellectual Property. Our developers are licensed to accept no one else's input. In other words, our user community members have the power necessary to ensure that the processes they manage ensure the most profitable means of oil & gas operations everywhere and always. Only our user community members own and operate service providers. If anyone in the industry wants to know who they need to resolve their issue, they only need to contact the relevant user community member. 

For Whom?

People, Ideas & Objects Preliminary Specification brings significant advantages to all producers. This is a solution that should be used by all producers in the North American industry. Whether that is Exxon or the producer firm that originated at breakfast. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil & gas economy, no matter their size. While we provide advantages to junior and startup oil & gas producers, we put their organizations in a position to succeed and grow. They’ll have distinct competitive advantages over today's business model. These are brought about through the reorganization of producer firms' administrative and accounting resources into our user communities service provider organizations. And the implementation of our Cloud Administration & Accounting for Oil & Gas Software & Service provided by them. 

The producer organizations that we define and support in the Preliminary Specification employs and deploys higher levels of specialization and division of labor. We feel the overhead costs of producers demand these be dealt with by making organizations more efficient through the application of advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed, producer based capacity and capability, into a variable, industry based capacity and capability, their variable behavior being decided upon a Joint Operating Committee's ability to produce profitable production. 

Our Preliminary Specifications support a reallocation of the producers' administrative and accounting resources into individual service providers headed by members of our user community. Our user community and their service providers are independent businesses that specialize in one administrative or accounting process. They conduct that process on behalf of the entire industry as their client base. If a Joint Operating Committee produced that month, under our decentralized production model price maker strategy, we can reasonably assume it is profitable. Upon production the processes administered by each service provider will be invoked through our task and transfer network. The processes undertaken and their associated billings will be charged directly to their Joint Operating Committees. If it’s not profitable, the property would be shut-in and none of the service providers would receive any data from our task and transfer network. Therefore, no processes will be conducted and no service provider billings will be rendered. The shut-in property does not incur a profit or loss, but is a null operation. Under either scenario, overhead costs will be covered in the current period through profitable operations or by the fact that costs will be variable under the Preliminary Specification. Meaning they won't be incurred when a property is shut-in.

• Producers will benefit substantially from beginning operations in this manner. 
• First they will reach their optimum profitability when losses stop diluting profitable properties. 
• Corporate profitability whether that is at 25% or 100% of the producer's production profile. 
• This will preserve their oil & gas reserves for a time when they can be produced profitably. 
• Those reserves will no longer have to carry the incremental costs of losses otherwise incurred if they were to have continued producing unprofitably. 
• Keeping the commodity as reserves can be seen as an affordable means of storage where the subsequent costs of production and storage are zero. 
• Commodity markets will find their marginal price when unprofitable production is removed from the marketplace. 
• Increasing the value of all producers' production by realizing marginal prices across their production profiles. 
• Providing for the replacement value of exploration and production.

Producer officers and directors assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information at the property level that determines profitability is collusion, it is no wonder producers are incapable of profitability? 

Our decentralized production models price maker strategy engages North American oil & gas producers in disciplined production. Achieving maximum profitability can only be achieved when unprofitable properties stop diluting corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. 

People, Ideas & Objects has pointed out the natural gas revenues lost over the past sixteen years as a result of a lack of production discipline. Noting $4.0 trillion in revenues that were rightfully belonging to the producers were allowed to pass to others who took advantage of officers and directors poor management. The same might be true for the oil side of the business however there is no objective way to measure what the price should be. What we can determine however is the skill that has been involved in “building balance sheets” has taken away from maximizing profitability. Although only $5.7 trillion of our $25.7 to $45.7 trillion value proposition was attributable to regaining these revenues through our decentralized production models price maker strategy. It is reasonable to assume that in the next 25 years we’ll be able to attain at least that amount. 

With our clear objective of rebuilding the industry brick by brick, and stick by stick. This is in a style of rebuilding that involves a dynamic industry based on a decentralized, connected environment such as the Internet provides. People, Ideas & Objects et al don’t have to break down oil & gas to rebuild it. The rebuilding is necessary due to the damage and destruction the chronic mistreatment industry has experienced at the hands of the officers and directors of the producer firms. Hierarchical strata of advanced paper shufflers define future failure. Consolidation of these will only seal them more permanently. To bring about an ERP system for the industry such as the Preliminary Specification provides, we must consider the opportunity of disintermediation. 

