How Our Users Make the Difference

It is our user community members and their service provider organizations that provide the key differences in enabling the producers to achieve the most profitable means of oil and gas operations. They’re the critical infrastructure necessary to enable change in the oil and gas marketplace. They’re the source of quality in the producer firm and the industry. And they enable the dynamic implementation of business models such as the decentralized production model. When a change is needed in the industry today, who do you turn to? In the future there will be no question as to who you will turn too. The user community member that is responsible for that area and has the capabilities to implement the changes on behalf of the producer and industry. They’ll have the power and control over the Intellectual Property that is the operational understanding of the industry. The derivative of the Preliminary Specification. It is theirs to do with as they believe is in the best interests of the producer and industry. The People, Ideas & Objects software developers will only ever look to the user community for what software it is that they will develop.

What we have learned is that software, and ERP software particularly, defines and supports an organization. In order to implement any change it is therefore necessary to make the change in the software first, otherwise the people will regress back to the old ways which are defined and supported by the old software. Bureaucrats have interpreted our breakthrough in this area as; securing their position in the organization by never changing the software. The user community member who is also the principle in the service provider sits in the new sub-industry that we are building. Working with the industries producers to ensure they are the most profitable they can be. Understanding their issues and opportunities. And, having the People, Ideas & Objects software development capability on hand to make the changes that they see necessary to fulfil their requirements of keeping their clients the most profitable that they can be.

Quality is a difficult aspect of an offering to define. Speed has to be an element of quality. Having things done right the first time as well. Affordability also has to be part of a quality offering. Recall that the configuration of the service providers are what provide our price maker strategy possible in the industry. Achieving the lowest cost possible but missing out on opportunities such as the price maker strategy would be foolhardy. The value that we provide the industry is so much more than just an efficient and effective cost. We are able to leverage the value that the oil and gas industry generates by making changes in the business models that we have the power to control. It is here where we become affordable. The service providers are a cost of doing business that is already incurred in the oil and gas industry. The $45 to $65 billion in G&A costs will be transferred and become the revenue streams of the service providers. When you compare the annual cost of the service providers over their value proposition of $25.7 to $45.7 trillion over the next 25 years, it’s a profitable value proposition for the producers.

Now we come to the decentralized production model of the Preliminary Specification. It is the reason that we have configured the service providers in the manner that we have. By restructuring them on this basis we will have done two fundamentally important things. First we will have moved the administrative and accounting capabilities from each individual producer, where they are replicated, redundant and unshareable; to an industry based administrative and accounting capability. Secondly we will have made all of the producers administrative and accounting costs variable, based on production. If a property is shut-in then all of the costs of the producer, except for capital, will not be incurred. The burden for the administrative and accounting cost control has shifted, if there ever was any cost control, to the service providers. Who at anytime might experience a drop of 10% in their revenue. The 10% being the amount of production that might have to be shut-in to maintain oil and gas prices. A budget-able contingency that can easily be handled by the service providers.

It is this kind of flexibility and capability that the dynamic, innovative, accountable and profitable oil and gas producer needs. They have enough to focus on with their competitive advantages of their earth science and engineering capabilities, and land and asset base. Constructing an administrative and accounting organization, which is exactly like each of their neighbors is destroying their profitability. If they had any, that is.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

It's a Business Opportunity

More than anything the People, Ideas & Objects user community is a business opportunity for those that work in the administrative and accounting fields of the oil and gas industry. We are developing and creating a new sub-industry that includes People, Ideas & Objects software developers, our user community and their service providers. It is these people who are working to provide the oil and gas producers with the most profitable means of oil and gas operations. That is their purpose and their focus. Turning the industry around from a bureaucratic slog to a dynamic, innovative, accountable and profitable industry.

The business opportunity comes from the fact that the members of the user community will be independent business people with their own going concerns and two distinct revenue streams. The first will be the fees that are earned when they are resident or are working on the software with the People, Ideas & Objects developers. Working to make the software that they want and need. These user community fees are paid by People, Ideas & Objects and are detailed in our budget. Our budget only deals with the initial phase of the Preliminary Specification. What it will take to implement the software in its first commercial release. The user community member should assume that this revenue stream would continue far off into the future.

