Change, Part VI - Capital

 Producers generally believe they are performing well, with historical data supporting an upward trend and financial improvement. However, is this enough? It's improbable that current producers can secure the necessary funding for future needs, as the required effort is too significant. Investors will continue to see them as financial drains until consistent "real" profitability is demonstrated.

In my view, the core problem causing this damage is a terminal disease. The practice of "building balance sheets" and "putting cash in the ground" has created a lasting legacy and culture that will ultimately be fatal. Performance accounting never stood a chance; the focus has always been, and will remain, on reserves. This pervasive culture was clear to me in the mid-1980s when Imperial Oil (Exxon in Canada) acquired Sulpetro for $750 million, seemingly based on the value of its reserves.

However, the company I remember was never that size and had declared bankruptcy just months prior. What did Exxon believe? That these assets could be rehabilitated and made profitable? Why didn't they devise a better strategy to acquire these assets from the Court at a much lower valuation, one based on their financial performance, which had driven Sulpetro to bankruptcy? Did Exxon not realize these assets were underperforming? While effort and capital could undoubtedly improve their performance, aside from a larger balance sheet, what was truly gained? Are all reserves, regardless of origin, worth the same value?

Therefore, it's crucial to question the basis of asset valuation: is it a) a perceived maximum price based on the worth of X reserves at Y prices, or b) a value derived from the assets' financial performance in capital markets? In oil and gas, option A has historically determined asset prices, with a market quickly forming around Exxon's valuation. This led to a gradual price inflation experienced across the rest of the industry. Consequently, the asset values on the rest of the balance sheet, the capital expenditures, eventually had to keep pace. These higher valuations were then supported by increased reserve volumes, such as shale, and an influx of investor capital.

Exxon clearly overpaid for these assets based on the market factors at the time. Overpaying for assets slowly kills an organization. From that point forward, trading on engineering valuations of assets became the industry standard, leading to competitive inflation in reserve values. Yet, the consequences I speak of were never fully realized. The accounting magic introduced by the SEC's Full Cost and Ceiling Test was a continuous boon. Recording the $750 million asset purchase, in this case, is allocated equally to every molecule of oil and gas reserves. If 1% of those reserves are produced, 1% of the asset costs are recognized. What happened operationally, financially, or performance-wise is irrelevant to the conversation, as the assets are wildly profitable under any strategy or implementation. In terms of the cost of capital and industry competitiveness, how reasonable is this for determining performance or which price production should command?

Shale exaggerates this, expanding assets and earnings unprecedentedly. Producers are suddenly trading in reserve volumes they could never have imagined, driving down the capital cost per barrel of shale and allowing the industry's disease of building balance sheets and reporting even higher earnings to go unchecked. The good times had truly arrived. Shale also brought about a short time horizon where steep decline curves forced producers to seek substantially more money from investors to keep operations running. But if initial revenues weren't recovering the capital cost and generating a return on those assets, how will more investment be recovered? Or does this ever end? Discovering this made investors realize that money only ever goes in the ground. Balance sheets are bloated well out of proportion in property, plant and equipment. People, Ideas & Objects recommend a pro-forma adjustment to move a minimum of 70% of property, plant and equipment to depletion to better reflect the firm's position.

For decades, producers in North American oil and gas were growing and profitable. What was actually happening in the industry was a slow erosion of performance, where simply spending money was profitable. Over time, industry competitiveness plummeted to what may be as low as 30% of what is commercially viable. How can I make such seemingly ludicrous claims? What do producers have after a decade of no support for their capital structures? A prosperous and healthy service industry? Far from it. A viable plan and vision for the future with a motivated, fully staffed workforce for the task ahead? No. A broad and deep financial foundation to leverage and meet tomorrow's challenges?

Today, cash flows can sustain producer organizations, which is only about 10% of what's needed. Producers are primary industry participants and must understand their responsibilities in maintaining the financial health and prosperity of their secondary and tertiary industries. This is urgently needed, and today's cash flows will not suffice. They will not even approach the amount of work required in the industry today. Its arrival, with its speed, velocity, and complexity, is completely inverse to producers' organizational capacities. Accounting, administration, and ERP are not competitive advantages for producers, but we wish them well in their attempts to implement these changes. What I know of oil and gas administration and accounting makes me glad I was ostracized from it for proposing the Preliminary Specification. Producers are frozen solid, incapable of making decisions or pursuing any action or direction. Good luck with their highly acclaimed "muddle through" strategy.

In terms of our current situation, consider what capital markets are offering. Dynamic companies are innovating with business models that yield from previously unrecognized resources. Last week, Elon stated he could use the processing power of parked Teslas as an AI facility, not just today's largest facility of a Gigawatt, but one of twelve Gigawatts. Drilling and producing are old news from a bygone era. No one is interested in the performance of oil and gas, and no one trusts its producers. Not because of what happened 10 years ago, but because of what hasn't happened since.

