Arbitrage Strategy, Part V, Conclusion

In our April 7, 2025 paper, “Oil & Gas Arbitrage: The Market Finds a Way,” and throughout this series, we pose critical questions about the oil and gas industry’s trajectory. Can the current leadership address its financial, operational, and political challenges? Is the Preliminary Specification the essential first step to organizing a resolution? How much time remains before control slips away—or has that already begun?

The root of today’s crisis lies in the industry’s chronic overcapitalization of assets. Bloated balance sheets, built on the mantra of “building balance sheets” and “putting cash in the ground,” reflect a cultural obsession with inflated property, plant, and equipment (PP&E) accounts. This practice, a common method to manipulate financials, has led to obscene financial statements that obscure what the industry’s true objective should be: profitability.

The consequences are stark:

• Bloated assets that are worth little or negative value as they demand cash to produce. 

• Bloated assets represent a dollar for dollar equivalent in bloated profitability. 

• Are also represented today in shareholders equity that in almost all cases would be negative if asset values were appropriately restated. 

• Therefore leaving producers with debt that is leveraged in logarithmic measures. 

• Decades of structural working capital deficiencies, and poorly performing cash flow metrics incapable of maintaining basic business operations. 

• Assets that are incapable of performing competitively to generate adequate free cashflow and profit. 

• Leading to declining productivity as admitted in Saturday’s May 17, 2025 WSJ.

• Producers blame their investors' demands for dividends. 

• Unaware that profitable operations provide a producer with independence and control of their direction. 

• Severely deprecated and diminished industrial capacity in its secondary industries. Actively pursuing business opportunities outside of North America and in other industries. 

• Investors and bankers abandoned the producer's capital structures a decade ago due to their lack of understanding why profits are necessary. 

• Which is worse, having investors abandon the producers for cause, or producers doing nothing about investor concerns for over a decade. 

• Acceptance or action by officers and directors to resolve the issue directly. Involves their admission of responsibility and culpability. 

Producers mistakenly equate high PP&E balances with reserve value, believing this upholds their fiduciary duty. Financial statements measure performance, not value. A high-performing producer would deplete greater capital costs on the income statement while remaining competitive. If the SEC prioritizes high asset values, it should reassess its mandate. The Preliminary Specification establishes a culture of reserves preservation, performance and profitability.

Officers and Directors Trajectory

The oil and gas industry’s dysfunction is deeply cultural and systemic. We can either attempt to reform this broken culture or reject it entirely, rebuilding with the vision of People, Ideas & Objects’ Preliminary Specification. Engaging with the current culture ensures its survival, fueled by higher commodity prices that only amplify its excesses and rewards the entitled. This business model is obsolete, has utterly failed, and will continue to fail—believing otherwise is delusional.

As investors demanded change in 2015, they must now lead the industry’s reconstruction through our Arbitrage Strategy. This is a daunting task, with asset values tied to the present value of projected reserves, as determined by reservoir engineers’ industry cost averages, not historical company figures. Producers’ scientists rely on these valuations to prop up balance sheet asset values, but these assets underperform and require significant revaluation to reflect their true worth. Cash-strapped producers are beginning what may become a broader liquidation, where real asset prices will emerge. See here. 

Investors, skilled at profiting from such opportunities, face assets with undefined management and operational frameworks. The Preliminary Specification is the only viable solution, but it requires funding for development. Given the oil and gas ERP market’s historical challenges, I am not issuing equity or debt, as I cannot deliver the Preliminary Specification profitably to shareholders. Our value proposition benefits producers, and if they deem it undesirable, I accept that. However, funding for development must ultimately come from oil and gas production in some form.

Replacement Value of the Incremental Barrel 

What must dictate the price of oil & gas commodities is the high costs needed to bring the incremental barrel of oil equivalent to the market. North American producers have the highest cost production and fill the role of swing producers. Any legacy property with the ability to bring about lower cost production will benefit profitably until such time as that production has exhausted itself. Nonetheless the producers are faced with the high cost of exploring and developing oil & gas production and that replacement cost is the real cost of oil & gas on that market. 

Where else is it expected that producers will be able to acquire the financial resources necessary to sustain their production profile if the appropriate “replacement cost profits” are not derived from current production. If they’re relegated to maintaining a utility styled return on the properties investment, in an industry with an inherent steep cost inflation, investors will forever be at the behest of producers looking for further capital spending. 

An inherent characteristic of the economic “price maker” is that they’ll only bring on new production that’s profitable. What has happened in the process of dividing the producer in two, as our overall hypothesis suggests. Where exploration and production are handled by scientists. And the business is operated with regard to corporate accounting, tax and regulatory requirements by accounting. Two disparate worlds where neither is fully aware of the other's value. As a result, what has driven the interest, vision and direction of the industry since the early 1990s. Has been the pursuit of science in terms of what is the most interesting and fascinating science to be involved in. For example, conventional production has withered to small percentages of the production profile. In natural gas it’s at 21% of the total US production. Despite its cost and deliverability being far more profitable than shale. “Business” is a foreign concept to oil & gas producers, officers and directors. 

What we’ve also seen throughout the past three decades is characteristic of the Keystone Kops. Industry testing unproved hypotheses only to abandon them to the next great thing. SAGD, heavy oil, unconventional until the declaration that shale will never be commercial and clean energy is the future, to a 180 degree return to shale. And as of last Saturday's WSJ, peak shale is here. Never taking a moment to consider what could be done to iterate and innovate through various means and methods to make these areas profitable. 

This on top of poorly considered talking points such as drill baby drill when they knew they’ve all but destroyed the service industry. And when the U.S. president opens the door for them they say that’s not really what they want. It certainly is not the leadership anyone would want, but it’s the leadership we have. They’ve proven incapable of anything but lies and excuses. And make no effort to change their ways. 

Conclusion 

People, Ideas & Objects propose this Arbitrage Strategy to shift oil and gas from its stagnant “muddle through” culture to a dynamic, innovative, accountable, and profitable one, guided by the vision of our Preliminary Specification.

As Milton Friedman noted:

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

Or Henry Kissinger 

By the time the threat can no longer be denied or minimized, the scope for action will have constricted or the cost of confronting the problem may have grown exorbitant. Misuse time, and limits will begin to impose themselves. Even the best of the remaining choices will be complex to execute, with reduced rewards for success and graver risks in failure. (Henry Kissinger, Leadership)

People, Ideas & Objects believe North American oil and gas is 80–85% of the way to an existential economic, operational  and political crisis. Waiting for it to fully unfold risks catastrophe beyond our current imagination.