We will need to consider the cultural propensity to “muddle through” and its destructive ways. This culture needs to be replaced by one based on performance. Changing that culture can not be done from within, especially when the issue can not be readily accepted for several decades. We can accurately predict that producers will do nothing. 

The nature of this rebuilding process is the cannibalization of the processes that have occurred since investors sent their message of dissatisfaction to producers in 2015. Being solely dependent upon investor cash meant organization cuts were necessary. This was when the producers' sole source of value generation, the investors' annual injection of additional capital, was no longer available. Keeping production processes in place was the priority and those processes involved in the early stages of oil & gas exploration and development were subject to layoffs. Assuming that the situation is alleviated in the following year and those resources would be recalled. Since the inactivity and abstinence of the officers and directors has continued for eight years, we can assume that the process management has been cut well into the eighth year of the exploration and development cycle. Therefore either way it needs to be rebuilt. The comment that I find appearing in what I’m reading and hearing today that concerns me the most. Is the statement “gradually then suddenly” from Ernest Hemingway in terms of how change occurs. Or how change is forced upon those inactive participants.

However, bringing one of the most complex systems, Oracle Cloud ERP, into one of the most complex industries into the environment of the small and startup, or any producer, is a risky proposition to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small or junior oil & gas producer? And that is the fact of the issue we are facing today as a result of the officers and directors “consolidation as a solution.” We need to ensure the future of the industry is in the hands of oil & gas men and women. They will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of regulatory, compliance and investment demands are real impediments to these needs. That is, if producers could not access the kind of systems necessary to operate in that environment, no matter their size, capital markets would remain forever closed. Today’s business model makes this an untenable barrier, and it will be even more so in the near future. Investors have explicitly requested Tier 1 ERP systems be implemented. Therefore all producers need to understand that the production discipline provided by the Preliminary Specification is necessary across all classifications of producer firms.

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate the full $3 to $5 million of free cash flow necessary to offset the annual base overhead of the producer firm. For administrative and accounting purposes, they will only incur the variable overhead costs of the service providers fees that they use. Accessing the explicit and tacit knowledge of the service providers process management through our Cloud Administration & Accounting for Oil & gas Software and Service. In addition, they will incur the costs of software development assessment by People, Ideas & Objects each year. As we noted earlier, not only are these overhead costs variable, but if they’re charged, that denotes profitable production. This indicates these costs are covered. In contrast, if the property is not producing it does not incur any overhead costs. And there are more attributes of our system that benefit the new oil & gas industry we are rebuilding. The ability to have your working interest partners within the Joint Operating Committee participating in the same ERP software developments and implementations will bring substantial advantages to all producers of all sizes. Our user community and their service provider organizations are a reorganization of the industries administrative and accounting resources. Focused on an individual process they maintain the software and service for that process across the North American continent. Using software and specialization to organize a producer's administration and accounting in a standardized, objective manner.

The Preliminary Specification also implements specialization and the division of labor across the producer firms, particularly in the earth science & engineering capabilities and capacities. As a first step in our solution for startups and junior producers, we listed this as the first step. These capacities and capabilities are becoming increasingly burdensome to each producer firm due to their unshared and unshareable nature. However, they are for different reasons than the administrative and accounting difficulties mentioned. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development. This requires further specialization of the producers' capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, expand the deliverability of the North America-based industry. 

Consolidated producers will have particular difficulty managing this technical resource when entrepreneurs see the startup opportunities we’re defining here. That is, if only there was an ERP system that provided a solution for oil & gas startups to deal with the finance, compliance, governance and regulatory environment. This would enable them to access funding! In addition to this limited technical resource supply we also believe that producers' firms are reaching a point where the costs of their scientific engineering and geology needs are beyond their commercial grasp and necessary to maintain their just-in-time operator status. Even so, a higher level of specialization and division of labor will be needed in earth science & engineering. It is the unshared and unshareable characteristics of these capabilities that we find the nascent difficulties to overcome. As operators, producers require these technical resources for a variety of just-in-time purposes. If we assume that across the industry the utilization rate of these technical resources is 75% due to organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution to these pending and most certainly future difficulties. A one-third increase in capacity with higher output from enhanced specialization and division of labor, providing a good start to solving this pending critical resource shortfall.