Change, Part V - Consequences

 The unfortunate reality for People, Ideas & Objects is that even a small financial gain, like finding a quarter, would significantly improve our outlook. This situation has greater consequences for producers, as we have no vested interest or obligations to them. What was already a challenge in shifting their "muddle through" culture has become even more difficult. We've previously discussed the impending changes in speed, complexity, and volume, and how producer officers and directors were unprepared. We are now entering a new environment where many may not even comprehend what's happening. What should we do in such a scenario? Should we continue to guide those who have resisted assistance with their issues for decades?

People, Ideas & Objects have chosen to prepare for the future. We will address the repercussions of the ongoing failures within the oil & gas industry. In doing so, we will attract individuals who clearly envision our direction and actively pursue it. We are already observing this divergence, with comments like, "you don’t have to worry about AI, you need to worry about the person who uses AI." AI is here, and it's advancing much faster than we realize. Evidence of this can be found in the quarterly reports of its providers: NVIDIA, AMD, Apple, Google, Oracle, and Tesla.

For instance, NVIDIA reported $90.8 billion in revenue and $45.2 billion in after-tax profit for the first six months of 2025, with $76 billion in working capital. The forefront of the AI revolution is distinct from the dot-com era. Last month's Oracle AI World conference demonstrated that AI is integrated throughout the database and is accessible within the ERP system, which we have always designated and designed the Preliminary Specification to operate from. We possess the necessary tools, but we do not, and never will, have producers as customers, thus eliminating any obligations or commitments to the oil & gas industry.

Our sole asset is our Intellectual Property, specifically the copyright of the Preliminary Specification and its derivative works. This provides us with the essential foundation of Intellectual Property that the oil & gas industry needs to adopt. We have emphasized its importance in establishing IP as an organizational framework within the Preliminary Specification and have reflected on its impact in all our writings, including our January 20, 2025 papers for engineers and geologists, and our user community and an April 7, 2025 paper on the impact of Hyperspecialization.

While the future remains uncertain, as with all great adventures, the destination isn't always the most important aspect. We will reach our goals. Software companies like ours are currently experiencing significant disruption. If we don't adapt now, we will only be squandering resources. We have fortuitously found ourselves in a position to realize this AI future in the most optimal way, while simultaneously resolving the oil & gas industry’s greatest business challenge. Who is ready to join us?

Change, Part IV - Don’t Look

 I purposely avoid getting too far into the technical details of Information Technology on this blog, but this brief discussion is both important and worth your time. The significance of Artificial Intelligence (AI) in ERP systems, particularly within the context of People, Ideas & Objects Preliminary Specification, is profound. Larry Ellison’s Oracle AI World Keynote address contained subtle points that, I believe, require an understanding of his perspective to fully grasp. When it comes to databases, Larry Ellison stands apart, much like Steve Jobs or Elon Musk in their respective fields.

His presentation began by addressing AI training and reasoning, specifically highlighting the role of private, structured data stored in Oracle’s global databases. This structured data adheres to specific principles, which are the focus of this post.

Ellison then asserted that “AI can Perceive, Understand & Reason across all types of data.” This capability is mirrored by Palantir’s software, which excels in handling private unstructured data. The key distinction between structured and unstructured private data lies in the normalization process and the relational nature of the data stored in Oracle AI Database 26ai. Commingling structured and unstructured data, as Palantir does, raises concerns about consistency and reliability. Database management systems are typically evaluated based on their performance in implementing the “relational model.” Oracle has historically been a leader in this area, and we will observe the impact of these new developments.

Interestingly, upon reading the relational model, Ellison was inspired to create the first relational database, leading him to co-found Oracle in 1977. According to ChatGPT, Larry Ellison, along with Bob Miner and Ed Oates, established Software Development Laboratories (SDL) in 1977, which later became Oracle Corporation. In 1979, they launched Oracle version 2, the pioneering commercially available relational database management system (RDBMS) that used Structured Query Language (SQL). This innovation was influenced by Edgar F. Codd’s seminal 1970 paper on the relational model of data.

An annotated version of Dr. Codd’s paper, relevant to this blog post, is available here. I strongly recommend a thorough review and understanding of this paper. After 55 years, its foundational principles for data management remain highly relevant. Today, relational databases appear to be the most valuable assets for a firm. C. J. Date’s textbook, Database Design and Relational Theory, also offers excellent guidance here. For those looking to effectively leverage AI and IT, proficiency in relational databases will provide a significant competitive advantage.

In the abstract of Dr. Codd’s paper, a crucial word stands out: “inference.” A properly normalized relational database allows users to “infer” information from its data. This concept is elaborated in section 2, “Redundancy and Consistency,” specifically subsection 2.1, “Operations on Relations.”