The culprits—producer officers and directors—are paralyzed by their culpability and predictable inaction. Their failure has pushed the industry, including its secondary and tertiary sectors, to the brink, necessitating urgent rehabilitation of capacities and capabilities and overall industry rebuilding. 

Our Preliminary Specification offers a vision for rebuilding the industry around reserves preservation, performance, and profitability, ensuring producers achieve the most dynamic, innovative, accountable and profitable operations. Time for debating alternatives has run out. We’ve laid out a framework where every individual and industry organization can contribute to this rebuilding process.

Delaying action by even six months risks irreparable damage. Consolidation won’t solve this, and trust in current leadership has eroded to the point where there’s no longer any expectations of current officers and directors. A “remove and replace” approach, aligned with the Preliminary Specification, must begin immediately—reconciling with the existing culture would be futile.

Success in averting this crisis depends on everyone finding a role in our vision of a rebuilt industry and acting now to build that. If our funding is secured but others remain passive, expecting People, Ideas & Objects to single-handedly deliver, failure is certain. Starting later, amid chaos, will also make rebuilding more difficult. Our funding decisions must be made within six months. If actions are delayed due to a continued lack of urgency, I fear we’ll lose focus when people are consumed by industry related firefighting. 

Arbitrage Strategy, Part IV, Reserve's Economics

Economics of Oil & Gas With People, Ideas & Objects 

Changes in Overhead

People, Ideas & Objects have refrained from estimating the overhead cost reductions achievable through the Preliminary Specification, until now. Overhead, primarily personnel costs for building and maintaining the capacity and capabilities to support oil and gas operations, faces imminent disruption. Dynamic technological advancements, particularly in automation and AI, are poised to transform work processes significantly.

Cloud Administration & Accounting for Oil & Gas: Currently, each producer redundantly builds its own accounting and administrative infrastructure. Our centralized, cloud-based solution eliminates this duplication, leveraging the cloud computing paradigm to drastically cut industry-wide overhead costs.

Variable Cost Structure via Joint Operating Committee: The Preliminary Specification restructures operations around the Joint Operating Committee, making all costs, including overhead, variable based on profitable production. Shutting in unprofitable production results in a null operation—neither profit nor loss—maximizing corporate profitability.

Hyperspecialization and Division of Labor: Artificial Intelligence enables hyperspecialization and enhanced division of labor, orchestrating complex processes that would otherwise be unmanageable and chaotic. Intellectual Property, one of seven Organizational Constructs in the Preliminary Specification, defines, controls access, administers licenses, and enforces authority, ensuring efficient management. Read our paper on Hyper-specialization, Artificial Intelligence and Intellectual Property. 

Automation through Permanent Software Development: The Preliminary Specification’s ongoing software development capability delivers high levels of automation, further reducing overhead costs.

Together, these features could achieve up to a two-thirds reduction in overhead costs for North American oil and gas producers. Gross overhead, typically 12–20% of revenue, translates to cost savings of 8–13% of revenue. (Note: All overhead discussed is gross, excluding capitalization and allowances.)

Discussions like these often spark fear and uncertainty about Information Technology-driven change. People, Ideas & Objects claims assumes a static comparison of a producer in the same configuration and timeframe, which may not reflect the future. We must shift from working for computers, as is common in oil and gas today, to leveraging them to amplify our strategic competitive advantages. These include harnessing Artificial Intelligence, automation, collaboration, conflict and contradiction as analytical tools, creativity, decision-making, tacit and explicit knowledge integration, design, financing, ideas, innovation, issue identification and resolution, judgment, leadership, planning, performance, quality, reasoning, research, thinking, and vision.

The future of work remains uncertain and unpredictable but is undeniably unstoppable. Embracing this path is the most productive approach for all stakeholders. Opening a buggy-whip factory today would be as misguided as it was a century ago.

Capitalization 

The oil and gas industry’s capitalization practices, as critiqued extensively in this blog, have devolved into a cultural fixation on “building balance sheets” and “putting cash in the ground.” Such misguided corporate goals, occasionally punctuated by claims that “profits don’t matter,” dominated discourse for decades.

Most oil and gas costs, being intangible, are capitalized and depleted over the life of proven reserves. SEC regulations dictate that for X proven reserves, Y expenditures are recognized, resulting in a depletion of Y/X per barrel produced. Shale’s vast reserves inflate reported profitability by stretching depletion schedules. Tax treatments differ, but People, Ideas & Objects focus on what’s required for oil and gas to compete in North American capital markets: determining the marginal price or replacement cost of an incremental barrel.

We propose a pricing model that accelerates capital recognition, treating many intangible costs as operational expenses. This approach, akin to a “third set of books” in Hollywood accounting, reflects the reality that businesses maintain multiple accounting perspectives for distinct purposes. This clarification seems necessary when, as recently as 2023, officers and directors misunderstood basic terms like “free on board” while developing the LNG export market.

Each Joint Operating Committee will receive standardized, objective monthly financial statements to assess property profitability. If a property incurs losses, partners can shut-in production, preserving reserves for future profitable operations.

In a capital-intensive industry like oil and gas, People, Ideas & Objects advocate for a fundamentally different accounting approach. Capital, the dominant cost component, must be passed to consumers in line with North American capital market expectations. We propose depleting capital costs over 30 months to remain competitive, significantly reducing the property, plant, and equipment (PP&E) account.

This accelerated depletion will establish the marginal price needed to replace a barrel of oil or gas equivalent, regardless of whether the property is a decades-old conventional well or a new shale operation. Our model also shifts some capital costs to current-month operations in product pricing calculations.

Compared to today’s market, PP&E balances will drop to 15–20% of current levels, with field activity as the key differentiator. Future profitability and enhanced free cash flows will drive significantly higher field activity.

Investors pursuing our Arbitrage Strategy should exercise caution. Current officers and directors, intoxicated by the cash flows of a capital intensive, primary industry based on partnerships, make poor decisions in this capital-intensive primary industry. With even larger future free cash flows, robust accountability—enabled by Oracle Cloud ERP and our Compliance & Governance model—and disciplined dividend policies are essential to prevent mismanagement.

Where’s the Value 

Financial statements evaluate a firm’s performance, they do not capture an organization’s value. Capital markets assess a firm’s value by discounting its future cash flows, driven by the capacity and capability of its reserves to sustain or expand those flows.