We are expecting that we will need to have 3,000 members of the user community in order to acquire the full understanding of the manner in which the oil and gas industry operates. We also expect that at any time 600 of these users will be working directly with our developers. So although this is a cornerstone of the business opportunity for the user community member, these revenues are only for their part-time efforts.

Each of the user community member will be focused on one area within the Preliminary Specification. And will focus and specialize on one process within that area of understanding. The competitive advantage of the user community member is their division of labor, specialization, automation of business process, quality and innovation. This process that they manage will be theirs where the license granted by People, Ideas & Objects gives them exclusive rights to that process. Competition between service providers and users is not on the basis of cost where one steps on another's functional or process domain. It is through their ownership and control of the service provider organization that they will manage the process on behalf of the oil and gas industry. Competing on the basis of specialization and the division of labor, etc. It is in the service provider organization that the second revenue stream of the user community member will be derived. They will have the salary, bonus, dividends and capital gains they earn from their ownership of their own service provider firm.

How big a service provider would need to be in order to manage a process on behalf of the industry is the question that no one can answer at this time. They would be of a moderate size considering they would be replacing the $45 to $65 billion in administrative and accounting costs that are being incurred in the industry today. It would be reasonable therefore to estimate that the service provider's revenues may be in the range of $10 to $30 million per year. This should therefore be considered a substantial business opportunity.

If we are undertaking the replacement of the accounting and administration of the industry. These numbers come into focus. Who knows maybe the bureaucracy will change into the dynamic, innovative, accountable and profitable organizations that we seek! With the costs and prior bank and investor commitments in excess of $200 / barrel, however, with organizations that are stale and choking on paper, there may not be too many investors that are interested in supporting that old model of organization.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

It's Not a Price War!

I did not catch the name of the individual that I saw the other day on Bloomberg. He had an energy consulting company, had at least 40 years experience and a PhD from Stanford. Certainly well qualified, but I fundamentally disagree with his position that we are in a price war with the Saudi’s and Opec. He said that when you’re in a price war you have to produce at your marginal costs. The marginal costs of some of the shale reservoirs, he stated, was as low as $10 and the Middle East was even lower. Noting that he thought oil prices might bottom around there. This is yesterday’s thinking. What the bureaucrats use for their excuse to do nothing. And how we find ourselves in a devastated industry where investors are used as ammunition to fuel an unnecessary war.

Oil and gas commodities fit the textbook description of what qualifies for “Price Maker.” This entire oil and natural gas depression has been brought about as a result of a small percentage of over production. Maybe 1 to 2%. Which has led to price decreases from their long term highs that are in the region of 70% on oil and 90% on gas. My math is pretty good, and I can tell that this is a losing proposition. All that would be needed would be to curtail a small amount of production in order to reclaim all of that lost pricing. This is also one of the key characteristics of a price maker. Where does the thinking come from that has producers continuing to produce oil and gas at a financial loss, yet they think that those actions don't impact prices? Bureaucratic sloth I would suggest.

The strategy that the Saudi’s have adopted is fair and reasonable. It has however changed from their position as the swing producer role which they occupied until recently. They feel that it is the North American producers who need to fill the swing producer role. The swing producer role involves removing production from the marketplace to ensure that it remains balanced. The Saudi’s changed their position as it was apparent the North American shale based producers, who are also the higher cost producers, were forcing them to curtail too much production to balance the market. Saudi Arabia was having to give up its customers in order to do so. Eventually, under the Saudi swing producer scenario they would have had no customers and no production. Therefore they changed their strategy to a fix production level and committed to their customers that they will provide their needs reliably. It is a sound business strategy. It is not a declaration of war.