We will now explore the implications of these developments for the oil and gas industry, building on the Preliminary Specification. A clarification is necessary before proceeding: we are cautious about exposing data in ways that compromise security, accuracy, or reliability. Our user community and service providers—the accounting and systems providers for producers—have been empowered to leverage the numerous benefits offered by the Preliminary Specification. Producers will lack the in-house accounting knowledge or resources due to the reorganization from the Preliminary Specification.  However, service providers will possess the necessary background, system understanding and authority to furnish producers with the accurate, factual data they need. AI generating “garbage out” is not in the best interest of our organizations, the industry, or the producers.

People, Ideas & Objects must finalize our data model in light of these significant advancements. AI has already assisted us in developing it, and we anticipate continued and expanded use of this technology. While I am hesitant to fully embrace Oracle’s enthusiastic promotion of APEX, ChatGPT indicates its use of programming languages as follows:

Oracle APEX application code generators primarily use PL/SQL for server-side logic and JavaScript for client-side functionality. APEX itself is built on the Oracle Database, so the generated processes, triggers, and dynamic actions are mostly executed using PL/SQL, with HTML, CSS, and JavaScript for the user interface.

Oracle’s choice to “primarily rely on PL/SQL for server side” is brilliant. It is their proprietary, procedural language that allows for conditions and loops to be embedded close to the database. Having used it in our developments in the early 1990s, I find this choice entirely appropriate. The “primary” qualification suggests that Java can be injected for handling database triggers and, I presume, stored procedures, or if not Java, then PL/SQL. The use of client-side technologies is less critical to this discussion. Other relevant considerations include the ongoing optimization of Java for AI, and the fact that SQL and PL/SQL are currently running on NVIDIA GPUs. (Oracle proof of concept.)

I largely view APEX as a client-side access tool. For individuals well-versed in the requirements of Oracle AI Database 26ai, with authorized access to People, Ideas & Objects, our data model, and the Preliminary Specification, this would be immensely beneficial to oil and gas producers. It would support both daily ERP operations—identifying profitable areas and opportunities for growth—and AI-driven inferences on the database.

We do not need to delve into vectoring, its storage, or use at this stage; these are features we will implement later. For now, our transactional needs necessitate the structural integrity of the Oracle relational database.

Regardless of how this technology is marketed by any vendor, the core point remains: Oracle is very close to fully meeting the relational model requirements defined by Dr. Codd in 1970. Our diligence in developing and implementing AI over the next decade will be a top priority. With Oracle, we have access to research, development, unparalleled tools, products, and support. We must also balance these technological advantages with our objective of providing producers with the most profitable means of oil and gas production.

Implementation

Oracle APEX and its Agentic AI have a significant role to play in the Preliminary Specification. Our user community and service providers would find immense value in its application to support profitable North American oil and gas producers. With exclusive licensed support from People, Ideas & Objects developers, they would be able to facilitate the dynamism and innovation that producers are engaged in, through detailed, accurate ad-hoc reporting and other essential functions.

Oracle APEX operates with two SQL database sublanguages: Data Manipulation Language (DML) and Data Definition Language (DDL). Responsible database developers will never grant general access to DDL, leaving our user community and service providers with DML access only to the fields within the tables they are authorized to view.

Oracle APEX is a powerful tool, and Agentic AI currently benefits from a robust development process where Oracle verifies the safety and validity of each Agent before release. This makes it an incredibly potent tool for industry professionals who utilize the Preliminary Specification, our user community, and service providers. We do not anticipate extensive hands-on development use by producers themselves, as this involves accounting information that requires appropriate preparation for presentation.

However, as an ERP system, we are involved in conducting mission-critical transactions. APEX cannot be involved in the development, creation, or management of these transactions. Processes such as the Material Balance Report have persistent, asynchronous, and stateful issues. APEX is stateless and, therefore, currently incapable of handling such demands. In terms of transaction processing and process management, People, Ideas & Objects’ software development requirements exceed APEX’s current capabilities. Java, SQL, and PL/SQL will be essential in these areas. 

Until proven otherwise, we must take all necessary measures to ensure the security, reliability, and integrity of producer data is captured and reported accurately. We look forward to fulfilling our objective of ensuring a renewed culture of reserves preservation, performance and profitability is established. With Oracle we know we can. Supporting producers, and the service industry as they undertake the next 25 years in oil & gas which have to be its most challenging ever. 

Change, Part III - That Makes Four

 In the past, many producers’ officers, and directors were questioned about the justification for their drive for consolidation. Continuing with their limited understanding of anything beyond their corporate world, they claimed consolidation was necessary because "small producers continued to overproduce to make their bank loan payments," thereby destroying commodity prices. In hindsight, they might want to reconsider their perspective.

The definition of a cartel is provided by ChatGPT.

A cartel is a group of independent businesses, organizations, or countries that agree to collaborate to control prices, limit supply, or restrict competition within a specific market or industry. The primary goal of a cartel is to increase members' profits by coordinating activities rather than competing.

