And We’re Back

I enjoyed the focused time away writing the five papers published over the past few months. These works have solidified research as People, Ideas & Objects’ third competitive advantage, complementing our user community and Intellectual Property strengths. While we’ll shift from a monthly paper publication schedule, we will continue publishing periodically moving forward.

I’m pleased with the papers’ content, which share a cohesive theme: the transformative role of People, Ideas & Objects, our user community, and their service providers in rebuilding North American oil and gas producers. Each paper targets a specific industry segment, detailing how the Preliminary Specification will drive change and support the industry’s reconstruction.

The first two papers, released on President Trump’s inauguration day, January 20, 2025, set the stage for this vision, highlighting the opportunities and mechanisms for revitalizing the oil and gas sector.

Reconstructing Oil & Gas

 Our first paper outlined how engineers and geologists can leverage the Preliminary Specification to establish their own oil and gas producer firms, revitalizing the industry into dynamic, innovative, accountable, and profitable producers competing in North American Capital markets.

Reconstructing Oil and Gas: Enabling Engineers and Geologists to be this Century’s Pioneers and Lead the Industries Future

Overcoming Barriers for Small Producers

 Small and startup oil and gas producers face significant challenges: limited access to capital, high overhead costs, and difficulties scaling into larger operations, which historically relied more on access to financial resources than engineering or geological expertise. The Preliminary Specification addresses these hurdles, enabling small producers, the future pioneers to thrive.

A New Era of Innovation and Profitability

 Small and startup producers are poised to lead the industry’s transformation, echoing the vision, drive and success of its pioneers. Investors, like Citadel’s hedge fund, are committing billions to non-operated oil and gas assets, relying on these newly formed agile, innovative producers to manage them. As change accelerates, investors seek profitable producers to restore faith, trust and confidence in the industry.

Catalyst for Change

 Our second paper explored transformative business opportunities in oil and gas administrative and accounting functions. People, Ideas & Objects envisions reallocating these resources from producers into independent, user community-owned firms. These firms will initially shape the business perspective of the Preliminary Specification’s software development, later transitioning to manage specific industry-wide processes. Service providers, leveraging the explicit knowledge embedded in the software and their tacit expertise, will deliver these services to producers.

Catalysts for Cultural Change: The Leadership Role of People, Ideas & Objects User Community

Leveraging Non-Rival Costs

 Drawing on Professor Paul Romer’s theory of non-rival costs, our user community and service providers operate through the Cloud Administration & Accounting for Oil & Gas platform. This shared infrastructure, accessible to all North American producers, eliminates the need for each producer to independently build and maintain administrative and accounting systems. By pooling these costs, the industry achieves significant overhead reductions.

Enabling Flexible Operations

 This shared infrastructure offers producers the flexibility to shut in unprofitable production. When a property is shut in, no data is generated, no service provider work is performed, and no service provider invoices are issued. The Cloud Administration & Accounting for Oil & Gas system renders the Joint Operating Committee’s financial performance a null operation—neither profit nor loss. This allows producers to focus on innovative solutions to restore profitability to the property.

Innovative Organizational Excellence

 Published February 10, 2025, People, Ideas & Objects introduces new approaches to configuring organizations for exceptional performance. As some organizations achieve unprecedented results, we explore what drives their success and how it can be replicated.

Innovative Organizational Excellence: How Elon Musk and Visionary Leaders Build High-Performance Enterprises

Redefining Performance in Oil and Gas

 North American oil and gas producers face intensifying performance demands from competitive capital markets—standards they’ve struggled to meet. The Preliminary Specification offers a framework to establish dynamic, high-performance standards and adaptable infrastructure. If leading organizations are setting new benchmarks, how long until these become the norm? Can oil and gas afford to meet only today’s expectations, risking obsolescence once again as capital markets raise the bar?

The Quest for Innovation

 Our January 20, 2025 white paper, Reconstructing Oil & Gas, challenged engineers and geologists to pioneer innovations akin to the America’s Cup sailing boats, which achieve 30-knot speeds in 6.5-knot winds. What proprietary innovations will unlock dramatic performance gains in shale formations? With vast known shale resources, engineering and geological breakthroughs could yield significant upside. Is shale’s full potential untapped?