We should note too that bureaucratic sloth is evident in the natural gas marketplace where the Saudi’s and Opec don’t exist. Natural gas has displayed these overproduction characteristics for the past six years. Who is responsible for that markets overproduction? I would suggest it’s the same people. The issue the bureaucrats will not deal with is shale based reservoirs. Recently the Energy Information Agency noted the Mancos shale formation in Colorado has been defined as 4,000 ft of pay. They have adjusted their 2003 evaluation of 1.6 tcf of gas to its current evaluation of 66 tcf of gas. What the bureaucrats will now do will be to ensure that the necessary steps are taken to get this natural gas onto the commodities marketplace so that it too can be fairly priced along with the other 2,500 tcf of gas that is sloshing around the continent. Producing everything that exists, irrespective of the financial implications is madness. Especially when the Preliminary Specifications decentralized production model employs the price maker strategy that would make all production profitable.

It’s odd that during these times I have been screaming myself hoarse that these commodities are price makers. And that the Preliminary Specification deals specifically with that issue in the industry. The issue that I generate in the process of bringing my solution to the marketplace is that I, like so many Information Technology based solutions in the marketplace today, disintermediate the bureaucracy. Bureaucrats are toast once the Preliminary Specification is in place. And they know that. So for them to consider the thought that they would eliminate themselves from the marketplace is comical to them. Why else would they ignore our $25.7 to $45.7 trillion value proposition over the next 25 years. We need the investors who have been used and abused by these bureaucrats to turn the tables and oust these bureaucrats by supporting the Preliminary Specification.

The bureaucrats can hire all the consulting firms and all the PhD’s in North America to go on Bloomberg and be the talking heads for them. Engage in nuclear warfare on their behalf and ensure that the issues and opportunities of the industry are obscured and unaddressed for another decade. This may be a test for how collectively stupid the western world has become. If “this” is acceptable and allowed to continue.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The Next Ten Years in Software

We are all beginning to understand the Information Technology environment that is now developing around us. Two years ago people had a disinterest in Information Technology that had been consistent since the 2000 dot com meltdown. Now we are beginning to see the potential that exists in the marketplace with all these devices. I for one am quite optimistic about the future. There is much that we can gain in terms of the quality of our life from Information Technology. We are only beginning to realize its potential.

It’s only in the last few years that it has been possible from a technical point of view to build the Preliminary Specification. It’s big and complex, and the demands that we are asking of the technology, those issues that were beyond the technologies capabilities, would have had to have been compromised in order to bring our product to market. There will be no technical compromise involved in bringing the Preliminary Specification to market now.

Choosing Oracle Corporation as our systems vendor provides us with the integrated technologies that we need to deal with the demands of the Preliminary Specification. We will not have to chase a disparate group of vendors who choose to pass the buck instead of take responsibility for the issues that we face. It will be Oracle that will be able to solve the problems. In the hardware, software and services end of the Information Technology infrastructure. We are fortunate to have them as our provider.

I think people will be surprised at what the People, Ideas & Objects software development team will be able to achieve. In these next ten years there will be very little that we cannot accomplish. Our first objective is the most important of all. The continued development of our user community and the establishment of their role in the industry. It will be the user community who are able to determine what is possible. It is here where the ideas will be coming from. They will have the power and control to make the changes to the software and implement them through their service provider organizations. Doing so at will. It is the user community that will make the oil and gas industry dynamic.

The first iteration of the Preliminary Specifications deployment will take what exists today and implement that in the software. We will have the industry operate based on that definition. The user community will not be innovating on this first iteration of the Preliminary Specification. They will be bringing the processes and their management to the framework of the Preliminary Specification and making it operational on the basis of the Joint Operating Committee being the key organization construct. And it will be in this work that they can be as innovative as they would like to be. Therefore to clarify, in terms of how they implement the Material Balance Report in the Preliminary Specification they can be as creative and innovative as they feel necessary. What I am stating here is that they should not innovate on the business model, the framework or the manner in which the Preliminary Specification is put together until the second iteration of our software’s development.

