To: The Board of Directors, Our RFP Response (IP), Part VI

 We’ve been discussing attributes of the Preliminary Specification and the role that software plays in society. Stating that it’s no longer enough to just own the oil and gas asset, you must also have access to the software that makes the asset profitable. Producer bureaucrats have found themselves at the point in their lives where they believe to their core that their only means of survival is to all get together and sing kumbaya. With covid lockdowns waning and commodity prices looking high to them, times never looked better than now to say the word “Boom.” And just like that everyone drops into line and everything is once again ok. I’m not there yet, in fact I’m far away, primarily because I’m having difficulty remembering what bureaucrats did to change their behaviors and methods to bring about this boom. People, Ideas & Objects recently identified seven crises that should concern the bureaucrats that include the following. #1, Chronic and systemic overproduction, #2, Consequences of the virus, #3, A looming producer debt crisis, #4, OPEC and others spare capacity, #5, Deterioration of the greater oil and gas economic systems capacities and capabilities, #6, Fiduciary risks of officers and directors, #7, “Good old Joe from Scranton.” We also identified a wall of incremental “new” cost categories that will need to be paid by someone somehow. Investors aren’t buying it. I recently hypothesised a “managed industry” scenario where this boom is a facade designed to facilitate the mass exit of the bureaucracy and ultimate capitulation from their posts. Enabling them to state they left when “things were good and there were no issues when they left.” Other than that I fail to see or understand their optimism.

In the process of writing this RFP I’ve been detailing the what, how and why the Preliminary Specification is the choice for the North American producers directors to take the future of the industry. We continue today with further discussion of Intellectual Property in the industry. Bureaucrats have abused Intellectual Property in the industry for many decades. The importance of IP in the industry is it will organize innovation. The most productive innovation is when it’s organized under a structure that provides for the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in something called the Constitution. Copyright has to be published in order to earn the copyright. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that the bureaucrats created to generate price competition in the service industry and elsewhere and ensure everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with bureaucrats sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? The organizational structure of the new oil and gas industry People, Ideas & Objects et al will be building has innovation structured and based on the laws of the land. It will be these laws that define what innovation is undertaken and what is not. The violation of another's copyright is not allowable under the law so there would be no violators. A self policing mechanism reducing the overall costs of unnecessary duplication of innovation in the industry. Providing the incentive for those with a few ideas of their own, and as a result, the inherent motivation to do the subsequent hard work that is necessary. Fully protected from the IP poaching that’s occurred so often under the bureaucrats and is culturally ingrained today. To do so not just for today, but for always and everywhere. These copyrighted publications also enable an understanding of how things are done. Building upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that encourages innovation, eliminates the costly redundancy of duplication of efforts, educates and provides the motivation to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil and gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for the leverage of Intellectual Property, or intelligence. Much as last century has been the leverage of mechanical work. Avoiding this or attempting to opt out is foolhardy in the extreme.

What is the motivation for people to develop these “ideas” of theirs? Are they not, just as the bureaucrats, in it for themselves and looking to siphon off what they can from the industry? Self interest is a part of every human endeavor. It comes down to whether or not it builds value. Bureaucrats have been well compensated and the industry has been destroyed. A great contrast due to the fact they have not been motivated by the discovery of ways in which they can build value through the myriad of ways it can be done? Intellectual Property is therefore not only a structural organizational component that can enable the means to control the innovation process throughout the industry. The motivation behind the participants is purely from the point of view of building value through the establishment of incremental profitability, reduction of cost, enhanced production deliverability or the expansion of reserves. It is the law, and most importantly of all, proven. The reason the United States dominates in the manner that it does is due to the fact the Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are Intelligent beings, not serfs like the bureaucrats. It is productive, constructive, focused on generating value and is an overall benefit to society. Otherwise why would you do the hard work that’s necessary? As a science and technology business, that is refuted to be second only to the space industry in terms of complexity. What has and what have these bureaucracies been doing under their business model?

The business model of the bureaucrats, I believe, was and is to have a pool of knowledge freely available to them when and where they want it and need it at its lowest possible costs of nothing. Therefore they couldn’t have anything published in this environment as it would be counter to their best interests in terms of any of their availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of the science and technology of earth science and engineering. Leaving themselves fully exposed at this time through the simple publication of this IP by any author, say in a blog. I am not a lawyer and am not recommending any action other than to speak to a lawyer. I am certain upon reading this bureaucrats will begin the process of delegating the documentation of these specific subjects into materials that can be published. Asking the geologists and engineers, who are already overworked and exhausted, to put it on their list of things to do quickly. Which of course they’ll do. ;)

Two other interesting aspects of Intellectual Property are first, what’s known as the safe harbor provisions. Why doesn’t consolidated mega-corp just turn around and launch a lawsuit against copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to cooperate with their every command. The safe harbor provision states that you can not launch a lawsuit against the copyright holder. Which is really too bad isn’t it? Again. ;) Secondly, the division of tacit and explicit knowledge. Tacit knowledge can not be captured or written down. Only the explicit knowledge. Therefore it is up to people to take the explicit knowledge they have and apply their tacit knowledge to generate the value. The services associated with Intellectual Property are as important as the IP itself. Just as People, Ideas & Objects have our user community heading up the service providers that are delivering our software and their services to the producer firms. Therefore fulfilling our need to have the effective and efficient delivery of the tacit and explicit knowledge underlying the Preliminary Specification. The ability to manage that second revenue stream that we’ve identified in the earlier part of this series should be raised and brought back into focus. 

What I do know is that oil and gas in North America needs to be moving forward quickly, efficiently and effectively. The preparation People, Ideas & Objects et al have completed can be leveraged by the industry at this critical time. We have prepared the Preliminary Specification and our organization of our user community and their service providers. Since its December 2013 publication and the beginning of our efforts in organizing our user community since the first quarter of 2014. The means and methods of dealing with the specific issues of overproduction, overcapitalization and collapsed commodity markets that have been rendered obtuse through the specious accounting conducted across the industry since the late 1970s. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the publication of the Preliminary Specification. A full decade of intense research that is reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be industries largest cost of all. The time needed to generate a viable, workable business model. We enable them to yield untold value creation in the short term and not have to undertake that ten years of research themselves. In addition, the Intellectual Property contained throughout this community of ours, just as it will be for the small producer sector, and all sectors and industries in oil and gas, is what we list as one of our three strategic competitive advantages. They are, our user community, research and Intellectual Property in reverse alphabetical order. Anyone offering similar aspects to the Preliminary Specification in their ERP software would be violating our Intellectual Property and we would expect, as law abiding citizens, the oil and gas producers would adhere to these principles of law, recognize that and refuse to use their software. 

People, Ideas & Objects et al fully understands and appreciates the difficulties and risks associated with today’s North American oil and gas producer. We have engaged the bureaucracy in the classic battle of creative destruction and today’s disintermediation through Information Technology. The battle is well documented in the pages of this blog. We are here to make the industry dynamic, innovative, accountable and profitable in order to achieve energy independence on the North American continent, everywhere and always. Profits from the real perspective of recognizing all of the costs of oil and gas exploration and production on a timely and accurate basis. We provide a value proposition that differentiates us from the marketplace to the tune of $25.7 to $45.7 trillion dollars over the next 25 years. Those who do not understand how that value could be generated are unaware of the damage and destruction that has been levelled across the industry, its sub industries and the greater oil and gas economy. And therefore I will note in terms of our value proposition it is key to remember that oil and gas is a primary industry.

