Timely Solutions, Part IV
Throughout the years, People, Ideas & Objects has maintained that North American oil and gas producers have not achieved genuine profitability since the mid-1980s. This stems from a pattern of overcapitalizing property, plant, and equipment, which has ensnared producer firms in prioritizing balance sheet expansion, inefficient capital allocation, and similar imprudent practices. Consequently, this has generated inflated reported profits, prompting excessive investor commitments that resulted in overbuilt capacity and overproduction of commodities governed by price-maker economics. Such dynamics have sustained industry-wide commodity prices below marginal costs for decades.
Over the past four decades, these factors have precipitated a significant erosion in the competitive framework of North American producers. This gradual value destruction was initially obscured, encouraging investors—drawn by the apparent profitability—to persist with their funding. By 2015, however, investors recognized the underlying issues and ceased further investments, thereby revealing the extent of the value erosion. This deterioration has persisted, exacerbated by the indifferent response from officers and directors toward investor concerns.
The emphasis by People, Ideas & Objects on profitability is deliberate: profitable operations would furnish producers with the necessary capital to manage their enterprises effectively. Governments and investors can never represent the primary sources of funding capable of addressing the substantial financial requirements of the oil and gas sector over the next 25 years. Profitability is the only source of capital capable of meeting the essential needs of this industry. As a primary industry, oil and gas bears responsibility for supporting the vitality of dependent secondary industries. Regrettably, the service industry has been subjected to considerable strain, reducing its capacities and capabilities to as low as 30% of previous levels, with limited intrinsic motivation for recovery. Resolving this challenge would prove complex if producers were to acknowledge it. Ultimately, North American oil and gas must undergo a comprehensive reorganization of its economic structure to attain profitability and restore competitiveness within capital markets. Only People, Ideas & Objects Preliminary Specification offers such a solution.
Would producers incur a $4.7 trillion revenue shortfall if they prioritized profits? This loss, identified by People, Ideas & Objects in late 2023, arose from a fundamental misunderstanding of business principles. A routine examination of financial statements by officers and directors should have detected the substantial forfeiture of export revenues. Instead, efforts appear to have focused on dismissing this information, often under the pretext that People, Ideas & Objects lacked expertise and that the figure was implausible. For 22 months, this has undermined our credibility while producers have refrained from acknowledging the reality.
Since mid-August, developments have confirmed that Shell lost an arbitration case against Venture Global, seeking billions to recover a portion of their share of industries $4.7 trillion in lost revenues. Venture Global’s second-quarter financial statements indicate that their contracts could yield an additional $197 billion in revenues.
Material developments of this magnitude must be disclosed to shareholders promptly, ideally via an 8-K filing. This obligation extends to all producers engaged in natural gas exports. To date, no such disclosures have been observed. The forthcoming quarterly report, covering the period ending September 30, 2025, is expected around October 31, 2025, at which point producers should fulfill their reporting duties diligently. Failure to do so may invite significant repercussions.
It is also noteworthy that the LNG-related issue forms part of a broader structural decline in natural gas prices since 2009, an area addressed explicitly in the Preliminary Specification. The historical heating value ratio, approximately 6:1 from 2009 onward, has deteriorated to over 50:1 by 2024 and persists. The emergence of LNG markets presented an opportunity to mitigate these pricing challenges, yet over 16 years, no officers or directors independently identified or addressed it. With investors withdrawing support from producers’ capital structures since 2015 due to inadequate performance and accountability—and a viable solution available since August 2012—association with such a record would be undesirable.
Achieving authentic profitability in an organization demands rigorous effort. Current producers demonstrate limited understanding of how to generate profits, the rationale for doing so, or the requisite actions. Their apparent oversight of $4.7 trillion in evaporating revenues, without evident concern, suggests that profit maximization is not a priority. If their primary recourse remains suppressing critics, this conveys more than any explicit admission could.