Cartels are most commonly found in industries with only a few major producers, such as oil, gas, or certain commodities. A well-known example is the Organization of the Petroleum Exporting Countries (OPEC), which coordinates oil production levels among its member countries to influence global oil prices.

Key features of a cartel: 

• Members collude (secretly or openly) instead of competing.
• They may set production quotas, agree on prices, or divide markets.
• Cartels are usually illegal in many countries because they harm consumers by reducing competition and increasing prices.

In summary:

A cartel is a group that works together to limit competition and control a market, typically to boost their own profits, often at the expense of consumers.

People, Ideas & Objects designed the Preliminary Specification to accommodate all producers, regardless of size. Using Cloud Administration & Accounting for Oil & Gas shares the entire infrastructure needed to operate an oil & gas business. Through our user community and service providers supporting our software, ownership in a Joint Operating Committee or producer firm is unknown and irrelevant to them; it's just data. Therefore, whether the user is part of Exxon or a startup down the street, they are only charged for the overhead costs they incur.

For the publicly listed small producers that once existed, overhead was a fixed barrier that demanded $3-5 million per year in incremental free cash flow to be offset. This obstacle prevented them from pursuing their distinct competitive advantage in engineering & geological capabilities & capacity development, forcing them to focus on raising cash to survive. Those who did were not necessarily the oil & gas professionals driven to explore and produce.

People, Ideas & Objects finds this unacceptable, as the distribution of innovation funds among small firms is approximately equal to the amount spent by larger ones. Yet, it could be argued that most innovation is developed by those in the small sector of an industry. Nonetheless, this sector of oil & gas is on the endangered species list or technically extinct as we stand.

I have chronicled the lack of business understanding inherent in the officers and directors of oil & gas producers. When we published the Preliminary Specification, we were accused of proposing collusion and introducing a conspiracy. Nothing could be further from the truth. It's plain, common-sense business practice to stop the bleeding in any area of the business to maximize profitability. In oil & gas, there is an inherent responsibility upon all of us not to waste this limited resource by ensuring we produce everything profitably. Our Preliminary Specification provides oil & gas producers with the most profitable means of oil & gas operations.

The Change Element

In their zeal to pursue their seasonal objectives of consolidation, some producers may have accidentally revealed their true motivations. First, for them to deal with the small producers' overproduction is a fairytale of mammoth proportions. Second, their stewardship of the industry for the past year has presented a rather dismal outlook. Is it overproduction that's causing continued global price declines? Or is it the plateau of production volumes and the realization that the steep decline curves of shale cannot be dealt with by the service industry they so carelessly destroyed? Contradictions are a byproduct of oil & gas officers and directors.

A strong history of collusion and cartel activity has haunted oil & gas for decades, sponsoring onerous regulations and a consumer backlash that has officers and directors cowering in the corner. Yet, on several occasions, we hear the need for consolidation based on the pretence of small producers being out to get them.

The Solution

It's unfortunate for the hardworking people stuck in these firms. If only there were alternatives such as the Preliminary Specification. To prove consolidated producers were not involved in a conspiracy would be difficult for the officers and directors. How could they provide evidence to the contrary? How could they now take positive steps to support the small producers?

I could be seen as biased if I promoted the Preliminary Specification. Since I don’t care much what they think, I’d say it’s the solution that solves many of their issues, such as:

• “Issue Mitigated, Nothing Litigated” strategy regarding their risk to investors who may pursue natural gas losses. Insurance coverage can’t be lost if actions are taken to mitigate officers and investors risks. (I’m not a lawyer.)

• Implementing next generation AI enabled ERP systems based on Oracle Fusion ERP and People, Ideas & Objects. 

• Participating in what appears to be the 4th Industrial Revolutions initial traction beginning to take place.
• Oracle Cloud ERP Keynote: Rocket Forward with Agentic Finance Now
• Oracle AI in Fusion Networks

• Prove they did not form an illegal cartel while consolidating their operations and blaming small producers. 

• Our Preliminary Specification specifically addresses all sectors equally, fairly and in a transparent way. Providing proof that no such cartel was formed.
• Realize the benefits of a purpose built Cloud Administration & Accounting for Oil & Gas focused solution. 
• Designed to provide profitable operations everywhere and always. With a value proposition far in excess of any cost they may be facing.

With all that's happening outside the oil & gas industry, is it not time for people to begin their participation? Or is "muddle through" so comfortable, or so constraining, that action is beyond consideration? It’s time for everyone to personally decide what the industry needs and what their individual role is, and maybe if they too have an obligation to act. If we don’t act, who will consumers turn to for their energy needs?

Change, Part II - Not So Changed

 As much as the velocity and trajectory of change are accelerating, some elements of the Preliminary Specification will remain constant. We would only consider changing something if it represented an improvement. This applies particularly to the reduction of overhead costs for both producers and Joint Operating Committees. People, Ideas & Objects, along with our user community, have dramatically cut overhead costs to mere pennies on the dollar, leading us to question why officers and directors so strongly resist our initiative.