Once the user community has implemented the Preliminary Specification and it is operational in the marketplace they will have free reign over any and all aspects of the software. It will be then that they have the foundation necessary to make the innovations valid and functional. Introducing major business model or framework innovations too soon in the development will only cause confusion and disorder. Best to write down any innovative thought that you might have during the first iterations development and bring it up later during the second iteration. We are headed to an unconstrained world where we can change our environment to suit our needs. Those members of the user community will hold a special role in the oil and gas industry. If I wasn’t otherwise occupied, I’d be jumping all over that opportunity.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Duck and Cover

This week I documented and reframed the competitive landscape of the oil and gas industry. Noting that the existing producers, with their catastrophic losses, are no longer competitive in the marketplace. That the costs and commitments for each barrel of oil produced total at least $200 and that is the legacy of their ways and means over the past many decades. The second quarter financials will be out in as little as two months from now. What I expect we will see is that the viability of the existing producers business model has expired. They will no longer be competitive or have earnings as a result of their legacy. This is contrary to the fact that they are stating they can be profitable at current commodity prices. They may report that they’ve generated operational cash flow, however, these few dollars will be consumed by their mounting debt payments and their lack of financial resources and capabilities. This is what I expect to see on a wholesale basis in the second quarter reports. But more than that, it is what the future of the industry will continue to be if we leave it to the status quo bureaucrats. No investor or banker is going to run to the aid of an ailing producer. The history of the industry has been that the investors capital are “sunk costs” that are not considered. The bureaucrats reputation regarding their fiduciary duty to their shareholders is known.

As I stated yesterday, I can’t compete with people who misrepresent the situation. According to the producers all is good. Their profitable and the commodity prices are up. That however is not a practical or honest representation of the wholesale devastation that the industry has experienced. It hit an iceberg in 2015, and the Captain of the ship is telling the band to keep playing. When in fact the producers have been taking on water and there is no one doing anything about it. For producers, in a time such as this, to choose to lie about the situation puts into question the capabilities of the industry in other areas. Where are we headed when the Captain of the ship is obviously deranged?

Oil and gas prices have been leaping from the market lows they reached most recently. Everyone is heralding this as the end of the bad times. I don’t think so. Particularly in natural gas. It’s never orderly or civil, and you can’t necessarily make out the logic when there’s a rush to the exits. Natural gas storage facilities will be filled sometime this summer. It will be the first time this event will have ever occurred. What will happen to prices then? When the fires started in Canada and the heavy oil plants shut down, natural gas prices in Canada dropped as low as $0.55. That was with 91% of the storage capacity filled. If you take all of the U.S. storage capacity offline, in terms of demand, natural gas prices could collapse in a similar manner. Best to get out of the market now, which has a temporary and decidedly upward pressure on prices.

What if the scenarios that I’m predicting here are the common sense approach the investors are taking towards the industry. What faith have the bureaucrats earned that they are capable of dealing with the issues and opportunities they face. When bureaucrats exist in a devastated landscape of their own doing that they don’t recognize or appreciate. That they state ridiculous claims regarding their viability and profitability in the face of such obvious facts. They are inspirational in ways they do not understand.

Further destruction of the industry on a wholesale basis is about to begin. Thanks to our good friends the bureaucrats our producer firms have no financial resources or capabilities. I think people have lost faith in the bureaucrats and are taking their positions before another big hit occurs. The good news is the Preliminary Specification is ready to go. All we need to do is to continue to develop the user community and then we can begin the developments of the software. The long, but relatively low cost and difficult time constraints of doing something like this have been completed in the development of the Preliminary Specification. Now we have to go through the relatively short period of time that will see the high cost era of our development.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Honest Competition?

It’s a deliberate misrepresentation to state that you can produce at $48 / barrel when your costs, as we’ve calculated them here, exceed $200 / barrel. Producers have never wanted to honestly account for their performance in these past decades. Oil and gas is a capital intensive industry where their bureaucrats refuse to consider the cost of capital in the determination of profit. Choosing instead to bury their capital and overhead costs onto the balance sheet for eternity. The fact of the matter is, that in today’s capital markets, to account for their performance and their costs would preclude them from consideration by that market. Pushing out an unaccountable narrative that they are profitable at $48 / barrel is irresponsible, corrupt and fraud. We should see more from the people who are responsible for the industry. The issue that I see is that it's the culture. It’s not one individual, it's the entire industry that has developed on this basis, and no one has stood up to the bureaucrats and said that it’s wrong.