Our value proposition is defined by two components. The first is the incremental profitability that was not being generated and most probably never would under the bureaucrats current business model. These incremental profits total $5.7 trillion. The second element involves others' estimates of what the expectation for future capital expenditures will be in the next 25 years. These total $20 to $40 trillion. Bureaucratic expectations are that these capital expenditures would continue to be sourced through investors and bankers. That is now proven to be a false understanding on behalf of the bureaucrats. A failure of their understanding of business. These capital costs, including those already listed as property, plant and equipment on the bloated balance sheets of the producers will need to be recaptured from the only source with an adequate amount of cash to fund the industry on a prospective basis. The consumer will have to pay the costs of the energy they consume, the investors are refusing to subsidize them further. We believe that the amounts sitting in property, plant and equipment of the producers balance sheets today better represent the unrecognized capital costs of past production. Are in fact a reflection of the subsidy that investors have granted the consumers as these costs have not been realized appropriately due to bureaucrats' specious accounting and their desire to “build balance sheets.” Passing these capital costs, in a capital intensive industry, to the consumer in a timely and accurate manner is the only method in which this industry will be able to proceed profitably. This also being the only source of funding that the producers could ever generate. Investors will need at least a decade of proven “real” profitability before they’ll come back into the industry on a wholesale basis. The costs of this future will be fundamentally more complex with new categories such as reclamation, refurbishing and rebuilding the infrastructure being added. These costs have been incurred on behalf of the producers, as a result of providing for the consumers energy needs. Without a means of passing these costs on to the consumers, such as the Preliminary Specification does, they’ll continue to bankrupt the industry, or their investors under the bureaucrats' proven method of mismanagement. 

It is People, Ideas & Objects, our user community and their service providers that are channeling these organizational structures towards innovation, productivity and profitability through software. It is software that defines and supports the organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (IP), Part V

 People, Ideas & Objects, our user community and their service provider organizations focus on the startup, small and junior oil and gas producers to ensure they’re provided with the full capacities and capabilities of the Preliminary Specification. Is due to the critical role and nature of their existence, as without them it would otherwise soon be over. Currently we have a market in oil and gas where the bureaucrats happily point to the fact that startup to junior producers are unable to compete and blame them for causing the difficulties we’ve seen in the industry. In fact they may have become the bureaucrats most recent, viable scapegoat! Our focus is appropriate, and we’re able to ensure these producers are able to enter the industry with far less barriers to entry by establishing them with the means to generate their second source of permanent revenues from day one. A ready market where the demand for those earth science and engineering resources will be made available through the Preliminary Specifications Resource Marketplace module. Startups, small and junior producers will also have the ability to interact with producers in the Work Order, Resource Marketplace, Research & Capabilities and Knowledge & Learning modules. Providing them with the cash necessary to pay the mortgage, the Internet, to work from home and skip past the dog food aisle for their families nutrition. Introducing them and their experience, skills, knowledge, and ideas that form their capabilities to the broader marketplace. We also eliminate that impossible wall of never ending overhead costs that consumed investors dollars year after year as the fixed, base overhead of a small to junior producer. Which is the cause of their demise today. It didn’t matter how good their technical skills were, that’s not what determined their success or failure as a startup, it was if they could get past that wall of base overhead costs. We’re going through a process of identifying the what, how and why People, Ideas & Objects et al provide these producers with a fresh start. Let's add another brick to the “how” variable. I think we’ve accurately described a different world for the future of the industry in terms of the need to begin to rebuild the industry brick by brick, and stick by stick. That’s not a top down consolidated mega-corp solution in my mind.

So why are we focused on this allegedly obscure sector of the industry? It should be the number one priority of everyone in the industry today. If we believe that consolidated mega-corp is going to fix these difficulties it would be a surprise. I’m not speculating here, I’m the only one that truly knows in my self deluded ways. And I’ll tell you why that is, none of the bureaucrats are calling me. It’s either their not interested in ERP, doing something on their own or planning to build the Preliminary Specification without me. Thinking that “big” will squash that bug formerly known as People, Ideas & Objects. First it’s no longer the wild west in terms of Intellectual Property. Second, the world doesn’t work that way anymore, copyright and Intellectual Property are respected at the highest levels everywhere and always. When Oracle and the majority of the Information Technology world depend on their own IP it’s not wise for them to go about diminishing others IP. It also doesn’t work from the point of view of having a first tiered vendor working with an industry that is trying to do the same. If consolidated mega-corp were attempting that. Why would Oracle work with any such scum when they’ll only turn around and do it to them once they're done. Therefore the board of directors of all of the producers are hereby advised don’t think they can use any of People, Ideas & Objects Intellectual Property. If People, Ideas & Objects finds that someone is using it we’ll have it stopped. Rendering any similar alternative ERP investments futile. Come to think of it, this little dissertation on the use of IP may be an interesting point when understood from a scientific and prospectively innovative industry. And that is how the underlying Intellectual Property of the oil and gas industry is managed within the Preliminary Specification. 

On a current basis the bureaucrats have known the Preliminary Specification establishes a strong foundation for which the Intellectual Property of those individuals within the industry becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published in final form by December 2013. From the Resource Marketplace module I summarized the point as.

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil and gas which is based on its earth science and engineering needs. After all, it is a business based on science. If we are to expand the capabilities in the science and innovation in the industry. We are going to need to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there is no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to the Intellectual Property within the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This therefore turning the oil and gas industry into a far more dynamic business.

With all of the industry fundamentally destroyed as it is, its IP is in disarray as far as I can tell. The capabilities and capacities that are derived from it are deteriorating as we speak. Making this somewhat of an IP gold rush in the industry, just to save it from the bureaucrats. However, check your employment contracts they may have clauses that state while working for them all of yours is all of theirs. Consolidated mega-corps difficulty is that none of this is published and the act of publishing is how the copyright is earned. Let me pass on one more important fact that I’ve determined since I’ve been so reliant on copyright. Patents and trademarks are defensive, in that they protect what is known of your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Copyright does not secure for you the rights to an idea. It only provides you with the monopoly rights to the expression of that idea. Implying it must also be pursued and maintained much in the manner that I do here. So until the Resource Marketplace and other modules of the Preliminary Specification are built. Ladies and gentlemen start your blogs! The first thing we must do for the startup, small and junior producers in the oil and gas industry is change their competitive advantages. To read now: Intellectual Property, earth science and engineering capabilities and capacities, their land and asset base. Done. One of the greatest forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of the producer firm as competitive advantages? Consolidated mega-corp is looking awfully unattractive right now. Bureaucratic brains exploding. 