Instead of letting another issue manifest itself as a crisis level issue, People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. As soon as the Preliminary Specification becomes operational, the producer firm will have two revenue streams. Their oil & gas sales are augmented by their earth science & engineering capabilities being deployed and used for revenue generation. The individuals can consult with one of the producers' own Joint Operating Committees or with other producers / Joint Operating Committees, as their clients. Due to the specialization and division of labor demands producers will need to choose to specialize or acquire specific capabilities and competitive advantages. These producer revenues will then offset engineering and geological costs incurred and charged to Joint Operating Committees or other producer clients. And through this enhanced specialization and division of labor, we achieve the same benefits of the 240 fold increase in productivity that Adam Smith experienced in his pin factory.

The second source of revenue should be seen as the starting point of oil and gas industry startup revenues. The startup's capabilities and competitive advantage will be less specialized than those of more advanced companies. The additional costs of head office operations not considered in the administrative and accounting category will be offset by these revenues. And this will apply to all producers no matter their production profile. When producers specialize in their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their needs.

In a world where software defines and supports organizations. This is some of the what, how and why we can provide when the Preliminary Specification is delivered to all producers in the North American industry. Instead of being mere serfs as the officers and directors wish to continue treating the engineers and geologists, they’ll be able to take control of their careers from this point forward. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry. This is our Work Order. Officers and directors may claim that charging labor directly is already available through their systems. Which is true, they can allocate some of these labor costs to the field. However, some are assumed to be captured in overhead allowances which the Preliminary Specification eliminates the use of. However their methods do not provide the necessary features of raising it to the point of making it a defined revenue stream for the firm. Its ability to interact throughout the industry is also a benefit. Allowing for interactions between resources and where they need them. Subject to appropriate approvals and governance. Theirs does not enable the second purpose of our Work Order system, which promotes industry-wide innovation through the establishment of working groups etc. Our Work Order system bills its costs at all times to corporate overhead, Joint Operating Committee overhead, an AFE or to a lease. Therefore the billable time of the individual engineer or geologist should be deployed within the producer 100% of the time or not be working for the producer. A fundamental component of this is requiring these people to establish their own producer firms. These firms are based on their earth science and engineering competencies, capabilities, and Intellectual Property. An industry where it will be less about who you know, but what you know and what you're capable of delivering, what is the value proposition that you’re offering? Preliminary Specification facilitates dynamic, innovative, accountable and profitable oil & gas producers, whether they are startups, juniors, intermediates, seniors, or multinational companies.

Hyperspecialization

We live in a time of significant change, collaborative work and a specialized work environment. Hyperspecialization is breaking processes down further to the point where the aid of software automation provides enhanced productivity through the division of labor between humans and computers. The future holds that Generative AI will enhance these. Our user community and their service provider organizations are configured to enable these attributes for the oil & gas administrative and accounting aspects of the producer firms and industry. 

In late 2023 People, Ideas & Objects undertook the task of building our third and final competitive advantage, research. Our other two are our user community and Intellectual Property. This was a result of beginning a comprehensive review of hyperspecialization and finding we needed more capacity and capabilities in order to undertake the task. What we were able to determine at this time was our belief in the market would need to be preeminent in how these specialized services came about. And what we have chosen to do in our research is to provide an understanding of the issues and opportunities of hyperspecialization to our user community for their guidance in forming. 

In Summary

Producers gain substantial value through the Preliminary Specification when the reorganization of the administrative and accounting resources is reconfigured into our user community and their service provider organizations. Instilling a fair and reasonable means of production discipline can only be achieved through profitability. If a property is profitable, it produces; otherwise, it constitutes an economic waste. Earning the replacement value of what it will cost to explore and produce a new barrel of oil or gas equivalent is what is reasonable. All of these depend on a more accurate accounting. This involves providing each property with comprehensive financial statements based on actual, factual information every month. Financial statements that are objective and standard across the industry so that every producer will know when their property reports a loss there is no question as to the next step. This ensures that the assessment of profitability is consistent with that of other North American producers. Would any other producer trust the “objective” nature of an industrialized version of Exxon’s ERP system?