We are not focused on minor adjustments to individual costs or contracts. Instead, People, Ideas & Objects is pursuing fundamental, structural changes that will yield significant benefits and outcomes. There are synergistic advantages, where improvements in one area enhance others. For instance, specialization and the division of labor are built upon the shared infrastructure of our upcoming Cloud Administration & Accounting for Oil & Gas software and service. Here's our approach to overhead:

Turn All Costs Variable

The reorganization and configuration supporting Cloud Administration & Accounting for Oil & Gas aim to make overhead costs variable, tied directly to profitable production. This enables producers to shut in unprofitable production, resulting in a null operation—no profit, but also no loss. This maximizes corporate performance, conserves reserves, and offers numerous other specific benefits.

Directly charging Joint Operating Committees for these overhead costs allows producers to include overhead in the current month's costs, which are then passed on to the consumer. As these are part of profitable production, the cash incurred to fund these costs is recovered within 30-90 days. Producers will no longer face decades-long waits to recover this cash, a consequence of their current policy of capitalizing most overhead costs.

As a result of these changes, overhead costs will cease to be a significant burden for producers. If a property is unprofitable, it will be shut in, and no overhead will be incurred. If a property is profitable, it will incur overhead and draw financial resources from the producers recurring monthly cash float established by using the People, Ideas & Objects Preliminary Specifications methodology.

Sharing of Accounting & Administrative Infrastructure

Applying Professor Paul Romers New Growth theory to oil & gas accounting and administrative infrastructure frees each producer from the need to build identical, non-competitive accounting and administrative capabilities. By consolidating industry resources and developing a single solution, producers can reduce their accounting and administrative resources and infrastructure, relying instead on our service providers through our Cloud facility. 

Our Cloud Administration & Accounting for Oil & Gas eliminates the redundant duplication of building the same infrastructure within every producer. We have reached a point where the IT resources are no longer available for each producer to undertake these tasks, where the financial burden has become too significant, and the task too complex for individual producers to manage. These are not part of a producer's distinct competitive advantage. Today, Cloud Computing is the only viable solution. As a related example, no one would suggest building their own infrastructure and capabilities for their own Artificial Intelligence’s Large Language Model’s (LLM) use. People, Ideas & Objects believe this same principle applies to oil & gas ERP.

Would any producer subscribe to an Exxon or Chevron-derived oil & gas ERP system? Our independence provides all producers with a standard, objective, actual, and factual accounting of their operations. This is essential. If a producer faces a property reporting a loss, they need to confidently know that all properties were subject to the same independent accounting criteria as theirs. Otherwise, production discipline will devolve into an accounting exercise aimed at boosting earnings, much as it is today.

Specialization and the Division of Labor

Producers have argued that our scope and scale are too complex and difficult. Yet, in making this argument, they fail to see that our scope is only marginally greater than their own. Our task is as substantial as their responsibilities and obligations. It is our scale that we need to address, and we are finding with these AI facilities that bigger is more efficient. The limiting factor is now the number of available natural gas turbines to power the cloud.

The configuration of accounting and administrative resources, as reorganized in the Preliminary Specification, presents a unique opportunity—one unavailable to any producer today or tomorrow, regardless of their size. Specialization and the division of labor are currently out of reach for most producers. They have been maximized to the point of diminishing returns; the greater the division of labor, the less efficiency is gained, as the volume of work within the organization does not justify the change. Low percentages of resource utilization diminish any benefits from task specialization.

However, by approaching the industry as a whole, we gain the transactional volume necessary to justify specialization and the division of labor, thereby realizing those benefits. Taking these advantages to our next category of automation and Artificial Intelligence, we see some of the synergies between these major categories in how People, Ideas & Objects reduces overhead and builds further incremental value.

Automation and Artificial Intelligence

We have discussed the benefits of automation in the highly specialized process management within Cloud Administration & Accounting for Oil & Gas software and service. It is reasonable to assume that the benefits from specialization and the division of labor will be substantial, and subsequent automation and Artificial Intelligence will be limitless in the short term—an empty canvas on which to build value for the industry and achieve the objective of People, Ideas & Objects, our user community, and service providers: to provide the most profitable means of oil & gas operations.

With discussions on how People, Ideas & Objects has adopted the high levels of automation and Artificial Intelligence embedded in Oracle Fusion ERP and their Database 26ai as a third, foundational justification for producers to support the development and implementation of the Preliminary Specification (as discussed in yesterday's blog post), there are many areas in the oil and gas industry where overhead costs are endlessly consumed. Production reporting processes are noted as the greatest consumer of all. Recall how our Material Balance Report (Podcast 32) and the subsequent automation of related processes are designed to address these issues.