The reason that everyone should be concerned about the startup to junior sector is purely for the fact that all of the industry rebuilding will be done on an innovative basis. This will not be your grandfather's oil and gas industry. I know it should say father but I struck a compromise between father and great, great grandfather's oil and gas business. It’s the 21st century and we can skip not just a few steps, but everything. Since we're rebuilding, why do it in any other manner? Innovation is the basis of the Preliminary Specification. It is one of the two People, Ideas & Objects, our user community and their service providers core purpose to provide all oil and gas producers with the most profitable means of oil and gas production everywhere and always. And to provide the consumer with the lowest possible cost of an abundant energy supply. We do this with the decentralized production models price maker strategy ensuring that all production is produced profitably. And innovatively to ensure that the costs remain affordable to the consumers and the commodities deliverability and reserves continue to expand. 

Business is changing quickly. Intels dominance in the market is now a constraint that is causing them to lag the market in consequential ways. As the dominant manufacturer of processors, theirs has been deemed a redundant business model. The business value is no longer in the manufacture of processors, it's in the design of them. Contract manufacturing is a commodity business where others are finding profits and opportunities in that area where Intel can not compete. In terms of design being the value, that is now the case and you should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will be running the Preliminary Specification exclusively on Ampere which will be far better due to the higher cost / performance than the Intel cloud offers. 

I wonder why Intel didn’t merge and become a member of the consolidated mega-corp themselves which promises so much in today's business world? This is the new business world and there are new business models. It comes down to one word, the individual. If you don’t see what the rebels at Intel did when they established Ampere your opportunities remain with the last few days of consolidated mega-corp. The individual is facilitated by that great innovation known as the door. It is also facilitated by what the Internet was really meant to be, FaceBook and such are just useless distractions. The Internet demands one thing and one thing that is difficult to attain however. The software to organize. To organize society today, with its global reach, can not be done in a spontaneous manner. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet through software providing them the means to conduct their business. Software defines and supports the organization. Without People, Ideas & Objects none of this oil and gas vision will come about by sitting and waiting for the phone to ring. At least it hasn’t happened yet.

The question also needs to be asked: why is it that Apple continues to innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovativeness they provide. They too rely on Intellectual Property as the basis of their value. They in fact consider themselves a software company that sells hardware in order to bring about that customer value. Again, software defines and supports their organization. What fool would run a company that sources their handful of products from a number of countries that total in excess of 3.5 billion in population? And then have the gall to snap their fingers and say “now innovate.” It doesn’t happen without software.

Please note that many have identified the Chinese as an issue that we should be concerned about. They are a formidable competitor of the class that North America has never faced before. For that there is no doubt. We do not have an issue with the Chinese people in any way. They’re good people and we are confident in our ability to compete. What we have however is serious concerns about the Chinese Communist Party. Extract the CCP out of the equation and we’ll be on a landscape that is more reasonable, fair and equitable. This is an apt metaphor for why we need to take the oil and gas industries' command and control out of the hands of the oil and gas bureaucrats.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (S&DOL), Part IV

 We’ve been discussing the marketing phase that People, Ideas & Objects have now undertaken. How the directors of the producer firms are our target audience to ensure the Preliminary Specification is chosen as their ERP system. In the prior post we noted the use of specialization and the division of labor was to be used to enhance the performance of the producers administrative and accounting functions and to provide the organizational foundation to implement our decentralized production models price maker strategy. We noted how the service providers that were affiliated with People, Ideas & Objects user community would be providing the ERP software and their services to industry as their clients. This involved the delivery of the explicit knowledge that had been captured in the ERP software and the tacit knowledge of the individuals within each of the service provider firms. Fulfilling the role of the accounting and administrative needs of the producers with a variable, industry based accounting and administrative capacity and capability. What we wanted to discuss today is the opportunity for all concerned that the consolidated mega-corp vision being pursued by our good friends the bureaucrats provides in contrast to our Preliminary Specification, and most particularly the start up and junior oil and gas producers.

With the clear objective of rebuilding the industry brick by brick, and stick by stick the consolidation route is contrary to every possible reality on the ground in the business world today. More of the same bureaucratic nonsense is not going to resolve what has afflicted the industry for the past four decades. Which can best be summarized as the bureaucracy. Rebuilding will involve a dynamic industry that can be based on a decentralized, connected environment such as the Internet provides. Hierarchical strata of advanced paper shufflers is a future failure, best defined. To bring about an ERP system for the industry such as the Preliminary Specification provides; must consider the opportunity of what is commonly referred to as disintermediation. And People, Ideas & Objects, our user community and their service provider organizations abide. However, bringing one of the most complex systems into one of the most complex industries into the environment of the small and startup producer is foolhardy to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small or junior oil and gas producer? And that is the fact of the issue we stand with today as a result of the “consolidation as a solution.” We need to ensure the future of the industry is in the hands of the oil and gas men and women who will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of the regulatory, compliance and investment demands are real and an impediment to these needs. That is, if they could not access the kind of systems necessary to operate in that environment, no matter their size, the capital markets will remain forever closed to them. An untenable barrier today that will be even more so in the near future. 

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate in excess of $3 to $5 million of free cash flow necessary to offset the annual base overhead of the firm. For the administrative and accounting they’ll only be incurring the variable overhead costs of the service providers fees that they use and the costs of the software development assessment by People, Ideas & Objects each year. Recall we noted recently that not only are these overhead costs variable, but if they’re incurred that denotes profitable production, indicating these costs are covered, or the property is not producing and as a result not generating any costs. And there are more attributes of our system that provide benefits for this new oil and gas industry. 

Enter two variables that were not available in prior decades and centuries. The cloud computing era with the maturation of the overall technological infrastructure that is best represented by the Internet. I believe people are mistaken if they think the Internet was conceived and developed in order to facilitate FaceBook, to me they are a generational fad. We are at the infancy of what the Internet can provide. And the second variable being the “service” aspect of our user communities service providers. It was discovered in our research that the level of innovation that is attributable to the small and medium sectors of an industry were as substantial as what the larger sectors contributed. Although the larger sectors contributed large amounts in total spend it was no greater than the effect of what the other sectors contributed. Professor Dosi was one of the key sources of research that I used in determining the framework necessary for an innovative oil and gas industry. There are 134 blog posts in this blog in which we wrote about his work during our 10 year research into building oil and gas ERP systems based on the Joint Operating Committee. Our Preliminary Specification, user community and service providers provide all oil and gas producers with the most profitable means of oil and gas operations, everywhere and always. However at the same time ensure that the consumers are provided with an abundant energy supply and the lowest possible cost of their energy consumption. Innovation within a science and engineering based business is therefore an inherent part of both these demands. 

Bureaucrats are great at citing what they’re going to do in their consolidation vision. They never follow up with how or why they’ll do it, and when it ultimately fails we’ll see that no thought went into their talking points beyond the distribution of their talking points memo. They say consolidation will cut overhead costs which is an inherently simple concept to grasp. Except, this also falls under the “growth industry” mentality that is prevalent and is a distraction in oil and gas. Growth businesses in other industries claim “they'll make it up on volume” is the familiar saying. What we do know is that few achieve that. The question we need to ask these bureaucrats is, if the reduction of overhead is the objective, why pursue that if only People, Ideas & Objects say that overhead is disproportionately out of place? Most of the industries overhead, 85% on average, is capitalized. Therefore excessive overhead costs must have been an issue they’ve been denying all these years. Is the reduction in overhead they’re seeking designed to enhance “real” profitability? Or, alternatively is it so they can bury their personal “take” that much deeper into the obtuse malaise of overhead sludge? So let's cut the chit chat and get to the point of what, how and why People, Ideas & Objects et al are going to provide these miracles. 