A Call for Collaborative Innovation

 Innovation in oil and gas requires a fundamental shift. Producers, the service industry, academia, and other stakeholders must unite to address critical questions: What performance do we expect from oil and gas? How will we achieve it? The industry’s current approach to innovation is inadequate. The first step is to reorganize, aligning efforts to harness the collective expertise needed to meet future demands.

Building a High-Performance Future

 By adopting the Preliminary Specification and fostering a culture of innovation, oil and gas can meet and exceed capital market expectations. It should be asked if shale has been fully exploited from an engineering and geological perspective. Organizing for excellence and setting ambitious goals will position the industry to thrive in a rapidly evolving landscape.

Hyper Specialization in an AI- and IP-Enabled Workforce

 In our March 17, 2025 paper, People, Ideas & Objects explore the synergy of hyper specialization, Artificial Intelligence (AI), and Intellectual Property (IP) within the Preliminary Specification, building on Professor Paul Romer’s theory of non-rival costs. By sharing administrative and accounting infrastructure, producers avoid the burden of building and maintaining it internally. Combined with hyper specialization and division of labor, these principles drive unprecedented productivity and performance in North America’s oil and gas industry, creating value far beyond the sum of their individual contributions.

Hyper Specialization in Today’s AI and IP Enabled Workforce:

The Power of Hyper Specialization

 Specialization has driven economic value since 1776, but have we reached the point of diminishing returns, where further specialization costs more than it yields? In the context of hyper specialization—extreme task segmentation—we believe we have. ERP systems, designed to identify and support processes and people, must evolve to accommodate this dynamic. Hyper-specialized markets may appear chaotic, with heightened activity mistaken for inefficiency. To prevent disruption and ensure order, clear mechanisms are needed to manage access, roles, and workflow.

Intellectual Property as Gatekeeper

 IP is critical to maintaining control in a hyper-specialized environment. By licensing only authorized participants with defined roles and responsibilities, IP ensures that only those with rights can operate in specific domains. Without IP protections, unauthorized players could encroach, eroding the benefits of specialization and stalling progress. IP safeguards the value of hyper specialization, division of labor, non-rival costs, and AI integration, preserving and enhancing industry performance.

AI as the Orchestrator

 AI serves as the intelligent overseer, coordinating the complex interplay of players, roles, processes, and Joint Operating Committees within the ERP system. With its comprehensive understanding of each participant’s status and responsibilities, AI acts as a traffic cop, judge, jury and executor, enforcing structure and functionality. It ensures seamless operations, managing the speed, complexity, and volume of interactions in a hyper-specialized market.

A Synergistic Future

 The integration of hyper specialization, AI, and IP, supported by the Preliminary Specification, unlocks transformative value for the oil and gas industry. By leveraging shared infrastructure, tightly controlled IP, and AI-driven coordination, producers can achieve unparalleled efficiency and performance, redefining the industry’s accounting, administrative, operational and economic potential.

Oil and Gas Arbitrage: Citadel’s Strategic Play

 On April 7, 2025, People, Ideas & Objects published a paper detailing Citadel’s March 22, 2025 strategy, where one of their hedge funds invested $1 billion in non-operated Haynesville shale gas properties. This move exemplifies oil and gas arbitrage, capitalizing on market inefficiencies.

Oil & Gas Arbitrage: The Market Finds a Way

Strategy Overview: Non-Operated Properties

 By acquiring non-operated properties, investors following Citadel’s approach benefit from operator management in the short term. This allows direct participation in oil and gas without inheriting the inefficiencies of legacy organizations that struggle with profitability. The paper implies that adopting People, Ideas & Objects’ Preliminary Specification offers the mid- to long-term management solution for these assets.

Rethinking Reserve Valuation

 The traditional net present value (NPV) of cash flow for oil and gas reserves inflates asset values due to producers’ outdated “building balance sheets” and “putting cash in the ground” strategies. People, Ideas & Objects advocate valuing reserves based on the NPV of earnings, reflecting true profitability. Producers, unprofitable and cash-constrained, often rely on property swaps or exchanges rather than cash for acquisitions, overpaying based on inflated cash flow metrics and lack of cash makes this now a buyer’s market. 

Citadel’s Long-Term Arbitrage

 Citadel’s strategy involves purchasing reserves at today’s prices, which are undervalued compared to their future profitable value under the Preliminary Specification. The arbitrage opportunity lies in the price differential between current and future profitable prices, multiplied by the vast shale reserve volumes. All costs are fully accounted for in today’s reserves valuation. Maximizing the differential’s leverage. 