These adjustments to capital costs, combined with higher commodity prices needed to achieve replacement value, will boost the free cash flow of a profitable producer. Additionally, overhead costs, now variable and charged directly to the Joint Operating Committee, will be included in commodity price calculations. This ensures that incurred overhead costs are recovered the following month, creating a “cash float”—a standard business practice.

The capital-intensive nature of oil and gas, with the scope and scale required to maintain and grow deliverability over the next 25 years, presents a formidable challenge.

Conclusion to Capital Assets, Cash and Working Capital 

Contrary to “building balance sheets" and “putting cash in the ground,” or spending the allowance investors are willing to provide to what we’ve described as the “old” producers. The Preliminary Specification sets in place a method of business operations to meet their future demands. Where officers and directors will be able to independently undertake the profitable operations of an actual business. 

The “new” producers as we’ve described them will have an independence in their operations unlike what we have seen before. Where financial performance dictates that they are in control and are able to pick among the best opportunities available. Where they have the financial wherewithal to undertake successful completion of what it is they undertake. Where the drilling rig price quoted is x and the producer respectfully pays x with no expectation of a discount, only the absolute performance that x commands. 

Instead of having property, plant and equipment recorded at sky high levels in an attempt to emulate the value of the firm. The capital configuration is different through the Preliminary Specification. Costs are being passed to the consumers in a competitive manner. Competitive in terms of price and competitive in terms of performance in the capital markets. Cash and working capital more specifically are the tools in which producers accomplish their objectives. 

The industry in the past two decades has had diminishing working capital due to their lack of performance. This is the reason that nothing is being done in the industry today, no one has the money. They don’t have the money because they haven’t made it, don’t know how to make it, no one’s giving it to them anymore and therefore choose only to listen to music with their friends in the basement. 

Compare what an effective executive such as President Biden is able to accomplish in one term and contrast that to one day of President Trump. There’s a reason for the performance differential, however the contrast is appropriate between what a producer is like today and the type we need very soon. Having cash to enact the producers' will is what’s needed. Without it all you can do is beat up vendors for discounts. And in turn, just don’t ask for focus or performance. 

Greatest Endowment of Wealth Ever, Destroyed

The Wall Street Journal reports that “U.S.drillers Say Peak Shale has arrived.” An admission they’ve taken the greatest endowment of wealth ever seen, and destroyed it in not more than two decades. 

Lower oil prices are expected to precipitate a decrease in crude output that won’t easily be reversed. 

Natural gas production has plateaued at best, and the service industry is severely weakened, operating with only 578 active rigs compared to nearly 2,000 in 2015. Decades of producer mismanagement have financially devastated the service industry, a crisis exacerbated by shale’s steep decline curves, high costs, and lengthy development timelines. In an industry that doesn’t make any money, doesn’t know how and doesn’t care to bother to make any money. 

Oil & gas are critical to U.S. economic and political stability, ideally from a position of energy independence or dominance. People, Ideas & Objects have long anticipated this challenge, proposing the Preliminary Specification as a comprehensive organizational framework to address the industry’s needs and objectives.

Our reliance on oil & gas intensifies daily, with each barrel delivering 10,000–25,000 man-hours of labor equivalent and serving as a key feedstock for Artificial Intelligence. Yet, incumbent officers and directors prioritize personal gain over industry health. Since 2012, the Preliminary Specification, built on over a decade of research, has offered a solution to avert a broader societal crisis. While producers now acknowledge the issue, their recognition is inevitable but insufficient without action.

Resolving this crisis begins with organization. The Preliminary Specification provides the roadmap to rebuild a dynamic, innovative, accountable and profitable oil & gas industry.

Arbitrage Strategy, Part III, One Lever, Four Actions

It’s tempting to claim that replacing and rebuilding the oil and gas industry is unnecessary and that current leadership has everything under control. People, Ideas & Objects will not lead that charge. We seek new leaders who instinctively recognize the industry’s operational and financial disarray and are ready to pursue alternative paths. Organizations don’t change—people do. Addressing the scale and scope of oil and gas challenges requires organization first. This transformative leadership and change must be backed by the financial community to succeed. Please read our papers on leadership in oil & gas here and here. And our April 2025 White Paper on this Arbitrage Strategy. 

Broad participation in shaping the future oil and gas industry is critical now. Further delays in rebuilding a viable industry are unaffordable. Who will consumers turn to when their energy needs go unmet, forcing reliance on foreign producers? Ceding control of North America’s economic future is unacceptable and must not be passively entertained. This isn’t yet a crisis, but it looms large.

Whether investors choose to sue producer officers and directors for willful misconduct or negligence will be decided by those with greater authority than I. Leverage lies with those who have witnessed decades of poor producer performance. The current situation was predictable, inevitable, and widely discussed by People, Ideas & Objects, making it nearly impossible for officers and directors to claim ignorance—they had to willfully ignore the warning signs.

Today, leverage rests with investors eager to reengage with oil and gas. The status quo leadership, responsible for these issues, will never address them. Acknowledging the problems would demand they admit their culpability.

Investor Actions 

Beyond their overstated claims of shale innovation, oil and gas producer officers and directors have revealed one undeniable truth: shale represents the continent’s greatest wealth endowment. Yet, after two decades of their leadership, the industry lies in ruins, with no residual value. An industry that neither profits, knows how to profit, nor cares to profit is unsustainable.

First-quarter 2025 reports confirm production declines in over half of our sampled producers, a direct result of their reckless destruction of the service industry, now operating at 30% of its pre-2015 capacity. Their “muddle through” strategy—relying on misinformation, blame-shifting, and scapegoating—yields no progress, only mounting challenges. Under current leadership, the industry is locked in a decades-long culture of decline that will devour any reform attempt. This culture must be abandoned decisively, replaced with People, Ideas & Objects’ vision of reservoir preservation, performance, and profitability.

Decades of leniency have been granted to these leaders, yet the industry continues its downward spiral. Oil and gas are no longer commodities to be taken lightly—our economic and political future hinges on energy independence, or even dominance. Consolidation, a misstep that maintains inflated asset values through dilutive share swaps, is the wrong path.

The investment community must now lead, using this arbitrage strategy to transfer the industry to new hands. By accelerating property sales, “new” investors can rebuild oil and gas under a culture of reservoir preservation, performance, and profitability, as outlined in the Preliminary Specification. The investment community’s objective, unrelenting guidance is essential to wrest control from self-serving officers and directors. The industry’s scientific brilliance and innovation must drive competitive differentiation, enabling dynamic, innovative, accountable, and profitable producers to compete fairly on North American capital markets.