Let's set the tone from the point of view of what will be the demands in terms of engineering and geological needs. People, Ideas & Objects have identified new cost structures that include the costs of:

• Recovering the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and passed to the consumer it would provide incremental cash flow to provide dividends in compensation for the past excessive reliance on investors.
• The refurbishment of the infrastructure as it stands today. 
• The rebuilding and expansion of the infrastructure. 
• And finally the looming and escalating reclamation costs of the industries past. 

These costs have been incurred by the producers as a result of providing for the consumers energy needs. Without a means of passing these costs on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the bureaucrats current and / or consolidated business model. These form the legacy of the bureaucrats in terms of the property, plant and equipment balances which we’ve determined are not transferable out of the corporation. And as much as they’ve tried, either are their reclamation cost obligations. Taking on the expansion of the infrastructure may be the largest of these costs, and I would suggest the greatest opportunity for all concerned in a dynamic, innovative, accountable and profitable primary oil and gas industry, and most specifically the secondary and tertiary industries. 

The Preliminary Specification also implements specialization and the division of labor across the producer firm and most particularly in the earth science and engineering capabilities and capacities of the producer firms. We list this as the first step in our solution for the startup and junior producers. These capacities and capabilities are becoming increasingly burdensome to each of the producer firms due to their unshared and unshareable nature, but for different reasons from the administrative and accounting difficulties mentioned in our last post. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development which demands further specializations be undertaken within each of the producer's capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, expand the deliverability of the North America based industry. Consolidated mega-corp will have particular difficulty managing this technical resource when entrepreneurs see the startup opportunities we’re defining here. That is, if only there were an ERP system that provided a solution for the startup to deal with the compliance, governance and regulatory environment and be able to access funding! In addition to this limited technical resource supply we also believe that the producers' firms are at a point now where the costs of their scientific engineering and geology needs are beyond their commercial grasp as it is. Nonetheless, a decidedly higher level of specialization and division of labor will be needed in the areas of earth science and engineering. It is the unshared and unshareable makeup of these capabilities that we find the difficulties once again. Producers need these technical resources for a variety of just-in-time purposes, as operators, for their highly technical areas. If we assume that across the industry the utilization rate of these technical resources are at 75% due to their organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution of these pending and most certainly future difficulties. A one third increase in the capacity with higher output from enhanced specialization and division of labor, providing us a good start to solving this difficulty.

Instead of letting another issue manifest itself into a crisis level issue. People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. The first is to consider the producer firm from the time the Preliminary Specification is operational, to have two sources of continuing revenues. The oil and gas sales and the revenues earned by all of their earth science and engineering capacities and capabilities being deployed and employed in the form of a revenue generating capacity. Whether that be to one of the producers own Joint Operating Committees, or in the consulting of the individual to other producers / Joint Operating Committees, as a client, of which they may / may not have an interest in. Due to the specialization and division of labor demands producers will need to have chosen to specialize or acquire a specific capability on the basis of the distinct specializations and competitive advantages they hold or desire. These producer revenues will then offset these engineering and geological costs incurred and charged to either their Joint Operating Committees or other producer clients. 

In terms of an opportunity in this new oil and gas industry, in which we are building brick by brick, and stick by stick, this second source of revenue should be seen as the initiation of the start up oil and gas producer firms' startup revenues. More than that they offset the additional costs of the head office burden not considered part of the administrative and accounting category. And this will apply to all producers no matter their production profile. When producers are specializing on their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their needs.

In a world where software has to define and support the organizations that exist. This is some of the what, how and why we’re able to provide when the Preliminary Specification is delivered. Instead of being mere serfs as the bureaucrats wish to continue treating the engineers and geologists, they’ll be able to take control of their careers from this point forward. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry is our Work Order. It can be reviewed in detail at this link. Bureaucrats may claim that charging labor directly is already available through the systems they use. Which is true they are able to allocate their labor costs to the field. However not with the necessary features of raising it to the point of making it a defined revenue stream of the firm. And the feature of making it a system that interacts throughout the industry. Allowing for the interactions between the resources they need and where they need them. Subject to the appropriate approvals and governance of course. Or enabling the second purpose of the Work Order system that we’ve defined in order to enhance the industry wide innovativeness through the establishment of working groups etc. Our Work Order system is able to bill its costs at all times to either corporate overhead, Joint Operating Committee overhead, an AFE or to a lease. Therefore the billable time of the individual engineer or geologist should be deployed within the producer at 100% of the time or not be working for the producer. And this is an inherent part of these people beginning the establishment of their own producer firms which rely on their talents of their much needed earth science and engineering capacities and capabilities. We’re not finished with the what, how, and why the Preliminary Specification facilitates the robust startup and junior oil and gas producers. We’ll continue this discussion on July 12, 2021.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (S&DOL), Part III

 It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil and gas has now been deemed a failure by our good friends the bureaucrats. They’re getting out, selling properties and writing down those assets that held such promise in all of those investment offerings. These Keystone Cops are on to the real thing now with clean energy and are making the transition with the revenues established by prior investors in an unauthorized fashion. Remember it’s cut and run. Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Granted it’s self serving as it involved developing the Preliminary Specification and demanded the bureaucrats conduct some serious effort, or work! After two years of this paper's publication; is it now acceptable to just walk away from the catastrophe they've created and venture off into territory that has proven never to be profitable? Or do they have a plan to make clean energy profitable? If so they should have submitted that in the business plan they needed to seek authorization for such a radical change in the underlying business. Why is it acceptable to let the bureaucrats saunter off now and forget about the failure they’ve created? Who will hold them responsible and accountable, it should be the boards of directors. And why is this method of failure the consistent behavior of these bureaucrats over the past four decades? Or am I mistaken about this and am unaware of some amendments to the Directors and Officers Insurance contracts? This behavior is unacceptable and reflects their moral and ethical depravity. And why would they do anything about this if they’re never held to account?

With this post we begin a series within a series where we’re describing the number of organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil and gas producers. These define the “what,” “how” and “why” of the Preliminary Specification. But most of all adopting a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

I have to admit I’m quite excited about this marketing phase People, Ideas & Objects are in now. I no longer have to concern myself with the bureaucrats and their activities, they’ve left a legacy they need to live with and I’m sure there will be more to talk about. I’ll find no argument anywhere that they’re the ones responsible for the industry wide damage that’s been done, no one is listening to them anymore and they’re probably on their way out anyways. The untenable nature of the producer firms is reflected in the downward trajectory of these organizations. The extent of the damage is so severe they are beyond remediation and the economic principles of creative destruction and disintermediation are fully in play. The situation on the ground is therefore ripe for a solution such as the Preliminary Specification, our user community and their service provider organizations. Marketing is a much more enjoyable situation for me as I do not need to be the grumpy guy in that far off distant corner of the Internet anymore. Our appeal to the directors of the producer corporation is simple. They decide which ERP software to implement within the organization. People, Ideas & Objects know that the directors are just as concerned with continental self-sufficient deliverability of profitable oil and gas operations and providing abundant, affordable energy to the consumers. People, Ideas & Objects assert, as in every business today, it’s not enough to just own the oil and gas asset anymore. It’s also necessary to have access to the ERP software that makes the oil and gas asset profitable. Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil and gas today and the systemic lack of profitability throughout the industry. It is what we refer to as a “modern day software bug.”