Unlocking Value Through Price Increases

 As oil and gas prices rise to “real” profitable levels—defined as the replacement cost of a barrel of oil equivalent in today’s market—reserves shift from possible/probable to proven categories, markedly boosting NPV. Replacement costs reflect the ever escalating, real costs of exploration, production, and operations, as defined by heavy oil and shale.

Escalating Costs and Future Funding

 Oil and gas production costs rise faster than inflation, driven by increasing engineering, geological, and field efforts. With easily accessible reserves depleted, each incremental barrel demands more resources. Current production must fund these rising future costs to sustain output.

Preliminary Specification: A Comprehensive Solution

 People, Ideas & Objects’ Preliminary Specification provides a robust accounting, administrative, and operational framework to manage these assets. It supports flexible participation models—active or passive—yet preserves voting rights in Joint Operating Committee agreements for novated participants.
Citadel’s strategy, underpinned by the Preliminary Specification, positions investors to capitalize on the inevitable rise in oil and gas prices, unlocking significant value from today’s under-realized reserves.

Oil & Gas Arbitrage: The Market Finds a Way

 Our fifth paper of 2025… 

Oil & Gas Arbitrage: The Market Finds a Way. 

Citadel’s Hedge Fund Begins Rebuilding and Reconstructing Oil & Gas. The Final Cornerstone is in Place

Can be downloaded here. 

Hyper specialization, Artificial Intelligence & Intellectual Property

 As promised our paper looks at the dynamic interactions that are a result of People, Ideas & Objects use of Hyper Specialization, Artificial Intelligence, and Intellectual Property for our user community and their service providers. The paper entitled…

Hyper Specialization in Today’s AI & IP Enabled Workforce: 

 Strategic Implications and Operational Consequences 

for the Oil & Gas Sector 

This is our third paper of 2025 that deals exclusively with our user community and their service providers. Download your copy here before all the shooting starts again. 

As Promised

Our third white paper of 2025 is now published—this also our second white paper this year focused on our user community. Today’s paper is titled:

Innovative Organizational Excellence, 

How Elon Musk and Visionary Leaders 

Build High Performance Enterprises.

Strategies for Emulating Their Success Within Our User Community

Be sure to download your copy while it's still fresh!

And Another!

 I’m pleased to confirm that our February 10, 2025, paper—  

Characteristics of Entrepreneurs and Innovators:  

How Elon Musk and Others Excel in Constructing Today’s High-Performance Organizations 

Strategies for Emulating Their Success Within Our User Community 

will be published on schedule.

I can also announce a fourth deliverable for 2025, slated for release on March 17, 2025, under the current working title:  

Hyperspecialization: Its Impacts and Consequences for 

Our User Communities and 

Service Provider Organizations.

With Today's Inauguration

 And as promised, two white papers are being released from People, Ideas & Objects. Building off of the "animal spirits" being released in the North American marketplace. These papers address how the material and consequential issues that have manifested in oil & gas are dealt with through the reconstruction of the oil & gas industry under new leadership. The titles of these papers are. 

Reconstructing Oil & Gas: Enabling Engineers and Geologists to be This Centuries Pioneers and Lead the Industry's Future 

Empowering Dynamic, Innovative, Accountable and Profitable Oil & Gas Producers Through People, Ideas & Objects

And

Catalysts for Cultural Change The Leadership Role of People, Ideas & Objects User Community

Reconstructing Dynamic, Innovative, Accountable and Profitable Oil & Gas Producers

These papers can be accessed here and here.  Get yours before they're all gone. 

Characteristics of Entrepreneurs and Innovators in Oil & Gas

 People, Ideas & Objects is pleased to announce that we will publish our third research paper on Monday, February 10, 2025. This paper represents the third deliverable from our recently established research capability. As a reminder, Intellectual Property, our user community, and research comprise the three distinct competitive advantages we pursue at People, Ideas & Objects.

Currently, a significant portion of our effort is devoted to research in preparation for the development of Phase I of the Preliminary Specification. Similar to one of the papers scheduled for release on January 20, 2025, this third paper will focus on our user community. The previously mentioned January 20 paper addressing our user community is titled:

Catalysts for Cultural Change: The Leadership Role of People, Ideas & Objects User Community 
Reconstructing Dynamic, Innovative, Accountable, and Profitable Oil & Gas Producers.