Unfortunately industry has now placed itself in a position where it has limited its options to People, Ideas & Objects, our user community and their service provider organizations. With that they have also imposed the fact that failure will not be an option. If the industry seeks profitability to achieve: 

• Energy independence for the rest of the century. 
• Provide consumers with abundant, affordable and reliable energy.
• Prosperity for all concerned within the industry, 
• A dynamic, innovative, accountable and profitable industry everywhere and always.

Today officers and directors do not have the culture, understanding or ERP software to do so. It does not have the capacity to change. An incapacity which has proven itself persistent over the long term. Despite the consequences of trillion of dollars of damages. Despite being faced with the most challenging future. Despite the desperate conditions the energy industry has been managed under them. A leadership that has proven itself unaware of existence outside of its own skin. Doesn’t care about profits, doesn’t know how to earn them and can not earn them from the remainder of what is left and the culture they’ve instilled. A leadership prone to erratic decision-making without clear reasoning. Never listening to shareholders who’ve expressed serious disenchantment. Declaring their past decades efforts uncommercial without a moment's thought as to how to remediate them or make them profitable. Wandering off into unrelated industries, only to return to what was declared uncommercial 18 months earlier. 

Specialization and the division of labor are the only means in which value has been gained. It has been argued that Adam Smith’s 1776 work in the Wealth of Nations was the turning point of western civilizations rapid expansion. People, Ideas & Objects believe software has stifled the ability of organizations to change. They cement the organization within the definition and without the capacity to change the software first, the organization remains static. Eliminating any future benefit from specialization and division of labor. People, Ideas & Objects also sees the capacity and capabilities we’ve built into our software development, especially our user community, we’re able to generate value in two material ways. The first is through the decentralized production models price maker strategies ability to instill production discipline across North America. And secondly, change enabled opportunities and capabilities that specialization and the division of labor have for generating value.

Our Value Proposition, Capital Component

Capital management is a critical component of People, Ideas & Objects' value proposition. Over the next 25 years, the demands on capital are substantial, including achieving profitableƒ energy independence and upgrading infrastructure. Historical reliance on investors for funding consumer energy consumption, a result of past producer policies, anticipates a need for $20 - $40 trillion. This figure exceeds the financial community's capacity and, like past policies, may be unnecessary.

Capital Management Challenges

Capital costs, retired to the income statement over decades, are a luxury few industries could imagine in the 21st century. Turning capital over in a much more efficient way is the method we use in the Preliminary Specification. Capital sitting on today's balance sheets represents cash that has been invested. With the Preliminary Specification, this capital will be priced into the commodity costs and passed to the consumer. We attempt to more accurately match the costs of exploration and production to the reality of the markets. Returning the previously invested cash to be reused, repeatedly, for dividends, future capital expenditures, and bank debt repayments.

The demands of $20 - $40 trillion in capital expenditures over the next 25 years can therefore be sourced through the $1 to $2 trillion sitting on producers' balance sheets today. Iteratively, and repeatedly using the same cash to approach these otherwise impossible capital demands. The remaining $5.7 trillion of our value proposition is attributable to our decentralized production models, price maker strategies, increased revenues, and profits realized by the producers. Establishing the much needed market or production discipline. Our recent publication of the greater than $4 trillion in natural gas revenue losses since 2007 is evident of the issue. Reuters recently stated that an additional $2.6 trillion was available to producers in the next two years. Supporting our value proposition of $25.7 to $45.7 trillion over the course of the next 25 years.

Our calculations support the issues and justification of oil & gas investors suspending their support in 2015. There is no greater message of urgent management attention required than a firm's abandonment by their investors. These signal to management that there are serious issues of concern. And issues in which the officers and directors have done nothing about since the 2015 investors' action. It is these enhanced revenues and profits from the Preliminary Specification that will be the only source of producers' future capital needs.

SEC Regulations and Misinterpretations

People, Ideas & Objects hypothesize that the late 1970s SEC’s Full Cost accounting methodology has caused an overcapitalization in oil & gas. Producer misinterpretation of SEC regulations is evident through the ceiling test, which reads that the Capital Assets of the producer cannot exceed the value of the independently evaluated reserves. This has shifted accounting in the industry from a measurement of performance to a measurement of value and fostered misguided ambitions such as “building balance sheets.” Turning the ceiling test, or maximum limit, into a target for each and every producer to achieve each year.