If we had some accountability in the industry my job would be simple. I provide oil and gas producers with the most profitable means of oil and gas operations. I can provide an oil and gas producer. One that is a start up with the ability to produce oil at $100 / barrel. The most cost effective level possible in North America. The best anyone else can do is $200 / barrel. The existing producers are no longer competitive. They will never, ever be competitive again. This is the fact that leads the bureaucrats to misrepresent their performance. They know the legacy of their spending hasn’t evaporated. It still resides on their balance sheet in the form of bank debt that needs to be paid. Bonds that need to be paid. And investors that have been fleeced annually for the past decades who will be curious “what happened.” Telling these people that their costs and commitments are now $200 / barrel, and there is a solution that can halve that figure if you bail on that pathetic producer, isn’t going to do well for that bureaucratic cash flow known as a paycheck. If bureaucrats think they can fool all of the people all of the time, then they are too far gone to be rehabilitated.

The irony, the dichotomy, the contradiction, hell the hypocrisy of my arguments. Is that I’m telling the investors and bankers that the existing producer is a “sunk cost,” and therefore is irrelevant and should be ignored. There is no sense in trying to rehabilitate it, just walk away. Start new and fresh with People, Ideas & Objects Preliminary Specification. Reducing the costs of production to half of what it is today. Providing you with up to 100% ownership. With no bank debt to encumber the assets. It's a free for all in the asset marketplace. The most dire producers have their crown jewels up for sale at fire sale prices. What better way to get into the industry in a serious manner for the long term with one significant difference. Profitably on your entire investment.

How will a producer with the cost structures and organizations that are so constrained compete in the future? Can they? I have a theory in life, never expect a mouse to run like a horse, you’ll only be disappointed. Is there an expectation that these old, tired and lame horses will make it into the Kentucky Derby tomorrow? Or is it best just to shoot them. Creative destruction is the reason that our economy has developed the way that it has. When the means of production becomes so convoluted and costly. When the status quo becomes so uncompetitive in the marketplace. It is wiped away and new organizations come along and take their place. Creative destruction is being hampered by the fraud that the bureaucrats are selling. Producing oil at $48 is a myth that doesn’t stand the laugh test. They just don’t want to face the destruction aspect of creative destruction and therefore will say and do anything for that bureaucrats pay check.

It’s a confusing time. Hard choices have to made. The desire to want to hang on to what you have overrides everything. And just maybe the status quo will get better! Or people can choose to look at alternatives and decide what their future will be. People, Ideas & Objects are developing their user community and that might be the place where you can make the transition quickly and effectively. And we may be having difficulty convincing people in the marketplace, but what can you do when your competition just outright lies about their competitiveness.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Let's Revisit "Recycle Costs"

Competition is healthy. Everyone strives to do better every day and that is how we progress to earn the standard of living that we have come to enjoy. I suggested yesterday that current producers are claiming that they can produce at $48, whereas People, Ideas & Objects Preliminary Specification could only achieve the $100 estimate that I calculated. I’m not offering a very competitive alternative, no wonder the bureaucrats don’t appreciate me. I seem to be traveling backwards when I should be moving forwards. How can this disparity occur? Lets for the purposes of selling my point of view revisit what “recycle costs” are.

I have yet to see a CFO of a producer quote these numbers that you hear producers are able to achieve in terms of their costs and profitability. They know precisely the layout of the local prison cells and the number of inmates per cell. I’ve never heard or seen a CFO quote those numbers, and with those prison floor plans I am certain we will never see or hear them state these absurdities. When I do here or see one of them you’ll be sure to hear it here first. The people that are pushing those numbers out are unaccountable useful idiots that the producer might set out on the street. Or, as in most cases, the press is only parroting what these people have told them. No one in the industry believes these numbers. They are fudge.