This publication delves into many details of the Preliminary Specification development, as well as the structure of our user community. It covers the individual phases of development and, most importantly, the compensation framework for our user community throughout the development process.

On January 20, 2025, we are releasing two papers. Both are relevant to everyone, but one targets our user community specifically, while the other is directed toward engineers and geologists. Together, they address the four critical elements needed to provide dynamic, innovative, accountable, and profitable oil and gas operations.

Our February 10, 2025 paper is entitled:

Characteristics of Entrepreneurs and Innovators: How Elon Musk and Others Excel in Constructing Today’s High-Performance Organizations
Strategies for Emulating Their Success Within Our User Community

At People, Ideas & Objects, we view our user community as the source of our solution’s quality. By making our user community a competitive advantage and our primary focus, we ensure the delivery of a high-quality ERP solution for the oil and gas industry. Over the next 25 years, the consequences of implementing a robust and well-designed ERP environment will be critical to the industry’s success. Starting with a thoughtful organizational design ensures that its benefits reach all corners of the sector. Approaching this task haphazardly would only jeopardize the outcome.

Periods of significant economic change—like the one we are entering—are exceedingly rare. We are transitioning into new economic models that promise exponentially greater performance trajectories, far beyond the scope of technology or bioengineering. This transformation will permeate every aspect of the economy, and its impact will be felt most intensely in North America. 

Many believe that Artificial Intelligence represents the future of our economy, driving growth through its capacity to leverage intellectual efforts. While People, Ideas & Objects acknowledges that there may be some truth in this, we also recognize the daunting competitive challenge posed by oil and gas. Each barrel of oil equivalent delivers between 10,000 and 25,000 man-hours of mechanical leverage—an extraordinary value proposition that consumers rely on every day. Far from fading into the background, oil and gas still holds its greatest opportunities ahead.

How Oil & Gas Will Participate in the Economic Upswing

 People, Ideas & Objects has scheduled Monday, January 20, 2025, for the publication of two of our papers. Originally conceived as a single document, we have separated them to provide clarity for two distinct audiences. We have titled these papers as follows:

Revolutionizing Oil & Gas: Enabling Engineers and Geologists to be This Century's Pioneers and Lead the Industry's Future

Empowering Dynamic, Innovative, Accountable and Profitable Producers through People, Ideas & Objects

and

Catalysts for Cultural Change: The Leadership Role of People, Ideas & Objects User Community

Reconstructing Dynamic, Innovative, Accountable, and Profitable Oil & Gas Producers

These two papers comprehensively address the full spectrum of exploration, production, administrative, and accounting needs for oil and gas producers. They provide insights into how individuals within the industry can actively participate in the surge of entrepreneurial spirit invigorating the United States following the inauguration of President Trump. There is no reason for the oil and gas sector to remain in the hands of those who have contributed to its decline. On the contrary, North America needs dynamic, innovative, accountable, and profitable oil and gas producers to step forward, take the lead from existing officers and directors, and actively fuel this entrepreneurial resurgence with reliable, secure, affordable, and independent energy.

Profitability is not achieved simply because a CEO declares that everyone needs to be profitable from now on. The same holds true for innovation and dynamism. There are fundamental differences between organizations that can generate profitability and those that cannot. Transforming a persistent failed culture cannot be accomplished from within that culture; a new culture must be defined and built from the ground up, brick by brick and stick by stick.

The purpose of these two papers is to initiate action across the industry toward building the culture envisioned in the Preliminary Specification. People, Ideas & Objects aims to empower leadership from the engineering and geological disciplines to drive the industry forward and participate in this new economy.

Media outlets requesting embargoed copies for Thursday, January 16, 2025, can submit their email addresses here.

President Trump's Energy Secretary

 I wanted to take a moment to break the silence on our blog and share an update on our ongoing work, which feels like we're writing an ever growing number of research papers. I anticipate being able to release our first paper in early January. Keeping up with the Trump-induced surge in animal spirits—is going to be quite challenging.

In the meantime, I'd like to offer my thoughts on the current state of political progress in oil & gas during the Trump transition.