The service industry, battered by decades of producer abuse, requires active rebuilding within this vision. Producers, through their deceit, bear the blame and cannot expect the service industry to risk further exploitation without shared commitment. If producers invest meaningfully, respect may follow.

Investors now hold absolute leverage due to officers and directors’ failure to act, breaching their fiduciary duties and exposing themselves to personal financial liability. This leverage can drive the necessary business transformation. The time for action is now—we all share a duty to avert further consequences. North American consumers will soon demand accountability, and the fallout will be severe for those unprepared.

Industry Leadership Actions

Since the early 2000s, I have built a personal knowledge management system inspired by Nobel Prize winner Herbert A. Simon’s insight:

In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.

(Simon, H. A., 1971, Designing organizations for an information-rich world, in Computers, Communications, and the Public Interest, pp. 40–41, The Johns Hopkins Press).

Using tools like Readwise (https://readwise.io/i/paul8934 for one month free) and its Reader app, I collect and review highlights from books, articles, PDFs, X posts, and podcasts via Snipd (https://get.snipd.com/pAbF/0sbistdl ). My system, enhanced by AI, curates content by searching for conceptually similar ideas. A striking example comes from Aleksandr Solzhenitsyn’s The Gulag Archipelago 1918-1956, a challenging but essential read for those swayed by ideological extremes:

A bold thought, a desperate thought, a thought to raise a man up: how could things be changed so that instead of us running from them, they would run from us? Once the question was put, once a certain number of people had thought of it and put it into words, and a certain number had listened to them, the age of escapes was over. The age of rebellion had begun.

AI analysis of my collection surfaces related themes of transformative shifts—from fear to resistance, passivity to rebellion—mirroring Solzhenitsyn’s spark of collective action. This resonates with the urgent need for change in the oil and gas industry—namely, the moment where fear and passivity give way to collective resistance and a new age of rebellion or transformation:

1. The clearest parallel is found in another section of Solzhenitsyn, where an ordinary act of refusal—"I’m not going"—becomes contagious and tips the balance from acquiescence to collective resistance. As others join in and refuse to let the authorities take a fellow prisoner, the captors realize that they can no longer operate with impunity. Solzhenitsyn writes that "[w]e were thousands! that we were... politicals! that we could resist!" The passage concludes with a sense of the revolution gathering strength and the "wind that seemed to have subsided... sprung up again in a hurricane to fill our eager lungs"—a quintessential image of the transition from escape and resignation to rebellion and collective power.

Leadership from those specified above know it’s time. 

2. Another powerful conceptual sibling is from John Locke, where resistance to tyranny is reframed: "those who justly resist are not the rebels; rather the rebels are those who are justly resisted." The doctrine of just resistance, rather than promoting rebellion, acts as the "best fence against rebellion" because it reminds rulers not to test the people’s tolerance for injustice. This passage carries the idea of a conceptual switch—of the moment when individuals and groups see that the real disturbance is not in resisting but in allowing unchecked authority.

The true rebels are not us but the small cadre of officers and directors who have exploited the system for personal gain. They hold the responsibility, accountability, and resources to lead the industry, not to enrich themselves. The status quo offers no viable future. Investors must act decisively, sending an unmistakable signal for reform, as further delays will deepen and prolong our challenges.

3. In Kissinger’s World Order, revolutions are described as erupting "when a variety of often different resentments merge to assault an unsuspecting regime." The broader the coalition, the greater the transformative potential—the parallel here is in the gathering of thought and will, when isolated individuals suddenly see themselves as part of something larger, and revolutionary change becomes possible rather than impossible.

In an us vs. them, they are the small cadre of officers and directors who hold the responsibility, accountability and resources to lead the industry, not to fuel their personal empire. 

4. In Thomas Schelling’s analysis of "spontaneous" revolt, he notes that when tyranny is effective in making examples of leaders (thus exacting a price for resistance), people will not move until "a signal so unmistakably comprehensible and so potent in its suggestion for action" is received. Once that threshold is crossed, and the potential for mutual support is clear, "spontaneous" collective rebellion becomes possible.

I believe that day is today. If left too much longer our difficulties become more profound and protracted. Investors must send "a signal so unmistakably comprehensible and so potent in its suggestion for action" that there is no ambiguity. 

5. Victor Davis Hanson discusses the concept of the "counter-revolution," a moment when the "madness" of a revolutionary situation reaches its limits and a critical mass seeks to restore normalcy. This is an explicit call to collective change, where individuals stop running and attempt to reverse the tide.

How many more chances will current leadership receive? How can we justify inaction when the need for change is clear? The industry’s trajectory under these officers and directors risks an existential crisis for oil and gas, threatening North America’s economic and political stability. Investors must leverage their authority to drive a mental shift toward action, using the Preliminary Specification’s vision of reservoir preservation, performance, and profitability as the foundation for rebuilding.

6. In the podcast Back to the People, the idea that "doing the right thing... puts the biggest target on your back and they will hunt you" directly echoes the existential risk and courage required to move from compliance or flight to standing one’s ground—even in the face of extreme danger. The passage details the necessity and inevitability of taking a stand, at great personal cost, when confronted with injustice.

My journey advocating for industry reform has taught me that ideas have consequences. The Preliminary Specification challenges entrenched norms. Is it enough to catalyze the investment community’s resolve? If left unaddressed, the industry’s decline could redefine “crisis” in catastrophic terms.

7. A different but related angle is found in Changemaking and overcoming resistance: Travis Kalanick asserts that "to overcome resistance to change, build trust with those you are asking to change." The notion here is about overcoming a culture of passivity or hostility—transforming fear and inertia into coordinated change, which echoes Solzhenitsyn's theme of the mental shift that precedes action.

Just as Solzhenitsyn described a turning point where courage reaches critical mass, we stand at a crossroads. Investors and new leadership must seize this moment to confront the status quo, shift from resignation to action, and rebuild the industry. History turns on such moments—let this be ours.

8. Lastly, in another highlight from Kissinger's World Order, it's observed that "[t]he grave conditions described here must, in the end, provide the impetus for societies to insist on meaningful leadership... greatness in history resides in the refusal to abdicate to vast impersonal forces," echoing the idea that history turns when people stop fleeing and instead face their challenges head-on. 