The creative destruction being undertaken provides opportunities for everyone, except the bureaucrats, and these opportunities would definitely include the directors. The new producers may be the best opportunity we’ve seen for a long time in the industry and what these companies could use more than anything is a steady hand to help navigate this road ahead. The advantages that People, Ideas & Objects Preliminary Specification brings for all producers is significant. Whether that is Exxon or the producer firm that was started at the breakfast table this morning. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil and gas economy, no matter their size. However, in the categories of the junior and startup oil and gas producers, the advantages we provide put their organizations in the driver's seat in terms of how they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under the bureaucrats' business model. This will begin being detailed in our next post. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We feel the overhead costs of the producers demand these be dealt with by making these organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed producer based capacity and capability, into a variable industry based capacity and capability, their variable behavior being based on a Joint Operating Committees ability to produce profitable production. Another reason for the high overhead costs of each producer is that all of their capacities and capabilities are replicated within each producer firm in an unshared and unshareable form. Today these accounting and administrative capabilities and capacities are purpose built within each producer organization to meet the demands of the various stakeholders and these overhead costs are the secondary cause to the lack of profitability throughout oil and gas. These costs do not form part of any of the producer's distinct competitive advantages.

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to their Joint Operating Committees. If it’s not profitable then the property will be shut-in and none of the service providers will therefore receive any data from our task and transfer network and therefore no processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

There are many benefits for producers to begin their operations in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. Whether that is at 25% or at 100% of the producer's capacity. When all costs are variable, production will be profitable at any volume of their production profile. This will preserve their oil and gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have occurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage where the costs of production and storage are zero. Producer bureaucrats assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once the bureaucrats realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such nonsense. That is until they ran the oil price down to negative $40. The refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of production the reserves reflected there was no damage whatsoever. These are just some of the many reasons for the Preliminary Specifications implementation. Oil and gas commodities are price makers, not the price takers the bureaucrats assumed they were for all these decades. One critical aspect of a price maker is that they only bring on new production when it’s profitable. The method we’ve developed is detailed further in the Preliminary Specifications Preamble. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil and gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in previous years. With technology and other industries providing growth opportunities, for oil and gas companies to assert they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect the producers capital allocation and capital discipline too. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets” and the like to the scrap heap. 

Cash demands in the industry are currently one of the producer's pressing difficulties. This is due to all of the producer's costs outside of operations being more or less capitalized and then recognized as depletion over the course of several decades. Including the capitalization of large percentages of overhead and interest. By not recognizing overhead costs in the current period producers are able to more easily declare their specious profitability. However, the cash that was consumed in those overhead costs is not returned in the current period in the prices of the commodity charged to the consumer. These overhead costs then sit as assets on the balance sheet in property, plant and equipment, or as we call them “the unrecognized capital costs of prior production,” for the next few decades. Therefore the search for new cash each month to replenish the cash float has been the issue for the past number of decades. When investors were willing, this was not an issue with the annual top up of investors dollars. Now the reality of their specious accounting haunts them daily as they try to find this new cash to cover the basic costs of their operation. Working capital has been and will continue to be a crisis in the industry under the current business model. No matter what commodity price is attained. Basic cash management would have indicated this to the bureaucrats many decades ago. (I wonder why they never changed these methods? I’m sure they must have had their reasons!) With the Preliminary Specification recognizing overhead in the current period as part of the operation, capturing that in the price charged to the consumer, return of the cash to the producer will occur within that production month. That however assumes profitable operations are conducted and all costs are accounted for appropriately. I’m on record, and allege that hasn’t happened. Calling the producers accounting specious and deliberately deceptive. I do at times wonder what costs are in that capitalized overhead that no one is aware of. Both in terms of its size and its composition. 

As a director of an otherwise terminal organization this might appeal as a more exciting type of work. With a directors experience, skills, knowledge and ideas, or what form the basis of an individual's capabilities. The directors would be valuable and rewarded throughout the industry. Don’t count yourselves out. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

To: The Board of Directors, Our RFP Response, Part II

 There is a consensus throughout the industry that the self-serving bureaucrats are the primary cause of the difficulties we’re all experiencing. Their two predominant attributes throughout the past decades have been inaction and enhanced personal financial compensation. Now that there is nothing left for them, they’ve been able to orchestrate our “managed industry” hypothesis for a convenient opportunity to exit the industry and their obligations. We may well see this final chapter of the destruction phase of creative destruction soon being completed. Leaving the directors of these producers in an untenable position themselves. What their actions will be is the big unknown. This series of posts is to identify an option for them to pursue, a solution to both their personal financial and legal jeopardy that they may now find themselves in. And to provide for the constructive means in which the creative phase of creative destruction begins. Let's call this final chapter of the destruction what it is, bureaucratic capitulation. Will this be an orderly and well controlled process that is methodical and predictable? It will be anything but. The level of opportunity that will be experienced throughout oil and gas, what I call the greater oil and gas economy, will be something far greater than anything that has ever been experienced before. With opportunity comes chaos. 

The stumbling block to all of this, the trigger for this to happen and the reason it’s being held up is the funding of the Preliminary Specification. This isn’t me boasting about this work. The industrial organization and the software that supports and identifies this new world being unavailable will force us to remain in this sludge of a bureaucratic industrial environment forever. Or until something replaces it. In the 21st century software defines and supports the organization. This was the defined reason the bureaucrats purposely never pursued any ERP software developments. It would establish a competitive organizational alternative that would impinge on their personal revenues and the means in which they were “earned.” Spontaneous order has been the principle that has enabled economic growth and prosperous development to occur historically. Both creative destruction and spontaneous order are stifled in the 21st century through the organizational cement of ERP software used by the current producer organizations. Any attempt to break out is futile. The Preliminary Specification will encase the industry in its own form of ERP cement as well, as will any other ERP software. This is the reason that we’ve endowed our user community with the Intellectual Property and the power to make the changes to the software as they, who are on the ground at all times, see and understand what changes are needed in the market. This enables the dynamic nature of the producers to continue developing when the ERP software is user community based. People, Ideas & Objects user community is a permanent industry based capability, and they are endowed with the necessary power to make the changes to provide for the most profitable means of oil and gas operations, everywhere and always. These are provided for in People, Ideas & Objects user community vision. Undoubtedly one of the key reasons our good friend’s, the bureaucrats, disliked what we’re offering. 