Chris Wright, nominee for Energy Secretary 

I believe there is more behind the policy of "drill baby drill" than President Trump may realize. He needs to ask how oil & gas drilling and expanded deliverability will develop under his administration. Will the industry be able to rally and return to abundant deliverability with this change in leadership? I find this doubtful. I have often stated that the Biden administration's obstructions have had little effect on the industry's performance, other than providing officers and directors with a convenient scapegoat over the past four years. "Muddling through" and doing nothing have been the producers' hallmark, and that has and will continue.

President Trump benefited from the surge in shale production during his first term, and we can agree that governments perform best when they step aside. Blaming the government disrespects the industry's pioneers who overcame impossible odds, dedicating their efforts to build what was once a robust oil & gas sector before these excuse-makers took over.

Today, I believe the president is being misled, perhaps naively, by those advising him on the industry's current state. The core issue is profits. Investors signaled this starting in 2015, but officers and directors of producer firms have chosen to ignore them. One of the most vocal in resisting investor demands was Harold Hamm of Continental Resources, who proudly claimed for many years before 2015 that he doesn't pay dividends. Finding investor demands too burdensome, Mr. Hamm took Continental private in the fourth quarter of 2022. With a personal wealth of $18.6 billion, this was an option for him. It is reported that Harold Hamm is President Trump's most influential oil & gas representative and that he recommended Chris Wright of Liberty Energy for Energy Secretary in the Trump Cabinet.

People, Ideas & Objects believe that past leadership holds responsibility for the industry's current predicament. They have betrayed every interest connected to the oil & gas sector, affecting everyone down to local businesses in rural areas where producers operate. Confidence in profitability will not return until it is permanently restored within producer businesses. Many stakeholders are unwilling to reinvest in what was previously destroyed by producers' indifferent approach to costs and the downstream implications of their actions in the broader oil & gas economy. Rigs dismantled for scrap metal and equipment sold to other industries were observed by producers' officers and directors without concern. These are the consequences, as illustrated by Liberty Energy's 9/30/2024 quarterly report, which purchased Schlumberger's fracing division in 2020. Note that Chris Wright, at the time of this writing, was nominated for Energy Secretary in President Trump's cabinet.

Focused investments have allowed us to develop new markets and lead technology innovation and operational efficiency in the industry. Over the past year, Liberty entered partnerships to develop the new gas-rich Beetaloo Basin in Australia. We have taken a significant step forward with the arrival of a Liberty fleet in country,” continued Mr. Wright. “During the third quarter, the Liberty Advanced Equipment Technologies (LAET) manufacturing and assembly division delivered its first digiPrime pumps. Additionally, Liberty Power Innovations’ (LPI) expanded operations in the DJ Basin are off to a strong start, helping bring our frac fleet CNG fueling services to critical mass.” p. 1

And

Today, the rising demand for power in commercial and industrial applications offers compelling opportunities for LPI. We are excited to leverage the expertise that we have built constructing and managing power plants for frac fleets to additional opportunities both inside and outside the oilfield. p.1

Outlook

Frac markets are navigating the slowing of E&P operators' 2024 development programs in response to the strong first half 2024 efficiency gains from factors including consolidation, longer laterals, and concentration in high-graded acreage. Elevated uncertainty in energy markets has further left operators reluctant to accelerate completions activity in advance of the new year. We now expect a low double-digit percentage reduction in Q4 activity, a bit more than the typical Q4 softening. Completions activity likely increases in early 2025 to support flattish E&P oil & gas production targets. Since late 2023, U.S. crude oil production has been relatively flat and would likely decline if current completions activity levels persist. 

Expressions of faith, trust, and confidence that producers have matters under control have all but vanished. Liberty Energy is seeking future fracing business opportunities outside North America and looking to apply their power systems expertise to industries beyond oil & gas. They state there is little doubt that production volumes will decline. People, Ideas & Objects assert this is the case as there is no money. Due to decades of mismanagement and leadership failures in the boardrooms of oil & gas producers they don’t earn profitability, have no support for their capital structures and destroyed the field service providers comprehensively. Again, this is from Liberty Energy's quarterly report. While I have no doubt that Mr. Wright will be able to provide the appropriate perspective to President Trump; it appears that oil & gas officers and directors have learned little since their investors began sending clear messages.