Each of these passages encapsulates—like Solzhenitsyn’s—those pivotal moments where thought and courage reach critical mass and the balance shifts from submission to confrontation, resignation to rebellion, and thus, where history turns. 

In Summary, Investors Have One Lever - Four Actions

Our strategy relies on the following understanding. Producer officers and directors can be incentivized to facilitate their companies’ liquidation to reduce their personal liability and preserve Directors & Officers (D&O) Insurance coverage. Investors are able to enact the Arbitrage Strategy by doing the following. 

• Acquisition of conventional and unconventional reserves at ultra low commodity prices. 

• Ultimately realizing both price and reclassification increases in reserves valuations. 

• Obtaining profitable operations through a reorganized and Preliminary Specification enabledindustry. 

• Producers can be directed to distribute special dividends of the proceeds from property sales to assist their investors in funding their acquisitions. 

• Enable People, Ideas & Objects reservoir preservation, performance and profitability culture. “New” investors purchase, and direct “old” producers to acquire Profitable Production Rights. People, Ideas & Objects method in which to fund the Preliminary Specification. 

• Producer officers and directors are motivated to participate in their liquidation to mitigate their liability and maintain D&O Insurance Coverage. 

• Indirectly stimulating the “new” producers leadership market to initiate action in creating dynamic, innovative, accountable and profitable oil & gas producers.  

Arbitrage Strategy, Part II, Leverage

Many issues are resolved in the Preliminary Specification, when implemented. The question arises why has that not occurred, or better yet, why has the level of accountability in oil & gas remained as opaque as it is and continues to be unaddressed? Producers could resolve their decade old conflict with their investors and regain support for their capital structures by doing so. What obstacle or obstruction is standing in their way? Two unresolved material issues which are directly addressed and appropriately resolved by the Preliminary Specification are the capital allocation to reserves for commodity pricing purposes and producers ability to shut in production. The consequences of producer inaction is the purpose for this Arbitrage Strategy we’re encouraging investors to use. 

Issue One: Capital Allocation to Reserves

In the capital-intensive oil and gas industry, unique business principles must be addressed. Capital costs dominate the cost structure and should be passed to consumers, but current pricing calculations in oil and gas fail to do so. SEC requirements uniformly allocate drilling and completion costs to every molecule of proven reserves, regardless of production timelines. This practice, applied to both conventional and shale properties, significantly distorts costs, particularly in shale due to its substantial reserves discovery. It severely understates per-barrel capital costs, inflating asset values and by equal amounts, overstates profitability, retained earnings and shareholder equity in financial statements.

Shale’s reservoir characteristics allow producers to book vast proven reserves, often in the Trillion Cubic Feet (TCF) range for natural gas—a scale once exclusive to major producers. However, shale wells experience steep production declines within 18-24 months, necessitating costly reworks like additional laterals and / or refracing, which can cost 50-60% of original drilling and completion expenses. These costs are added to property, plant, and equipment, again allocated across all proven reserves. This accounting method risks leaving substantial capital costs stranded upon property abandonment, a problem exacerbated by shale’s high costs, high deliverability, steep declines, and large reserve bookings.

This issue has been repeatedly raised, including in blog posts like “Issue Mitigated, Nothing Litigated” and “Reality, Accountability, Myths and Chester Too” from January 2021, and on page 32 of the July 4, 2019, White Paper, “Profitable, North American Energy Independence — Through the Commercialization of Shale” Industry leaders are aware but have not adequately addressed, it states.

What we do know is that no producer at any time in the past four decades has temporarily shut-in any oil or gas due to its lack of economic performance. Here is the very difficult aspect of the behavior which is conducted in oil and gas today. Not only do they continue to produce systemically, everywhere and always below the breakeven point. They’ve attempted to deceive everyone by allocating their capital costs to each and every molecule of oil and gas held in reserve no matter how long it will take for that molecule to be produced. Will it be this year, this decade or this century in the case of shale reserves of natural gas? Therefore deceiving everyone with the misguided belief that their breakeven costs are $50 / boe when they’re really $150. Causing the erosion of value and wealth to accelerate even faster out the firm.

This issue is evident throughout the oil & gas conventional and shale reservoirs. It has been present since the late 1970s SEC guidelines for Full Cost were implemented and forms part of the industry culture. In January 2021 the SEC began an investigation of Exxon's overvaluation of their assets as a result of an Exxon employee whistleblower complaint. Most particularly in the Permian field. As of today the investigation is believed to be ongoing as there has been no public announcement regarding results. 

Issue Two: Shutting In Production

Our July 4, 2019, White Paper outlined our decentralized production model, or price maker strategy, emphasizing the benefits of shutting in unprofitable production. Enabling independent business decisions by Joint Operating Committee members, based on actual, factual accounting which determines if the property is profitable do not constitute collusion, despite claims by producer officers and directors to dismiss People, Ideas & Objects’ Preliminary Specification.

Officers and directors have also argued that shutting in production would damage reservoirs and incur high costs—claims lacking merit, as shutting in is standard practice during Gulf of America hurricanes, plant turnarounds, and workovers. Nine months after the publication of our White Paper, the COVID-19-induced demand collapse forced a 25% reduction in global oil production. Producers later reported no reservoir damage and full restoration of prior production volumes, contradicting their earlier stance. This discrepancy remains unreconciled.

Determining profitability per property is currently impossible in oil and gas. Since the 1986 oil price crash, the industry’s high-throughput production model, which relies on full production to offset high overhead, has obscured profitability. This model persists as a cultural norm. Our price maker strategy calculates the marginal cost of each incremental barrel, financing the replacement costs for all future production. 

Oil and gas, unlike other commodities, provide 10,000 to 25,000 man-hours of labor per barrel of oil equivalent, and fueling an undetermined volume of Artificial Intelligence, underscoring its unique value proposition to consumers. We have a duty to future generations to deliver a thriving, profitable industry with abundant reserves. How will we justify consuming such valuable resources if their production isn’t profitable?

In 2023–2024, People, Ideas & Objects estimated a $4.7 trillion revenue loss in natural gas this century. Calculated by comparing revenues at a 6:1 oil-to-gas heating value ratio to actual revenues, where ratios reached 50:1 in early 2024. This reflects chronic overproduction’s devastating impact on natural gas’ price structure. Oil price distortions are global and subjective but may be similarly significant.