A Conclusion

People, Ideas & Objects would strongly refute the idea that we are applying Oracle technologies for technology's sake to the business issues of oil & gas. That is not, nor has it ever been, our approach. We have consistently used advanced technologies to resolve business problems. We are not the ones who will tell you Windows 11 will make everything right. Oracle is using AI as a technology to solve business challenges, just as we are. The difference is stark, and it is the reason we are now adding their AI initiative as a fundamental justification for the survival of oil & gas producers.

Producers may report that all their operations are profitable yet still report corporate losses. If overhead costs remain as they are today, chronic and systemic corporate losses will continue. The magnitude of these changes introduced by the Preliminary Specification will reduce overhead costs to single-digit pennies on the dollar.

Let's assume, for discussion purposes, that the shared infrastructure of Cloud Administration & Accounting for Oil & Gas reduces overhead by 50%, which I would consider the minimum. Recall Adam Smith’s research at a pin factory, which yielded a 24,000% increase in production from specialization, the division of labor, and mechanical automation. What could intellectual automation yield in accounting and administration? Making all costs of the producer and Joint Operating Committee variable introduces an operational flexibility that People, Ideas & Objects believes should be welcomed.

It's easy to think these changes will make a producer profitable. I would beg to differ. They will help; however, the industry operates at a low level of competitive efficiency—a level that is unprofitable and far from competitive or profitable. It has a culture of "muddle through," which is anti-initiative and ingrained over at least 40 years. Hence, People, Ideas & Objects' much-needed rebuilding through the Preliminary Specification.
Drilling and producing is the only business model producers currently have. Accelerating their level of competitiveness to profitability will be an engineering and geological pursuit. Accounting and administration will serve in support, providing the much-needed understanding of what works and what doesn't from a financial and business perspective. The challenges of ensuring profitable, abundant, affordable, and secure energy are competitively produced are their responsibility.

We believe it's time for everyone in the industry to decide what their role will be in this rebuild.

Change, Part I - The One Constant

 When People, Ideas & Objects considers the commercial release of the Preliminary Specification as it's currently configured, we anticipate being one or two generations behind market needs. This is unacceptable. While the industry configuration and the software's value proposition within the Preliminary Specification remain sound, the methods of its construction, implementation, operation, and usage will undoubtedly evolve. This is where our focus and energy must be directed today. People, Ideas & Objects and our user community are now “AI First” in our product and services. 

I strongly recommend watching this Oracle conference video (registration may be required). It demonstrates how Oracle Fusion ERP, enhanced with Agentic AI, transforms various familiar roles. With just a few prompts and some user thought, issues that many companies might not have previously considered, primarily due to limited accounting capabilities, were resolved. These material problems were addressed in seconds, as opposed to days. Consider what impact this would have for an engineer reviewing the costs in a Joint Operating Committee.

Oracle Cloud ERP Keynote: Rocket Forward with Agentic Finance Now

These features are only accessible when data is managed appropriately within the database, specifically Oracle AI Database 26ai with the Preliminary Specification. Many of these capabilities are a direct result of AI being embedded within this database.

In previous blog posts, we discussed the revenue losses incurred by officers and directors due to unrealized natural gas prices. This was caused by chronic and systemic overproduction since the shale boom began in 2009, driving prices from a 6:1 ratio to oil down to as low as 50:1. This situation is intolerable and should have been addressed by officers and directors at some point since 2015, the time when producers' investors demanded performance and accountability.

Our Preliminary Specification has been available since August 2012, offering producers an opportunity to tackle this issue by introducing production discipline through profitable production.

I am now adding the introduction of Oracle's 26ai Database and Oracle Fusion ERP with Agentic AI as a third pillar of justification for beginning the development and implementation of the Preliminary Specification. We've all witnessed the effectiveness of chat-like interfaces in LLMs. Apply that lesson to oil & gas ERP systems and consider what they'll be capable of providing. Without the Preliminary Specification, your corporate "dark ages" are imminent.

It's clear that oil & gas producers do not share my concern regarding their legal liability to shareholders concerning fiduciary duties and natural gas revenue losses. No producer has yet adopted our "Issue Mitigated, Nothing Litigated" strategy. Investors will make their own decisions on their own timelines. I am confident in my position, and both People, Ideas & Objects and the producers cannot simultaneously be correct on this matter.

Nonetheless, the writing is on the wall. Will producers remain in the metaphorical "dark ages" with their current systems? This video even states that these features are not available as a bolt-on implementation. Therefore, a cultural transformation, as prescribed in the Preliminary Specification, is the appropriate remedy for their predicament. 

I believe officers and directors who recognize this opportunity to adopt and implement the Preliminary Specification will sleep better tonight than they have in decades past. When all is said and done, they’ll be seen as geniuses for the high performance they’re able to attain from the most profitable means of oil & gas operations, everywhere and always thanks to People, Ideas & Objects and our user community. 