Few outside the boardrooms of oil & gas producers trust the statements made by their officers and directors. Most damaging is they have lost credibility in the eyes of their investors. For nearly a decade, these leaders have declined to act on the significant messages sent by investors. Despite possessing the authority, responsibility, and resources to address industry challenges, they have often attributed issues to external factors or made various excuses such as "praying for a cold winter," "market rebalancing," or asserting that "profits don't matter; it's cash flow." As oil prices declined from $100 to $35, they publicly claimed profitability at ever-lower price points—$70, $60, $50, then $40—through creative accounting practices. Other justifications included declarations of innovation, blaming the service industry as "greedy and lazy," professing newfound commitments to production discipline, and fluctuating stances on shale and clean energy.

These are just a few of the excuses offered over the years, consistently deflecting responsibility. The events of 2023 demonstrated that the core issue is one of leadership, not just profitability. Until there is a change in leadership among officers and directors, meaningful progress in the North American oil & gas industry is unlikely, regardless of who is blamed.

In 2023, People, Ideas & Objects published findings on the consequences of producers' actions in managing shale gas in the 21st century. The decline in traditional heating value pricing from 6:1 to as low as 50:1 to oil in early 2024 highlighted a lax approach to business, resulting in a loss of $4.1 trillion in revenues from shale gas in North America this century. This issue was exacerbated by the failure to capitalize on the development of the LNG marketplace, with producers selling gas domestically at an average of $3.22 since LNG exports began in 2015, while others purchased, liquefied, and exported it realizing prices as high as $50.00.

Officers and directors did nothing until we raised this point. They then began contracting to do so as quickly as they could to rectify their mistake. Unfortunately, they’re too late and were forced to sign agreements with LNG facilities that have not been approved by the regulators and in some instances not even approved by the LNG facility owners to build. Precipitating President Biden to shut down the approval of any more LNG facilities during his administration. So yes the Biden administration has been the roadblock to progress in North American oil & gas, not sheer incompetence by those who have the authority, responsibility and resources to act to avoid basic business mistakes.

Initiating meaningful activity in the industry is difficult while current officers and directors remain in place. Lacking any imagination, vision, understanding or concern they'll "muddle through" for another decade or two. President Trump has a good pick in Mr. Chris Wright as he has experienced the consequences of the producer's incompetence first hand. However, Mr. Hamm doesn’t think investors are worthy of any say in the industry and he is of like mind with his cohorts. They blamed President Biden for shutting them down in their attempt to correct their failures on LNG contracting. The issue here is they didn’t understand free-on-board. Blaming external factors may continue unless there is a fundamental shift in oil & gas industry leadership.

Since 2015, little has been done to mitigate ongoing issues affecting the broader North American oil & gas economy. Changes in government policy alone are unlikely to alter perceptions of how the industry has been managed. Without significant organizational changes and a commitment to addressing these challenges, progress may remain elusive. They have not renounced their prior methods and continue to belittle People, Ideas & Objects for having a plan on how to generate “real” profitability. They have no organizational approach to deal with these issues and wish only to lay the blame on the next convenient, viable scapegoat. Don’t fall for it, President Trump. 

These Are Not the Earnings We're Looking For, Part LXXIII

 Composition of Our Value Proposition

Intangible & Unquantifiable Attributes, Con’t

Markets

At People, Ideas & Objects, we are advocating for a new organizational approach in the oil & gas industry, one that leverages the dynamic, innovative, accountable and profitable nature of markets. Unlike the corporate hierarchies that have dominated the past century, markets have historically been the foundation of economic systems. The alternative solution currently being explored—consolidation or centralization by existing producers—seems to be falling short of expectations. This approach runs counter to the broader trend of disintermediation and decentralization driven by the Internet. We believe the choice is clear, which is why we designed the Preliminary Specification as a market-oriented, industry-wide oil & gas ERP application.

The Preliminary Specification includes three distinct markets: the Petroleum Lease, Financial, and Resource Marketplace modules. Each of these modules is designed to replicate and interface with the physical markets that currently exist, supporting the transactions and collaborative decision-making necessary for producers to leverage their unique competitive advantages—whether in land & asset bases, or earth science & engineering capabilities. 

We’ve emphasized the superior quality of accounting information that People, Ideas & Objects’ Preliminary Specification will provide to producer firms, which stands in stark contrast to the opaque, disorganized, and often unused accounting systems in place today. If the current state of the industry—marked by its destruction—isn’t enough to illustrate the problem, one has to wonder why so many officers and directors still believe they are running prosperous businesses. Engineers and geologists bypass traditional accounting data, relying instead on reserve reports, which are not accurate, historical or factual.