This leads to the following consequences:

1. Overcapitalization leads to a proportionate amount of overreported profitability.

2. Attracting undue attention from investors who overinvest in an attempt to capture those profits.

3. Leading to an overinvestment in productive capabilities, or unprofitable production as we describe it.

4. Which leads to a subsequent overproduction of commodities which follow the economic principles of price makers.

5. Commodity prices have been chronically depressed during the past four decades.

6. Leading to a number of catastrophic price collapses in both commodities.

The Preliminary Specification decentralized production models' price maker strategy is the only reasonable and fair method in which producers can attain production discipline. Remedying these chronically depressed commodity prices by instituting a means of production discipline across the industry. Unaware that it would be the most competitive producer that carried the lowest capital cost in the form of property, plant, and equipment. Having a reduced carrying amount due to operational efficiency or enhanced profitability by reducing property, plant, and equipment on the balance sheet. Ensuring 100% of their production profile was eligible for profitable production.

There is no requirement in the SEC regulations for a producer to attain the limit of the ceiling test. Just as there is no minimum requirement of what the balance sheet value of property, plant, and equipment needs to be. These bloated balance sheets, once again, lead to an equal amount of overstated profitability on the income statement. The disproportionate nature of capital, in a capital-intensive industry, and its vastly overstated profitability are not lost on the current officers and directors. They have created a perception of performance that is false. One in which accountability through poor ERP systems, where little to no software development was undertaken for three decades. (People, Ideas & Objects' competitors have done stellar work in the face of impossible budgets and working conditions.)

The question then became throughout the 1980s of the philosophical question of what is capital? And therefore large percentages of overhead and interest were then capitalized to property, plant, and equipment. These have continued although as a response to People, Ideas & Objects we have seen a reduction in the percentage amount of interest being capitalized with enhanced reporting regarding its makeup. This however has not been the case with overhead. Which has seen the exact opposite in terms of enhanced accountability. Less is known about the nature of capitalized overhead today than at any time in the past four decades. What we know through experience is that upwards of 85% of all overhead in the industry is capitalized.

The issue with the capitalization of overhead and interest is that these costs are incurred on a monthly basis and are part of the organization. They are a cost of the business and therefore need to be priced into the commodity being passed to the consumer each month. The fact that they’re not eliminates the producers' “cash float.” The cash consumed in these costs is not replenished in the following month when they’re capitalized for 20 years and depleted with other capital over that time. Leaving producers so heavily dependent on outside sources of capital and searching for new cash to cover overhead each month.

Shale Production Economics

People, Ideas & Objects believe a number of unique characteristics of Shale need to be taken into consideration. These include:

1. Higher drilling and completion costs.

2. Shale exposes substantial reserves.

3. Prolific initial production volumes.

4. Steep decline curves within the first 2 years.

5. High rework costs to run additional laterals and/or frac.

The SEC’s theory allocates an equal amount of capital cost to each molecule of proven hydrocarbons. Shale exposes a large reserve base for producers to allocate their costs to. Production from the lateral that extends up to 10 miles can be exhausted in as little as 18 months. Leading to the need for costly reworks to re-frac the original lateral or drill another lateral and frac it. Meanwhile, the 18 months' production only recovered 5% of the recoverable reserves (and capital costs). Up to 50% more costs for the second lateral will be added to the costs of each remaining molecule. Within ten years, what appears to be a commercial, viable technology, will become an expensive and costly endeavor due to the method of collecting capital costs on the property and not recognizing them quickly enough.

People, Ideas & Objects resolves this in two ways. First, by recognizing the high Shale costs of capital over the course of its initial production. Second, by recording any secondary, service work, or rework as an operating cost. In this way, the unnecessary asset bloating will cease. And there will be a return of the cash consumed in the high-cost Shale operation on a much quicker basis. Subsequently, oil & gas will be priced at its actual cost. If it attains profitability it will produce, if not it will be shut-in. Producers and consumers will choose to sell or buy on the price of the commodity that is offered. Its marginal replacement value.