Podcast # 34, Artificial Intelligence Part II

 Last week, Oracle hosted its annual conference, now aptly named Oracle AI World. While there were no major product releases beyond Oracle AI Database 26ai, the event focused on integrating Artificial Intelligence across their product line, particularly in Oracle Cloud ERP (also known as Oracle Fusion ERP), which forms the basis of our Preliminary Specification.

The name People, Ideas & Objects is inspired by Professor Paul Romer’s Nobel Prize-winning new growth theory, which emphasizes sharing non-rival costs. Object-based software is the ultimate expression of this concept. As the owner of Java, Oracle developed Fusion ERP as the first ERP system written in Java. Consequently, People, Ideas & Objects benefit from the AI features introduced in these Fusion ERP and database updates.

Larry Ellison’s keynote presentation, as always, offered compelling insights. He highlighted that current LLMs primarily utilize public data, whereas the majority of private or corporate data resides on Oracle Databases. With Oracle AI Database 26ai, users can activate a feature that allows their private data to be incorporated into the LLM they are using. This feature will be particularly valuable to North American oil & gas producers seeking to broaden their analysis and combine their private data with public data. It is important to note that this process does not publish the firm’s private data; it only accesses what is necessary to resolve the prompt query, addressing initial confusion about data publication.

Oracle AI Database implements NIST-approved quantum-resistant algorithms (ML-KEM) to encrypt data-in-flight. Combined with the existing support for quantum-resistant encryption for data-at-rest, Oracle AI Database’s data protection approach is designed to prevent hackers from harvesting organizational data now and decrypting it using quantum computers later. Other vendors have implemented quantum-resistant algorithms either in their network and storage architectures or in their database services, but not both.

Although not explicitly discussed in Larry Ellison’s presentation, subsequent client discussions revealed an interesting tension. I have often criticized officers and directors for their failures stemming from their defense of the status quo. This defense is now permeating Oracle client organizations. My conclusion is that Artificial Intelligence is generating FUD (fear, uncertainty, and doubt) across organizations. It is by far the fastest technological adoption we have witnessed, and it is perceived as a direct threat to productivity. Furthermore, understanding how to leverage AI competitively is challenging, especially given that "others" are already using it in ways that could impact their jobs. I see significant push back starting. 

Today’s podcast touches on some of these highlights and raises many more. 

Saturday evening update, I review these podcasts after some time has passed and feel I need to place a warning on this one. It made sense when I made it, but there’s too much data too quickly and is overwhelming even for me. I’ll hopefully get some time to break it down and make it palatable so be warned beforehand. 

Pod up

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The Cost of Inaction, Part IV Consequences

 I’ve consistently presented my perspective on the extensive and intricate challenges confronting oil and gas executives and directors. Simultaneously, there's an effort to narrow the issue's scope to only LNG production by the industry, specifically Venture Global's contracts. Natural gas revenue losses stem from a decline in the structural market price, shifting from a 6:1 heating value equivalent to oil to as high as 50:1. Based on oil and gas prices and volumes this century, the unrealized natural gas value stands at $4.7 trillion.

Currently, discussions revolve around a potential oil surplus in the global market, with concerns about large tanker inventories and chronic oversupply projected for 2026. North American shale and heavy oil, being the highest-cost producers, have contributed to these oversupplied markets by refusing to act as swing producers.

Concurrently, citing field operational shortages, discussions about shale's steep decline curves are raising concerns about production deliverability. Who would have anticipated such a scenario in the 21st century? Fortunately, the Preliminary Specification offers a solution to these issues, aiming to rebuild the industry on a foundation of reserves preservation, performance, and profitability.

Most would have expected the dynamic nature of consolidation to have taken effect by now. Over the past decades, executives and directors have repeatedly made poor decisions regarding the industry's direction and survival needs. Consolidation appears to be a contender for a medal against the shift to clean energy, the classic reversal from "shale will never be commercial" to "shale is the future," or the gold medal performance of ignoring their investors for a decade. The reality is that the oil and gas industry is fundamentally broken.

Investors hold interests in these producers from which they cannot easily divest, as doing so would lead to even greater, more permanent destruction. While dividends in recent years have offered some relief, most positions remain underwater. What are investors to do? They could remove the officers and directors at the next AGM, but that's akin to herding a million cats in less than an hour.

Public company officers and directors are covered by Directors & Officers Liability Insurance in case of shareholder lawsuits. I believe lawsuits based on Negligence and Willful Misconduct would be justifiable, if ever there was a case to be made. I am not a lawyer, and this is not legal advice; it simply reflects my interest in resolving industry issues through the development and implementation of the Preliminary Specification.

That's a long journey to build the Preliminary Specification and rebuild the industry. Yes, but my conviction is tempered by the fact that officers and directors can avoid their problems by actively seeking solutions. If they choose to build the Preliminary Specification, they can demonstrate their commitment to rectifying the situation. Issue mitigated, nothing litigated, as I like to say.