To illustrate the critical importance of accurate accounting, consider this excerpt from David Serna of the Founders podcast, discussing a historical figure who revolutionized his industry through rigorous accounting practices:

It was a lump business. And until stock was taken and the books balanced at the end of the year, the manufacturers were in total ignorance of results. I heard of men who thought their business at the end of the year would show a loss and had found a profit and vice versa. I felt as if we were moles burring in the dark.

And to me, this was intolerable. I insisted upon such a system of weighing and accounting being introduced throughout our works as would enable us to know what our costs was for each process. And especially what each man who was working for them was doing, who saved material, who wasted it and who produced the best results. And he says he ran into human nature.

Every single manager in the mills was against his new system. And he said it took years before he was able to actually install an accurate system. But this was the end result. Eventually we began to know not only what every department was doing, but what each one of the many men working at the furnaces were doing and thus to compare one with another.

One of the chief sources of success in manufacturing is the introduction and strict maintenance of a perfect system of accounting. That's a main theme. How many times did you repeat this in the books before? So that responsibility for money and materials can be brought home to every man.

Investing in technology yields significant advantages, compounding savings and enhancing competitiveness, which can determine profitability.

Organizations often overlook the importance of precise accounting, leading to undiscovered waste and inefficiencies. Embracing modern technology, such as advanced furnaces, can substantially reduce waste and protect profit margins, even when initial investments are met with skepticism.

The Scottish-born American industrialist and philanthropist Andrew Carnegie was the leader of the American steel industry from 1873 to 1901. He donated large sums of his fortune to educational, cultural, and scientific institutions.

Born: November 25, 1835

Dunfermline, Scotland

Died: August 11, 1919

Lenox, Massachusetts

The Founders Podcast book being reviewed was Andrew Carnegie, Autobiography.

People, Ideas & Objects believe the reliance on markets will be fundamental for the producers ability to prosper. However it will not occur within the domain of the existing producer organization and their inappropriate accounting. If Andrew Carnegie was able to acquire this quality of accounting information from the computers that I can only imagine were available in the 1870s. Then why do we accept today's nonsense? The question to ask the producer officers and directors is “how do you get to Carnegie Hall?”

Relying on markets, supported by accurate accounting, is crucial for producers to thrive. However, this transformation will not occur within the current producer organizations and their outdated accounting systems. The complexities and speed of the oil & gas industry today demand a fundamentally different approach. Presently, many producers are uncertain whether shale is a viable investment or should be abandoned, whether clean energy represents their future, or if consolidation will succeed as a business meme. The past three years alone have made it abundantly clear that many in the industry remain "in total ignorance of the results." 

Markets, coupled with appropriate accounting, are just the beginning of the solution to navigating the increasingly complex landscape of the oil & gas industry.

Innovation

The pursuit of clean energy by oil & gas industry officers and directors may be considered one of the most significant leadership failures in recent history. By shifting focus to renewable energy sources like wind and solar, these leaders inadvertently signaled to the service industry—traditionally the primary source of innovation—that they were no longer a priority. This message also extended to the engineers and geologists who had been steadfastly enduring the industry’s boom and bust cycles. For many, this shift was the final straw, leading them to conclude that their skills and interests might be better applied in other industries. They likely recognized that producers were either being misled or were heading for disaster, as has occurred so many times in the past.

Now, with consolidation becoming the favored strategy, a similar disillusionment is taking hold. Consolidation often results in producers reducing the number of service industry participants they work with. The surviving company typically retains relationships with their suppliers, while the acquired company ceases to engage with its previous partners. This has led to a wave of bankruptcies among smaller service firms, as they lose significant portions of their customer base. What these trends suggest is that consolidation follows clean energy in the dictionary. And we can therefore conclude that officers and directors have a long way to go before their business education is complete. 

The Preliminary Specification is built on two foundational principles: establishing producer firms on a profitable and innovative footing. While there are many priorities we address, instilling these two principles go a long way toward transforming the industry. A key innovation process included in the Preliminary Specification involves a strategic approach to managing unprofitable production.

When unprofitable production is removed from the market by shutting it in, the firm's profitability increases, and a host of other significant benefits follow. One major advantage is that the property in question becomes the focus of the Joint Operating Committees innovative thinking to determine how best to return the property to profitable production. This can be achieved through various methods, and the Research & Capabilities and Knowledge & Learning modules within the Preliminary Specification offer valuable tools for conducting these types of operations.