It is these C Suite officers that need to scuttle out of their posts as quickly as they can before the facade of our “managed industry” hypothesis is proven, or the industry realizes that it's in no condition to face even one of at least seven of the listed crises they’ve created for themselves. What we know for certain, if this “managed industry” hypothesis is valid, is that it is not what the directors signed up for. To cover for and repair the damage done by the officers they supported. To involve themselves in the spaghetti like details of an untenable corporation that’s unmanageable. Which is without the support of the financial community and headed quickly towards any number of outcomes that would be considered tragic. Whether they knew or understood the situation as it was developing, or if they know and understand the nuance of their situation even today, it does not matter. Directors are culpable and guilty of ignoring the overproduction of oil and gas since at least July 1986, on a systemic industry wide basis. And the solution to that overproduction problem that People, Ideas & Objects has published in the form of the Preliminary Specification in December 2013. However, a solution that has been openly discussed here since December 2005. It’s not what you know necessarily, it's what you should have known. I find the difficulties the industry is realizing are predictable, tragic and wholly unavoidable. The fact that I’ve detailed a solution to them many decades ago has caused me to be the target of these bureaucrats' vile and anger during that time. 

Through People, Ideas & Objects, our user community and their service providers the systems and organizations throughout the greater oil and gas economy can begin to develop under the vision of the Preliminary Specification. Through the interaction of the user community and the creative, greater oil and gas economy to rebuild the oil and gas industry. To build it brick by brick and stick by stick as we’ve stated here on this blog as far back as our October 20, 2008 post entitled “No One’s Fault But Our Own.” Here are suggestions of some questions that directors should ask themselves, today.

• Maybe People, Ideas & Objects et al have a point, what alternative is there? 
• If there is an alternative, is it a viable business model, as comprehensively researched, based on the issues and opportunities that are experienced in oil and gas today? Setting a clear foundation and vision for the future of this industry? 
• If directors funded People, Ideas & Objects et al budget they would have no subsequent influence in their success or failure. They would have control of their own destiny. What if they failed? What if any alternatives the directors may decide to use failed? 
• What control and influence do directors have over their current producers' success or failure?
• Would the sale of producer's existing reserves provide the directors with the best means in which to provide for their stakeholders under any future scenario? 
• What would happen if oil and gas prices rose higher, “to the moon” as they might say? 
• Would directors still capture that value in the sale of the reserves?
• And what if, directors would have, could have, or should have found… The commodity prices collapse again. 
• How could I as an investor / director participate in that exciting new oil and gas industry?

There is nothing left of the producer firms in terms of value left to extract. The industry's momentum has hit the point where it will be all consuming under the current business model. It has been expended and exhausted with the industry demanding cash in order just to operate. The state of affairs in any sense of the business could not be in worse condition than it is today. Higher commodity prices will not help. If existing producers were to provide any remedial value generation it would be too little and too late. The decades of triage that are necessary is far too much time. Especially when compared to the time that’s available for the producers to consider they have a systemic profitability issue. Then they would have to prove they’d seen the light about profitability and cease to operate the industry in their behavioural and cultural manner that has so fundamentally destroyed it. Through People, Ideas & Objects et al these objectives can be achieved at less cost, without the need to fight the bureaucratic cultural inertia and resistance to change that exists. With far less time when the entrepreneurial talent throughout the industry is unleashed to solve these problems through the Internet. Most importantly it will be done successfully.

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response, Part I

 A quick note to say we never received an RFP. We would never be included in the bureaucrats list and don’t expect one at any time. This blog series would be our response if we did.

We’re marking another milestone here at People, Ideas & Objects. A point in time that we have not achieved and have not been in a position to conduct until now. Today we begin the active marketing and sales of People, Ideas & Objects, our user community with their service provider organisations and our Preliminary Specification to the North American based oil and gas producers. What we’ve been upto these past few decades is a matter of discussion. I’ve been of the belief that we conducted the necessary research into the issues of the industry's poor financial performance. Brought about a robust discussion of the issues and opportunities involved and brought the fight to those that I felt were the culprits responsible for the damage and destruction that they’ve caused. We identified a historical process that industries have seen repeatedly when faced with the demise of their organizational methodologies. That process is in its final days as we expect the bureaucracy have achieved what we’ve hypothesised as their “managed industry” scenario where the appearance of normality allows them to slip into the darkness without the awareness of their destruction's culpability. Leaving others to the potential catastrophic results when the facade of the “managed industry” fades back to reality.

In the beginning we identified that the lack of real profitability in the industry was to be felt across the industry but also with everyone involved across the greater oil and gas economy. Without profits there is no value being generated and therefore the decline and destruction of the activities being conducted. This point is well understood and appreciated throughout the greater oil and gas economy. The efforts of everyone whether that be time, energy or money have been wasted by the self interests of the bureaucracy, who we’ve defined as the C suite of the producers. The capitalists focus on profits being earned by investors is therefore appropriate in any and all cases. When the investors are satisfied, they are there to provide for the future. When they’re not satisfied, they are quickly able to leave, sending the ultimate message of disapproval of the activities being carried out. It is our belief that investors, as were others, were duped by specious accounting that did not represent the situation on the ground. Aggravating the poor performance of the industry for a protracted period of time. Leading to the comprehensive exhaustion of value from the industry. What is represented today in the financial statements of the producers would not be something to be proud of. Producers' financial statements reflect they are in serious long term financial jeopardy. And none of these financial statements are representative, they are as specious as they’ve ever been. 

Throughout People, Ideas & Objects history it has always been our objective to appeal to the investors of the oil and gas producers. This will continue and nothing has changed. The Preliminary Specification provides for the most profitable means of oil and gas operations, everywhere and always. We will not waver from what we believe to be our ultimate competitive advantage over our ERP software competitors. Investors are however not the decision makers that are able to influence the producers towards the selection of People, Ideas & Object et al. What we are now doing in this marketing shift is that our focus has moved to the investors representatives, the Boards of Directors of the producers. Ultimately they are the final decision makers that will be making the decisions as to which ERP system provider they’ll use within the producer firm. Based on the bureaucrats recommended list of vendors. Of which we most certainly would never be on any of these lists due to the creative destruction and disintermediation forces we have leveraged and focused on these bureaucrats. Therefore we are now seeking to exploit the sunlight that we see breaking through between the Boards of Directors and their bureaucrats. 

If we are correct in our opinion of the situation on the ground as it stands today. Those being these three main components. The critical financial jeopardy the producers are in, the current state of the “managed industry” and the probable exit of the bureaucrats. There is much to be concerned about for these directors. We have discussed what we believe the financial situation in oil and gas to be and won’t revisit that. The “managed industry” is somewhat of a new hypothesis that I developed recently. It began last summer when we noted the legal jeopardy of both the officers and directors in terms of identifying their specific personal risks as a result of the long term issue of overproduction in the industry. Since July 1986 we’ve been able to document the fact that overproduction has been the source of a lack of real profitability throughout North American oil and gas. Secondly we noted that the Preliminary Specification addresses overproduction specifically with a direct solution to that issue and as a result generates profitability everywhere and always. It was published in December 2013. Noting these two facts would allow their insurance providers providing their Director & Officer Liability (D&O) insurance coverage to void the contract. The solution to this probability was a strategy that we were stating as “Issue Mitigated, Nothing Litigated.” Directors would be able to achieve the mitigation of their personal risk by adopting the Preliminary Specification and avoiding any claims of mismanagement. From Holland & Knight.