Shale is the key to long-term, profitable, energy independence on the continent. There is an abundance that may last for 50 years or more. Prudent use of these resources would dictate that they be produced and consumed based on the market price so that effective decisions can be made as to their cost and use. There is no more costly oil & gas available than Shale, and as such, Shale will dictate what the price of all oil & gas will be. Industry needs to ask “what is that cost?” Are we to deceive ourselves continuously on the basis of “building balance sheets?” Where any production qualifies as profitable due to the fact it consists of operating costs, royalties, a sliver of overhead, and a small portion of the actual capital consumed in the exploration and production process? Or should we attempt to more accurately match these costs to find a more accurate accounting of what the actual costs are and consider more than just the SEC’s ceiling test?

Today we have the obscene, bloated, and out-of-context capital asset balances of the producer firms. Supported by debt and in many cases negative retained earnings and in some cases negative shareholder equity. These are part of the cookie-cutter financial statements that each producer issues with the only differentiating quality being the size of the production profile. To ascertain which producer is the hero and which is the zero, a reader is unable to come to any conclusion. Homogenized financial statements are the opaque method in which performance and accountability are avoided.

Conclusion

As a consequence of these financial statements and their long-term acceptance, a culture has developed around this method of operation, which is oblivious to any alternative and believes in its own processes. In reality, indiscriminate spending, which is assumed to generate profits, has led to a lack of commercial or competitive differentiation or understanding within the industry. Over four decades, the costs of assets involved in oil & gas have inflated, mirroring the rise in prices. The industry's competitiveness has gradually eroded, leading officers and directors to mistakenly believe in their competitiveness. However, by any standard, the assets are bloated and represent a non-performing cash drain on shareholders and banks. Without the annual infusion of capital from investors, the industry would not be sustainable.

Regarding the secondary service industries, they too have experienced abuse at the hands of producers. Confronted with the boom/bust cycle of an unmanaged industry, producers have cut up to 50% of their field-level activity. Observing the desperation in the service industry, they exploit it by offering work at half their previous prices, thus slashing the service industry's revenues by 75% - a situation that has occurred numerous times in the past.

Recently, producers have sourced cash through the service industry by delaying payments for over 18 months, eroding the faith, trust, and goodwill in producers. Service industry investors, who have seen their equipment scrapped and sold off to unrelated industries to stay afloat, have learned harsh lessons about their role in oil & gas that will take a generation or more to unlearn. Sudden shifts in producers' business models towards clean energy have left them feeling that their interests might lie elsewhere. If producers are committed to clean energy why would they continue investing in oil & gas. I argue that rebuilding the service industry is essential from the producers' perspective. If they were more invested, perhaps they would show more respect for the industry. Therefore, it is believed that any rebuilding of the service industry's capacity and capabilities must be initiated by the producers' philanthropic goodwill. They broke it; hence, they should fix it. Additional capital will need to be generated by producers to provide for these sources of capital.

There are few options for the industry to actively commence the rebuilding of the greater oil & gas economy. Profitability and prosperity were never genuinely earned but rather surreptitiously acquired through inappropriate means. We have argued this point since 2012 and have not seen any change in producer behavior. Change will not occur with the current producer officers and directors, whose culture will resist every step and ultimately prevail. Producers must rely on profitability to source their capital needs. In a capital-intensive industry, the majority of costs passed to the consumer would typically be capital in nature, but this has not been the case either today or at any time in the past four decades. The trust, faith, and goodwill in the producers by the investment community have been destroyed. Only the People, Ideas & Objects Preliminary Specification is structured to rebuild a dynamic, innovative, accountable, and profitable oil & gas producer. Without profitability and a rapid cycle of capital management, the future of the industry remains uncertain. The fact of the matter remains, if officers and directors made the industry profitable, they would have had unlimited resources to do what was necessary.