Our price maker strategy enforces production discipline by aligning with capital market demands. Shutting in unprofitable properties prevents dilution of profitable ones, maximizing overall corporate profitability. Competition in North American capital markets will drive dynamic, innovative, accountable and profitable oil & gas producers' production discipline. 

Discussion

Since the 1986 oil price collapse, producers’ focus on cost-cutting has been a flawed strategy, masking systemic unprofitability. This operational fixation has weakened the service industry, reducing its capacity and pushing it toward non-oil and gas sectors or operations outside North America. Producer officers and directors have not acknowledged this industrial decline.

The resistance to change from officers and directors suggests an intent to sidestep these issues, possibly driven by personal financial motives. Their documented inaction could jeopardize their Directors & Officers Liability Insurance. Questions arise about their insurance status, potential use of corporate resources for indemnification, or pursuit of alternatives like funding the Preliminary Specification to adopt an “Issue Mitigated, Nothing Litigated” approach.

To establish a breach of fiduciary duty, it’s sufficient to show officers and directors should have known about these issues, as evidenced by basic accounting principles, discussions and quantifications on People, Ideas & Objects’ blog. Their failure to act has damaged the industry and its secondary and tertiary sectors.

While proving personal motives for inaction is uncertain, officers and directors are the primary beneficiaries of the industry’s status quo. Under our Arbitrage Strategy, their questionable stewardship raises doubts about the industry’s future. Investment groups, recognizing strong future demand for oil & gas, and North America’s strategic advantages, are eager to invest but distrust incumbent leadership. By leveraging the officers’ and directors’ fiduciary duty violations, investors can oust them, dismantle their culture, and rebuild the industry based on the Preliminary Specifications Arbitrage Strategy.

Continued in Part III, One Lever, Four Actions

Arbitrage Strategy, Part I, Background

 People, Ideas & Objects Arbitrage Strategy

People, Ideas & Objects value proposition offers oil & gas producers the most profitable means of oil & gas operations, starkly contrasting the entrenched “muddle through” and “do nothing” approaches of current producer leadership. Their strategies, unchanged despite over a decade of investor demands, have squandered industry value and investments. Producer firms have not only wasted resources but also systematically eroded the service industry’s capacities and capabilities. Today, oil and gas reserves are a financial burden, consuming cash during production and proving worthless if unprofitable, as we’ve long asserted.

Our strategy splits the industry into “old” producers, clinging to failing models, and “new” producers, leveraging the People, Ideas & Objects Preliminary Specification to profitably produce all oil & gas. By focusing on reserves—especially undervalued natural gas—“new” producers can rebuild a dynamic, innovative, accountable and profitable industry. Investors today can acquire non-operated properties at low commodity prices, realize the price increase for those reserves value and move volumes of possible and probable categories to the proven reserve classification. Managing them in the short-term through the Joint Operating Committees operator. This approach unlocks significant upside through rising commodity prices and reclassifying probable/possible reserves as proven.

For “old” producers, selling these properties should be distributed through special dividends, delivering financial returns to the investors who just purchased the property. However, “new” producers require a robust mid- to long-term system for operations, administration, and accounting. The Preliminary Specification, tailored for this strategy, is the only viable solution. It must be funded through Profitable Production Rights and implemented for “new” investors to realize our Arbitrage Strategy. Learn more about Profitable Production Rights.

Our History

Our writings have consistently emphasized the Preliminary Specification’s price-maker strategy, which maximizes revenues and aligns with today’s oil and gas replacement costs. This ensures producers operate as high-performance organizations with strong reserves value and financial results, competing effectively in North American capital markets. Chronic overproduction, driven by intellectual and systemic failures, has suppressed commodity prices—a core issue we address. Yet, the Preliminary Specification is more than a price solution; it’s a comprehensive ERP system.

Valued in the trillions over 25 years, our value proposition reorganizes the industry using the Internet, replacing outdated hierarchies as other sectors have done. Despite resistance from producer leadership, our warnings—ignored for years—have proven prescient, with the industry now in a historically dire state. Oil and gas, as a primary industry, generates enough cash to maintain a facade of viability, but financial reporting, based on SEC rules, has been distorted. The industry’s focus on “building balance sheets” and “putting cash in the ground” inflated assets and profits, attracting over-investment and causing overproduction of price-sensitive commodities.

Since introducing the Preliminary Specification in 2012, we’ve faced obstinance and resistance from producer leadership. Their mismanagement has also alienated the service industry, destroyed trust, and driven away their investors for over a decade. Producers’ credibility is gone, and their financial performance is abysmal. As a primary industry, oil and gas must recognize its revenues stem from secondary and tertiary industries' involvement not just internal efforts. Dumping its financial challenges onto the service industry has eroded its capacity, ensuring no recovery of faith or goodwill for “old” producers. The path forward lies with “new” producers acquiring properties and the development of the Preliminary Specification as the organization supporting industry.

Directors and Officers Liability Insurance

On June 2, 2020, following the release of our White Paper, “Profitable, North American Energy Independence — Through the Commercialization of Shale,” I raised concerns about Directors and Officers (D&O) Liability Insurance. Our July 4, 2019 paper, dismissed by producer leadership as unworkable, argued for shutting in unprofitable production—a concept ridiculed until April 2020, when oversupply drove oil prices to negative $40.00, refiners rejected production, and 25% of global output was shut in. My comments on D&O insurance were validated by a June 9, 2020, Reuters report noting producers increased their D&O coverage by 75%.

Since then, People, Ideas & Objects have highlighted D&O insurance, emphasizing that officers and directors were informed of their inactions through our efforts and bear fiduciary responsibility to address them. We prepared a draft RFP response, a no-risk proposal, but received no engagement. In early 2025, we quantified the industry’s failures: a $4.7 trillion loss in natural gas revenues since 2009 due to a pricing structure collapse from 6:1 to 50:1, and a missed LNG market opportunity stemming from a basic business misunderstanding of “free on board.”

We question whether these failures reflect deliberate neglect or the “muddle through” inertia of producer leadership. Given the scale of losses, time elapsed, and dishonesty displayed, is “muddle through” just laziness or veiled grift? Despite being informed of $4.1 trillion in natural gas losses in early 2024, no producer contacted us about the Preliminary Specification. And the EIA reported 2024 natural gas prices were the lowest ever.

The industry’s destruction and our harsh treatment are maddening, yet we understand the threat we pose to those resistant to change. More perplexing is why producer leadership has ignored investor demands for over a decade. Investors, seeking action, see no progress. What leverage can they use to compel producers to sell properties and distribute these proceeds as special dividends?