The Application Severability Provision (as an example provided from this website.) 

Absent an “application severability provision,” if any insured had knowledge of a fact that was misstated in the application (regardless of whether the insured knew the fact was misstated in the application), coverage under the policy could be voided to all insureds. An application severability provision avoids this potentially unfair result by making it clear that the knowledge of an insured who knew of facts that were misrepresented in the application will not be imputed to any other insured for the purpose of determining whether coverage is available under the policy.

Coverage under this policy shall be void as to the following:

Clause 3. the company if any past or present chief executive officer, chief financial officer or chief operating officer of the organization knew, as of the inception date of the policy period, the facts that were not accurately and completely disclosed in the application.

Such a provision helps ensure that “innocent” insureds do not lose their coverage through no fault of their own.

However, in light of the fact this issue of overproduction was raised as early as July 1986. Has been the systemic cause of financial destruction in the industry for all but 5 of the past 35 years. The Preliminary Specification as the solution to overproduction was published in December 2013. How does one claim innocence? People, Ideas & Objects have also stated, repeatedly since May 2004, that software defines and supports the organization. Therefore any organizational change will have to be made in the ERP software first or the organization will regress to that which is defined in the current software. This has been used by the bureaucracy to secure their franchise by sponsoring no ERP software developments in the industry. Leaving them uncontested in their methods of “governance.”

Knowing today how bureaucrats think; they may have adopted our “Issue Mitigated, Nothing Litigated” insurance loss mitigation opportunity however, with their own plan. If they could make it appear that all was back to normal, in the form of a healthy and prosperous industry. That facade would provide them adequate cover to make their hasty exit and be able to state unequivocally that they left when the company was performing well and they’re not responsible for anything that may happen subsequently. People, Ideas & Objects hypothesis, unproven as it stands today, and undetermined if the current oil and gas industry is in a “boom” as alleged or a “managed industry” environment. Our “managed industry” hypothesis being roughly defined as the consolidation of peers at or above the listed book asset or reserves value through a further dilution of shares, stopping the pursuit of new production and aggressively buying back the remaining shares on any share buyback authorization.

It is true to a larger extent that the directors of the producers could exit just as easily as the bureaucrats. From what I noticed however, most of them were re-elected for the 2021 fiscal year and the opportunity to retire from the board may not arise for another three quarters. That may be too late. They could leave now however that would look bad if our hypothesis became valid. I see them being somewhat stuck as a result of the bureaucrats exercising their goodwill and good judgement that we’ve learned from them over the past decades. It is also true to a large extent that the shareholders are being provided with the opportunity to exit their positions with the higher valuations being realized by the producers in this “managed industry” scenario. To what extent this would be possible is and would be the question. I believe in either scenario, Directors need to consider the implications of their D&O Liability insurance.

It will therefore fall to the Boards of Directors to establish new governance and compliance methods, new organizational structures and start the rebuilding process anew. It is generally well known that the industry does not use first tiered ERP applications such as Oracle. The underlying base of the Preliminary Specification. This will be a mandatory requirement in order to win back the trust of the investment community in the future. The reputation of the specious accounting and systems obtuseness is well known and understood throughout the investor community and the need to address that today is the first priority of these directors. Our good friends the bureaucrats were well aware of these issues and it is not happenstance that the governance is as bad as it is. That none of the necessary software developments were undertaken were a result of our Preliminary Research Report published in May 2004 that stated ERP systems defined and supported organizations. 

People, Ideas & Objects, our user community and service providers stand at the ready, with the well researched and functional business model of software and services defined in the Preliminary Specification needed by the industry. Ready, willing and able to deal with the issues and opportunities of the industry today and in the future. I would personally assert that September 1, 2021 is an ideal time to start an initiative such as the Preliminary Specification, however not the only time. People, Ideas & Objects uses the Joint Operating Committee as the key organizational construct of the Preliminary Specification. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. We move the compliance and governance frameworks from the hierarchy and align them with the seven frameworks of the Joint Operating Committee to achieve speed, innovativeness, accountability and profitability in the producer organizations. 

It’s so good to have made the transition to a marketing phase of these developments. The difference in my writing is self evident isn’t it. I’ve never criticised a client as a policy of my business career. Today I don’t have any clients though. I’m therefore consistent with my policy and will continue to always be. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

The Perils of "Data" and "Best Practice"

 We’re continuing with a look at the tools, methods and competitive advantages of the People, Ideas & Objects user community as we inch ever closer to that inevitable day where we’ll all be needing them. In terms of developing ERP software user community based developments are mandatory. If you want exact, quality software you’ll need a robust user community. There is too much complexity and subtlety in the world of business to ignore. Developers are involved in a complex science of their own. Working together they can capture the nuance of the business within the software. We have been focusing on the development of our community as our priority for the eight years since we published our user community vision. Providing an understanding of the power our users will have in this development. Power in the form that only they have been licensed to prepare derivative works from the Intellectual Property of the Preliminary Specification. And power from the point of view that our developers are deaf, dumb and blind to everyone but them. Developers are licensed to only take direction from the user community. Those people who People, Ideas & Objects consider to be our customers. Our competitive advantages are our user community, Intellectual Property and research. As an overall community we are all focused on providing producers with the most profitable means of oil and gas operations everywhere and always. In our last post we highlighted the use of conflict and contradiction as two high level means of analytical review. Today I want to touch on two areas that I’m personally not of the belief hold too much value in determining any of the value we will need to provide producers with the value generation and profitability we’re focused on. Those being the focus on data and best practices. These I see as the prolific go to, catch all phrases that are used to refute criticism of the objectivity and understanding of the work that was analysed. In reality data is not going to tell our development teams very much. And I feel best practices only homogenize failure. 

These are the opinions of one man and I’m sure that some people have had other experiences  that may be of value to our user community. That will be for them to determine. What the data tells us about the failure of the oil and gas industry is that all of the producers were profitable and have been for the past four decades. We know now that was a purposeful lie that continues today. If not for a steady stream of investor and banker dollars to constantly feed the spending machines there would have been no oil and gas industry. The data will not tell us anything about the opinion of the investors or bankers or the changes they may make in the future. The past five years should have provided a real life example of what the capitalist system is and how it functions. Why the focus on shareholder returns is the primary and some would say only concern. Without organizational profitability at the top of a primary industry you have a rapid decline and destruction on a wholesale basis across the greater oil and gas economy. It’s that simple. For everyone down to the local corner grocery store clerk to be fully employed demands that oil and gas be profitable in the real sense of the word. This will only come about with the knowledge, experience, skills, education, routines, ideas and perspectives of everyone involved. Reading streams of data that give the bureaucrats a satellite output of the floating roofs of oil storage tanks to determine the state of the overall markets. Only to be so rudely interrupted by negative $40 oil prices I think qualifies as a best practice. 