Our Value Proposition: Introduction

People, Ideas & Objects has prepared a solution that resolves many of the issues facing the industry today. What’s potentially more valuable is the ability to reorganize the industry in a way that will promote innovation throughout and accommodate the necessary changes over the next few decades. We have recently been highlighting the production discipline that would be gained in the industry and the need for that capability when trillions of dollars are being realized by other parties and not the producers. This is an issue we have consistently highlighted in our promotion of the Preliminary Specification. As this issue is prevalent today, we find other areas of the Preliminary Specification that have the potential to be collectively of equal and possibly greater value. We will be breaking down some of these larger attributes of our offering and discuss them individually over the next few weeks. This will include:

• Capital management.
• Specialization and the division of labor.
• Professor Paul Romer’s non-rival, or sharing of costs.
• Cultural shift to preservation, performance and profitability.
• Setting the Joint Operating Committee as the key organizational construct.
• Implementation of market systems. 
• Innovation and Intellectual Property.

Over these next few weeks each of these topics will be visited to reflect the value the industry and individual producers can gain from the implementation of the Preliminary Specification. 

Society today is incapable of accomplishing anything of material consequence without the ability to have software define and support the organization of the people involved. It may still be available otherwise, however it would not be on a competitive basis. I’m not of the opinion that Tesla is in the business of selling cars to make money from the sale of the car. It serves as a platform from which to build, with software and services that promise far greater prosperity than what mere car sales could provide. This is the value of software in business today. It introduces new business models that are unique to the methods of how money is made in an industry. Without software, a business model will fail. The oil & gas industry's current business model has failed catastrophically.

We have a group of officers and directors that are of the mindset that they can compete with a 1950s business model of the industry. This will involve the consolidation of producers into ever larger bureaucracies to insulate those officers and directors that are today in legal jeopardy due to the consequences of their inaction of managing the business appropriately. They feel the need to drill wells is the business. They assume the remainder of the business will be handled by the market. It has now been realized the industry is poorly managed and there are substantial values freely available to be poached from under the noses of the producers. Just from a word processor, a printer and a pen.

These are the attributes of value. Profitability is the only concern of the corporation, theoretically speaking. The past forty years have diminished that thought and other goals and objectives have come to share that space. Without profitability, particularly in a primary industry such as oil & gas, there is little of anything to go around at the end of the day. The performance of the producers' assets falls well below what is necessary to sustain the entire oil and gas economy's prosperity. The service industry has been particularly affected by the habitual cost cutting and roller coaster ride of the producers' unnecessary maintenance of boom / bust cycles. It is an unreliable employer in which no one can bank a mortgage or family upon. Revenues from the oil & gas assets, although reported as profits, are nothing but the gross margin and therefore do not maintain a competitive criteria. Spending money is profitable, guaranteed. This has eroded the expectation over the past four decades to the point where the industry's asset performance does not cover its long term cost structures.

At the same time the leadership have left what is unquestionably the most difficult and challenging future for the industry in a position where it hasn’t the wherewithal to conduct even a small portion of the task ahead. In order to begin to do so, the first and only task is they need to understand the ways and means of earning profits. There is no government, no investors that can or will undertake to fill the role that the industry needs to do for itself. The size of the task is too large. Profits are the only source of cash large enough to begin to deal with the challenge ahead. Larger bureaucracies, emerging from consolidated producers, will undoubtedly struggle to adapt and earn significant profits after finalizing their deals. The culture of the industry, as displayed over the past decades should provide the evidence of their continued failure. 

Drilling, issuing shares and consolidations have amounted to absolute destruction of all value throughout the oil & gas economy. Industry can not and will not be able to build from the shallow base that it has built for itself. The pursuit of the holy grail of “Petroleum Reserves” has proven to be a fallacy. If they’re unable to produce them profitably they’re worthless. And now the great share swap will be their solution to put the industry right?

Leadership, responsibility, accountability.

Officers and directors are the leadership, responsible, and have had the authorization to employ the resources of the firm to resolve these issues. They’ve failed unquestionably. Had decades of opportunities to resolve their difficulties and chose not to. Catastrophic damages have occurred and they will be held accountable for their (in)actions. They’ve now limited their choices to People, Ideas & Objects Preliminary Specification to be implemented on an urgent basis if they should so choose. If not People, Ideas & Objects have alternatives on how to fund our developments. 

Should they decide to forgo the deadlines of February 16 or April 12, 2024, our alternative will be the implementation of Profitable Production Rights. Leaving them to explain to their shareholders why they’re losing at least 5% more of their revenues due to the inability to make a decision. A continuation of the waste we have seen from these officers and directors. 

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.