 

The most powerful economy will be the largest energy consumer, emphasizing the need to manage our oil and gas resources wisely. Unprofitable production is wasteful and irresponsible. No external source will provide cheap, reliable energy to fuel the leading nation. Profitable energy independence is not only achievable but essential, and consistent profitability is the only capital source robust enough to achieve and sustain it. By adopting the Preliminary Specification from People, Ideas & Objects, supported by our user community and service providers, we can build an industry that ensures producer profitability, aligning with this vision.

This discussion continues in “Arbitrage Strategy, Part II, Leverage.”

Cultural Stagnation or Revolution

 There’s a point of divergence in the market that holds the fate of the industry in its hands. Those with the cultural influence today are at a difficult point in terms of the industry's fortunes. Custody of the authority, responsibility and resources to manage has been and is mismanaged on a scale unseen in the business community. We can see clearly the devastation and wrought they've authored across the industry horizon. Is anything happening? If anything does happen it usually spells the demise of one group's future prospects. Recently Chevron announced they are outsourcing some of their engineering to India and layoffs within their organization. Engineering graduates from the universities are not adequate to meet long term demands, and that more people are retiring each day are not seen as difficulties. I would have thought that recruitment to begin rebuilding dynamic local capacities and capabilities would be seen as the best solution. 

Kimmeridge Energy Management was in the news looking to Canada to buy into oil & gas producers. Stating that industry consolidation was necessary and therefore the strategy they’re pursuing. What the service industry doesn’t need is a further dilution in their customer numbers. What producers need are dynamic, decentralized and “thick markets” to solve the issues producers have created for themselves. In both oil & gas but especially in the service industry. Chevron and other producers may begin to realize they reap what they sow. What Kimmeridge shows is the extent of the oil & gas cultural influences at times extend into the investment community. 

I’m not saying the Preliminary Specification as it stands today is the solution that solves all the industries difficulties. It does however establish a culture and foundation of dynamic, innovative, accountable and profitable oil & gas operations. With input from throughout the industry it will be the solution the industry needs to begin. We need to organize an industry approach that finds the way using the guide posts of workable models of the Preliminary Specification. Before we can approach any problem of this scale we need to organize ourselves first and foremost. ERP software defines and supports the organization and allows it to function even in today’s basic economy. Imagine how oil & gas could be with the whole of industry's involvement in building the Preliminary Specification five years from now. Then imagine what the status quo would provide. 

If investors want to involve themselves in consolidation it's their responsibility. Doing the same thing repeatedly and expecting different results is insanity. There are areas of the investment community with backgrounds derived from oil & gas’ culture. For them to see People, Ideas & Objects perspective takes a certain willingness and courage. 

Decision Time 

What happens to this industry from this point will be the result of many difficult decisions. People who have watched from the sidelines, who didn’t see the bigger picture or didn’t think these difficulties would affect them now know differently. There are two vivid and stark visions in which to choose from. Each alternative can be mapped to their ultimate conclusion. People, Ideas & Objects offers the challenging and rewarding work of rebuilding and reconstruction of a dynamic, innovative, accountable and profitable industry from the ground level. The status quo is no longer offering a continuation of healthy expectations. Which year will be the one in which your job is outsourced offshore. When the status quo employs the cost control business model, and precludes any other consideration, it will continue to count the pennies while the trillions of dollars of value are ignored or misunderstood. 

In a decentralized market such as what oil & gas needs. Individual decisions need to be made by independent actors. In the past, or in simpler times this could be orchestrated and coordinated loosely through somewhat primitive means. Today’s demands are far more complex and to suggest this is the reason for consolidation is disingenuous. Accommodating speed, complexity, distance, coordination and accountability is not possible through centralized control. Accountability will most  certainly suffer and may be the driving motivation for producers to consolidate. In contrast individuals as actors in a market economy will decide which industry configuration they want and act accordingly. Ray Dalio founder of Bridgewater Associates @RayDalio. 

Ultimately, power will rule. This is true of any system. For example, it has repeatedly been shown that systems of government have only worked when those with the power value the principles behind the system more than they value their own personal objectives. When people have both enough power to undermine a system and a desire to get what they want that is greater than their desire to maintain the system, the system will fail. For that reason the power supporting the principles must be given only to people who value the principled way of operating more than their individual interests (or the interests of their faction), and people must be dealt with in a reasonable and considerate way so that the overwhelming majority will want and fight for that principle-based system.

If there’s one aspect of these past several decades where change has been necessary. The culture of the producers will never make a decision, it is not in the officers and directors best interest. And as ridiculous as it may sound that People, Ideas & Objects would pursue something for so long without the desired results. Consider that producers officers and directors have denied their investors for more than a decade now. Not only denied them, stood obstinately in opposition while they watched their prospects predictably dwindle. Generating viable excuses, blaming others and scapegoating talking points to be mimeographed and distributed to each other for a consistent message to be broadcast across the industry. 

People, Ideas & Objects understand not everyone is oriented to make such drastic decisions. At least not at the beginning. We are however looking for the leadership who will start the ball rolling with us. If this fits within your comfort level and you need to take a swing at bat then the market is the place for you. Whether that’s within our user community or anywhere within oil & gas, including as a newly formed producer, nothing will be left untouched. The first step should be to understand the configuration of the industry within the Preliminary Specification. Then act in your best interest in the market of your choosing. One caution is producers are sensitive to anyone’s affiliation with us. People, Ideas & Objects glows radioactive.  Therefore keep your plans quiet until absolutely necessary. 

Shutting In Production

The current inactivity in the oil and gas sector reflects deeper, long-standing issues. For decades, producers prioritized cash flow over genuine profitability, a focus that masked the steadily declining performance of their assets. This approach led to a reliance on investors, and when that support predictably dried up, working capital became critical. Officers and directors often point to dividends as the cause of today’s cash shortages, failing to recognize that profitability itself would generate sufficient funds, but also secure the operational independence they had lost through years of questionable financial management and reporting.

A key obstacle to optimizing the industry has been a persistent resistance to shutting in unprofitable production. Arguments typically cite excessive costs or potential reservoir damage, but real-world evidence contradicts this. During the COVID-19 pandemic, approximately 25% of global production was shut-in without widespread reports of subsequent reservoir damage. Furthermore, routine gas plant turnarounds and hurricane-related shutdowns in the Gulf of Mexico (such as those caused by Ida, Laura, Katrina, and Rita, which halted substantial production) clearly demonstrate that temporary cessation of production is both feasible and frequently practiced.