This process of restoring unprofitable production to profitability is of immense value to the producer and should be a central focus for the firm. It addresses the company's most pressing challenges and offers significant opportunities for value generation. However, as Andrew Carnegie once noted, selling such ideas to those with vested interests can be a difficult task. Yet, this is precisely the kind of innovative approach that the Preliminary Specification advocates.

Discussion 

The Preliminary Specification is undeniably a dynamic solution, one that fundamentally reshapes the oil & gas industry. I've long asserted that it will change everything, and it undoubtedly will. The initial effects will likely be disruptive—marked by dislocation, disorientation, and, in a word, chaos. However, amidst this upheaval, there is a clear vision that can help guide the industry back to a place of stability and purpose. The real question is whether this transformation will come about through deliberate action or be thrust upon us by further failures.

Through our series reviewing producer financial statements, we have meticulously documented the financial devastation within the industry. It's intriguing to note that many of the foundational principles we laid out in our Preliminary Research Report in May 2004 and the Preliminary Specification in August 2012 were initially dismissed. When we published our projections of trillions of dollars in potential value, industry leaders laughed. Yet here we are in 2024, and those predictions have materialized, quantifiable in numerous ways. What remains incalculable, however, is the human cost—lost careers and opportunities that a viable, profitable, and prosperous industry should have provided throughout this century and will desperately need in the future. Despite this, those responsible continue to act as if they understand what they are doing, with the current push for consolidation leading us toward yet another disaster.

What frustrates me most is the clear value that the Preliminary Specification offers the industry—value that remains ignored. In decades of advocating for these solutions, I have been vilified, ostracized, and rendered persona non-grata within the oil & gas sector. I have sustained this pursuit entirely on my own resources, never receiving a single cent from any oil & gas producer. Meanwhile, as I predicted more than a decade ago, trillions of dollars in oil & gas revenues and value have been lost, and the capabilities of the service industry have degraded and continue to diminish. Entrepreneurs, organizations, investors, and leaders within the service industry are disheartened, unmotivated, and have lost all trust, goodwill, and faith that producers will act beyond their officers' and directors' narrow self-interests.

The service industry clearly understands that the lack of producer profitability is the root cause of the extreme boom-and-bust cycles. They also recognize that producers seem unconcerned with addressing this issue. After 33 years of commitment from People, Ideas & Objects, with no progress in getting producer officers and directors to take action, it is evident that the real dreamers are those in producers leadership positions. Initiative is dead—they’ve killed it. No one is willing to lift a finger to help them anymore, as there is no point in trying when producers themselves refuse to work towards improving their profitability.

Conclusion

The actions of oil & gas officers and directors have led to the industry's downfall. Lacking the necessary business acumen and refusing to accept input or solutions, they have failed to understand the broader role and responsibility they hold in ensuring the industry's health and prosperity. Instead, they have focused on self-interest, leading to a collapse that has left the industry in a state incapable of meeting its financial or operational needs. Meanwhile, they have misled politicians into believing that oil & gas resources will be readily available for political leverage, an assumption that is dangerously misguided. I wouldn’t want to be the one who made those promises.

I understand that these accusations may not sit well with those I’ve criticized. They may dismiss them as mere opinions. But ask them this: What tangible value has been generated from the development of the vast shale resources? Who has truly benefited, been rewarded, or prospered, and where does that value stand today? If they point to oil & gas reserves as the answer, then ask them how they plan to access those reserves and produce them profitably. If they claim it has always been profitable, you’ll have your answer.

On the other hand, consider the tangible and intangible value that People, Ideas & Objects have built into the Preliminary Specification. Notably, our key organizational construct is the Joint Operating Committee. What additional intangible value might be realized from aligning the legal, financial, operational decision making, cultural, communication, strategic, and innovation frameworks of the Joint Operating Committee with the compliance and governance frameworks of the corporation? The potential value is enormous.

In today’s advanced societies, organizations are defined, supported, and often constrained by software. To effect change, the software itself must first be changed. People, Ideas & Objects offer the most profitable means of oil & gas operations, everywhere and always. It's no longer sufficient to simply own an oil & gas asset; one must also have access to the software that makes the oil & gas asset profitable.