Far too much time, energy and money has been wasted on evaluating data in the oil and gas markets. People, Ideas & Objects solved the real profitability problems in the industry by pointing out that oil and gas commodities are subject to price maker characteristics and are not price takers. We mentioned that on this blog for the first time in our November 11, 2008 blog post entitled “Times Like These...” While I have been obstructed and vilified for this. Literally run out of the industry by these bureaucrats for publishing this knowledge. They continued to use their satellite data and destroyed the industry comprehensively and completely. All they needed to do was to recognize that oil and gas as price makers implied they would only bring on new production if it was profitable. That is what a price maker does. Well they will argue that all of their production is profitable which according to their accounting it is. And we have argued that is a lie and produced through their providers who are not first tiered ERP systems providers such as People, Ideas & Objects proposed use of Oracle’s Cloud ERP. Why is it that these, now mammoth bureaucracies are using homegrown, very old ERP systems unable to report the fact that producers have not been making any money? Why hasn’t it been evident to everyone that they just swap in investor money, swish it around a bit and then bring in another round of investor cash the following year? Seeking the truth from data needs to be something that I maybe need to be educated on, that I’m missing or is as specious as I’m suggesting. We have to look at more than the data as it would seem that the bureaucrats have been doing plenty of just that.

People, Ideas & Objects through the reallocation of the producer's administrative and accounting resources into service provider organizations brings about a standardization and objectivity to the accounting and administration conducted in oil and gas. Therefore those that find their Joint Operating Committees are not producing profits will be motivated to shut-in those properties to enhance their corporate profitability. This is done when the unprofitable properties no longer dilute the profitable properties. Producers will know that their accounting information is the same standard, objective accounting that all the other properties in the industry were subject to and can accept that. They’ll know that the costs of administration and accounting of the Joint Operating Committees was consistent with all the others on a feature by feature basis. This standardization and objectivity is desired in the accounting and administrative areas. The competitive advantages of our user community and their service provider organizations are; quality, specialization, division of labor, automation, innovation, leadership, integration, tacit and explicit knowledge division between humans and software, design, planning, thinking, negotiating, compromising, observation, reasoning, judgment, ideas, research, collaboration, creativity, issue identification, issue resolution, the use of conflict and contradiction as analytical tools and decision making. It will be these attributes that our user community members and their service provider organizations use to differentiate themselves from other members. Price competition is eliminated in our vision as it provides no value. Having our user community focused on these distinct attributes in a competitive environment will provide their customers, the oil and gas producers, with the most profitable means of oil and gas operations. Having others jump in and offer a competitive offering at a lower price precludes the time and energy necessary to do the hard work of building the producer's value over the short and long term. These rights are provided to our user community members through the Intellectual Property license from People, Ideas & Objects that gives them a monopoly over the process they manage. Only they will be able, and in turn be responsible for ensuring their process is completed consistently and correctly across the industry, but also enhanced from a service point of view within their service provider organization and their exclusive access to People, Ideas & Objects developers. 

What do “Best Practices” provide? Once again I’m negative on this attribute as much as I am on data. Too much reliance on this as a catchphrase is done, in my opinion, and little to nothing can be done to amend or alter a process in any material or beneficial way. Tinkering at the edges of the interfaces has been all that’s been conducted in this sense as no one has the responsibility or power within the producer organization to authorize or implement any changes of any material size. The issue comes about as to how to get the software to change to accommodate the new requirements of the processes? Traditional ERP software providers are not interested in one off customizations, if it's a benefit to the company requesting it, then maybe it's a benefit for their entire client base. The last question to solve is who’s going to pay for the costs. A decade later the new best practice that is truly value enhancing in 2011 appears and things have changed and it's no longer understood or required. Therefore everyone knows this and has resigned themselves to these facts. It takes too much energy for changes to come about. Tinkering at the edges in the form of best practices looks good and fulfills the demands as defined in the Job Description and Performance Review. With the Preliminary Specification all that will be necessary is to email or pick up the phone and call the user community member responsible for that process. Either way it can be done at the speed of light. Assuming the call is over VOIP and the Internet are both provided through Fibre Optic cable. 

Take the example of what our user community will be doing for what I think will be the most extreme example of the analysis they’ll need to undertake. People, Ideas & Objects Preliminary Specifications Material Balance Report. A soup to nuts management of the production process from the well head to the financial statements of the Joint Operating Committees and producers that own them, but also the custody transfers of the product. All the regulatory, royalty and internal reporting requirements included. Automation of these processes has been a dream of many people in the industry, most of those are the people that have to work on some area within this domain. If we don’t begin to deliberately automate these menial data handling, massaging, filling out of forms and the seeking out of data; we’ll be short of people to do the things that humans have the competitive advantages for and that we listed above that our user community will be conducting. These apply to the entire industry not just People, Ideas & Objects et al. Let's begin to have the computer do what they have competitive advantages over us. Data management, storage and processing. We can’t compete. And they can’t compete with what we have as advantages. 

The Material Balance Report is almost purely logical and mechanical. Agreements may override the logic of the chemical makeup or physical layout of the infrastructure. That doesn’t preclude it from being automated. There is a process where the information is estimated, initially and mostly for accounting purposes. Then amendments start the process of refining the data for the production month. Where changes in the makeup of prices, sales or production volumes and transactions are different than first reported etc. This will occur until the accounting month and production month magically appear to be reporting the same values. Which may take up to three months to complete. The number of iterations through each of the processes, the number of people, companies, regulators, service industry representatives and ghosts in the machine are too numerous to count. The objective to automate this process has been well beyond the scope of any one individual producer. People, Ideas & Objects have our proposed, consolidated, industry wide budget in which this could be accomplished. Now is the time and today we have the user community and technology that have the means in which to do so. And taking this vision further with the objective of implementing the Internet of Things which is an inherent part of the Preliminary Specification. 

This will require a massive effort on behalf of our user community for them to put together. To have it fit in with the overall architecture of the Oracle Cloud ERP and Preliminary Specifications. The regulatory jurisdictions in North America that will be involved. Their parsing of the myriad processes within the Material Balance Report into their service provider organizations to achieve the performance, efficiency and effectiveness that is demanded of them. This task will not be for the faint of heart and will break a few brains in the process. My brain was broken in the process of developing the Preliminary Specification so consider yourselves lucky, you won’t have to deal with me. 

What will the Material Balance Report look like when it is complete? How easy will the interface be to use? Will it accommodate the myriad of changes that will be commonplace in the future with new and elaborate devices being developed in the Internet of Things environment? I think that everyone who has looked at this area from a high level or a detailed level knows that it can be, and should be done. The impediment has always been it’s too costly with little return on that investment for the one producer if they undertook the task. The real value comes about when all the partners in a Joint Operating Committee and elsewhere are using the system. The cost / benefit value proposition has changed with what can be accomplished by our user community. What has also changed is the reliance and weighting that has traditionally been given to data and best practices. It will be the facts as presented that will need to be dealt with. Facts such as the process's operation must contain X requirements at this point, and Y for these people… And we will interface it here in order that the producer's user will be able to have… This is the line of work of our user community. I could go on but leave it here with the comment that this comes from the narrowest point of view for brevity purposes. 

The only solution as it stands today, from a creative destruction point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industries revenues away from the development of these initiatives. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.