This reluctance to production shut-ins seems symptomatic of a "muddle through" culture within the industry – a tendency to wait for problems to self-correct, often resulting in unnecessary and permanent damage rather than proactive resource management. This passive approach has had staggering financial consequences, contributing to an estimated $4.7 trillion in lost natural gas revenues this century due to overproduction. The industry also largely missed the opportunity to stabilize natural gas prices during the buildout of LNG export facilities, partly due to a failure to grasp fundamental business concepts like "free on board." Today's quiet market activity raises the question: is the industry again missing a chance to improve gas prices by not mastering efficient shut-in and restart processes?

A fundamental problem enabling this situation is the inability to accurately identify unprofitable properties. Current Enterprise Resource Planning (ERP) systems lack the necessary detail, especially regarding overhead and depletion accounting. Without this granularity, producers cannot pinpoint where or address the sources of financial loss, even as the need to rehabilitate oil and natural gas prices grows urgent.

The proposed "Preliminary Specification" offers a solution by establishing detailed, factual financial statements at the Joint Operating Committee level. This approach reorganizes industry administrative and accounting resources to directly allocate overhead costs only to profitable properties, eliminating industry standard overhead allowances. If a property isn't profitable and is shut in, associated work stops, and no overhead is incurred.

Consequently, overhead transforms into a variable cost tied directly to profitable production. By recognizing these actual costs within the cost of production (rather than capitalizing them), the commodity price will reflect the true cost, passed to the consumer upon profitable production. This ensures overhead is either avoided entirely or recovered promptly, creating a self-sustaining cash flow for monthly overhead expenses and ending the constant search for new capital to cover them.

The substantial financial and business advantages of this profitability-focused model, often overlooked by the prevailing "muddle through" mindset, include:

• Maximizing Profitability: Preventing the losses of unprofitable properties from diluting overall earnings.
• Officers and Directors Fiduciary Duty: Ensuring reserves are properly recognized, managed and valued.
• Financial Health: Eliminating the burden of using future revenues to cover past losses.
• Cost Reduction: Shutting in production cuts unnecessary operational and storage costs of unprofitable overproduction.
• Enhanced Reserve Value: Increasing the volume of, and Net Present Value (NPV) of reserves as commodity prices rise.
• Resource Conservation: Saving reserves for the time in which they can be produced profitably.
• Targeted Innovation: Focusing efforts on ”where and how” to make unprofitable properties competitive in the North American capital markets.
• Market Price Discovery: Allowing commodity markets to find their marginal price by removing unprofitable production.
• Reflects the True Cost of Today’s Production: Ensuring commodity prices reflect the actual cost of bringing replacement barrels (such as heavy oil or shale) to market.
• Production Discipline: Profitability is the fairest and most reasonable method of production allocation, aligning actions with financial best interests.

This element of our business model provides a compelling value proposition that we’ve documented to be in the trillions of dollars. Yet the cultural push back has been significant. It's telling that while individuals within the scientific community can be persuaded by the data one-on-one, they often revert to industries' cultural norms once back in their environment, repeating justifications for why production supposedly cannot be shut in.

This resistance likely masks a deeper issue: a fundamental inability within the current system for producers to determine with confidence which properties are profitable and which are not. Even if an unprofitable asset is located, understanding the specific business reasons why it's unprofitable is often impossible with existing tools. Navigating the complexities of Producer / Joint Operating Committee dynamics further complicates decisive action. With effective business tools such as the Preliminary Specification engineers and geologists can more effectively do their work. 

People, Ideas & Objects Preliminary Specification resolves the co-location issue of where knowledge and operational authority reside. By delivering the knowledge to the Joint Operating Committee  – the entity already empowered with operational control – we eliminate a major source of conflict and inertia. This aligns the Joint Operating Committee's operational framework with the industry's organizational structure, creating a unified approach where shared financial ownership motivates consensus among partners.

Under this model, each Joint Operating Committee receives granular monthly financial statements. Crucially, these reports should not be viewed merely as tools to flag properties after they become unprofitable – that approach reflects the limitations of today's data. Instead, their power lies in proactive management. Producers should use this information to identify properties trending towards unprofitability six months or even a year ahead of time. This foresight allows them to investigate the root causes, collaborate with accounting on business solutions, and potentially avoid the need for a production shut-in altogether.

Without the clarity provided by the Preliminary Specification, the status quo persists: producers cannot reliably gauge a property's profitability or determine what effective interventions are available. Current methods of recognizing depletion misleadingly classifies all production as profitable. Overhead allowances provide no insight into overhead costs, failing to control one of the industry's largest expenses. Furthermore, reported G&A costs appear artificially low (3-5% of revenue) due to heavy capitalization (up to 85%). While the existing system of overhead allowances reflect an industry-wide monthly total of $0.00 in overhead allowances each month.

Conclusion 

The oil and gas industry's leadership has demonstrably lost its grip on the sector's financial, operational, and political realities. How North America navigates forward from this point is unclear, especially as revenues continue to be managed by those who seem unable or unwilling to acknowledge this loss of control, creating inherent conflicts.

Trust, faith and goodwill in industry leadership were casualties decades ago. Culturally emphasizing a reliance on dwindling cash flows – mistakenly perceived as the only metric that matters. However, the current level of inactivity  reveals that cash flow alone is insufficient to repair the extensive damage caused under this long-standing paradigm.

The critical question remains: what is the path forward? People, Ideas & Objects proposed solutions, designed to address these deep-seated issues, have been met largely with silence from an industry gripped by cultural inertia. There seems to be little belief that meaningful change is achievable. Personnel appear to be simply marking time, anticipating layoffs and severance packages, while leadership in the crucial service sector is showing signs of capitulation.

For thirty-four years, as of May 2025, I have persistently advocated for a different approach. The oil price collapse of 1986 highlighted the issue: strategically shutting in a small fraction of unprofitable production would have stabilized the market and mitigated almost two decades of decline. Yet, my analysis from both accounting and operational auditing perspectives made it clear that the industry's structure, then and now, renders even this seemingly simple action impossible. This realization spurred the development of new organizational models and supporting systems starting in 1991. Decades later, I continue to champion the Preliminary Specifications necessary structural changes, and reflect on not only the desolate nature of industry inactivity, but also the persistence and dedication to “muddle through.”