I would assume there's a need to choose a viable option. The shift to clean energy was unauthorized and failed the laugh test. Shale's flip-flop may be remembered as the most confusing business strategy. Consolidation is already enshrined in the Smithsonian. None of these identified strategies were viable solutions, adequately addressed an issue (consolidation blamed small producers), or proposed a genuine solution. What purpose do these people serve, and why are they there?

Podcast # 33, Decentralized Production Model

I’m very pleased with the exceptional value these podcasts are delivering. Admittedly, I may be biased, but they capture precisely what I intended to convey in the Preliminary Specification. They allow anyone with even a passing interest in the project to get up to speed quickly, thanks to the AI’s remarkable ability to synthesize and communicate the material efficiently.

Today’s episode focuses on our Decentralized Production Model—the core value-adding framework that enables the industry to manage reserves responsibly and eliminate the chronic waste of producing unprofitably. All in just 14 minutes.

Pod up

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The Cost of Inaction, Part III Culpability

We resume the discussion by revisiting the question of how critically the industry required the use of the $4.7 trillion in lost natural gas revenue. The only reasonable conclusion, after reviewing the prior analysis, is one of utter devastation. Officers and directors appear either oblivious to the scale of the damage—or perhaps are concealing a deeper sense of culpability. At this stage, attributing such negligence to mere naivety or ignorance strains credibility.

Investors voiced their dissatisfaction in 2015, citing concerns over performance and accountability, yet producers have made no changes. In a healthy and profitable industry, profits should easily cover debt, dividends, and capital requirements. While investment is needed, there are multiple capital sources; not every company lines up on Wall Street for more money each year. The primary goal is to make money, and despite efforts to educate oil and gas leadership, they have ignored their investors' message.

The strategy of "waiting out" investor demands for accountability, under the assumption that investors "understood" the industry's decline curves and would eventually be forced to invest, was both sophisticated and dangerously unpredictable. This has led to an unprecedented environment where steep decline curves are experienced, even though prolific shale makes up the majority of the industry's deliverability.

In 1991, I began pursuing the application of Information Technologies to solve business issues in oil and gas. My team and I developed a business plan to raise private capital, and in 1992, we signed a joint development agreement with Oracle. This venture failed in 1997 for reasons I only understood in the 21st century, when both Oracle and IBM exited the industry after failing to attract producer interest in developing ERP systems. What Oracle, IBM, and subsequently People, Ideas & Objects learned is that there is no desire to establish accounting systems that would bring about appropriate levels of accountability in oil and gas. IBM was the last to leave in 2005, leaving only People, Ideas & Objects as potential "new" providers in the ERP market. It was far easier to discredit a startup than a multinational tech firm.

Our conclusion of "designed unaccountability" is supported by the lack of ERP market entrants. SAP had a strong uptake in many of the consolidated producers five years ago. The lack of any issues being resolved proves our argument that they are the bureaucracy. People, Ideas & Objects have faced adversarial treatment for two decades, as documented here. We believe there's more to this. ERP is one aspect of accountability; accounting is the other. Neither has been prioritized in producers' budgets. It's one thing to question why the logic of making money through the Preliminary Specification hasn't been implemented, or why we've failed to follow through for two decades. But why has there been no internal change in either ERP or accounting? Budgets have been slashed to prevent accountability from being determined. And why, after a decade, has no one listened to their investors?

This is not merely a disappointing record. When we consider the $4.7 trillion in natural gas losses, we see that decades of unaccountability and inaction have led to atrophy. Today's expectation is that the business will need to be saved by investors, who are expected to pour in capital despite no changes or improvements in accountability. This is more than we can quantify or qualify, other than deliberately abusive.

Chicken Little began this campaign in October 2023 to highlight and seek solutions for the natural gas revenue losses incurred by North American producers. For almost two years, I was ridiculed for stating such "ridiculous things" while those incurring the losses belittled and ignored the issue. To put this in perspective, these losses should have been the first issue raised and resolved in every boardroom since 2009. Natural gas prices shifting from a 6:1 to a 50:1 ratio with oil is unprecedented. The only visible action was that it provoked boards of directors to silence the messenger—the one with the solution, People, Ideas & Objects.

As we know, shale began the deterioration in natural gas prices in 2009. If producers were aware of the Preliminary Specification as a solution in August 2012, why has there been no change in the accounting and ERP budget to accommodate this? The problem exists, is semi-permanent, and demands action due to its material nature and increasing magnitude. Investors demanded accountability and performance in 2015. After being confronted with the actual, factual $4.7 trillion in losses, only LNG contract litigation and ad hominem attacks followed. 

This raises critical questions regarding the industry's resistance to adopting a proposed solution. While a fear of operational change could be a factor, it does not fully account for the sustained financial losses and the unresponsiveness to investor demands. Consequently, the possibility of corporate culpability emerges as a significant consideration in explaining this prolonged inaction. An inaction that has left the industry with a tragic financial consequence it will never recover from.