How is it that an industry that receives over $100 per barrel and is barely profitable suddenly reduce their costs below $50. It’s a miracle! I’ve heard that it’s due to the innovations that have been instituted by the producers since the decline in oil and gas prices. Since the western world uses historical accounting how do you innovate the costs of a well that was barely profitable at $100 down to profitability at $50. I worked in oil and gas accounting from 1977 to 1985. I worked in oil and gas auditing from 1986 to 1994 and I have seven accounting courses, but I don’t know how to do that. And I’ve never been in prison either.

So the question comes down to what are “recycle costs” the industry term for what it currently costs to produce. Simply it is the cost of production that would be necessary to produce a profit at an oil price of x. If x = $50 the cost of production must be below $50 so the recycle cost would need to be $48. Done, how else could you justify full production that eliminates your entire capital base? After they get these numbers out on the street the investments will flow back into the firms on that false belief. The bankers love it that you’ll be profitable down the road as well. When the time comes to answer the bankers and investors questions it will be “oh, this operation did this, and that operation did that, missing our targets, but our costs next quarter will be $44.”

If you haven’t caught on yet, I’m accusing the industry of wholesale fraud. But remember you never heard an officer of anyone of those companies ever state what the oil or gas price they are profitable at. It’s all heresay, the press believes it, the investors believe it and the toilet stuffed with cash flushes again.

It goes back to the desire to never account for the “sunk costs” in the industry. Why when you can continually get away with fraud. This has gone for so long it’s the culture of the industry. People are taught and trained to do this. If you don’t play along you’ll be ousted like that blogger at People, Ideas & Objects. Persona non grata, but I’ve never felt I had anything to lose except my integrity. Yesterday I calculated the costs and committments that the current producers incur to produce is at $200 and they say they can produce a profit at $48, someone is selling an agenda.

An industry that has had their capital base wiped out is not normal, but highly abnormal. That states unequivocally that they never made any money during the entire life of the organization. They’ve destroyed any money they were given. That includes the time when prices were over $100. I would suggest that there is something seriously wrong in that industry. In the case regarding the oil and gas industry it is run by a group of self interested bureaucrats who have a good thing going for themselves and could care less about anything else. When an industry has proven that it’s incapable of ever making any money it’s time to start sweeping out the old. It is corrupt, not functioning and unable to be rehabilitated. Or maybe they did get their costs down to $48, their debts paid and returned the money back to all their shareholders. And this was just a dream, and J.R. didn’t get shot.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The Transition Begins

The oil and gas investor is faced with a choice. And by investor I mean those that participate in building producer firms, not those that trade shares on a market. They can invest in the existing producers and continue on with the status quo operations. Or begin fresh and new with an industry remake based on the People, Ideas & Objects Preliminary Specification. Today we will analyze these two alternatives to determine which choice is in the best interests of the investor, and quite frankly everyone. At the same time we will see what position the bankers will take with respect to any changes that the investors make.

We know that the bureaucrats can’t, won’t and will not ever change. This was best displayed in their narrative last week regarding Opec’s meeting being a failure. The narrative was that Opec had lost credibility, or relevance due to their inability to agree on a production ceiling. I think 30 million barrels a day is still relevant. A production ceiling was discussed briefly but was never really on the agenda, it was on the North American producers wish list. Opec producers are making money. They said they see the “market rebalancing” and therefore did not see the need for action. Throwing the “market rebalancing” narrative of the North American producers back at them. The issue in oil and gas lies with the North American producers financial situation.

Lets look at that situation from People, Ideas & Objects point of view. I have stated that these are the times where producers actions will be looked upon as critical to their future. What are they doing in these next six months. That will determine what their future will look like. If it’s more of the same, then they will prove that they are incapable of understanding the issues they are faced with. If they are able to make some decisions that address the issues and opportunities in the industry then they may find that the investor class will have a different attitude towards them in the coming months. What we might learn today is that it doesn’t matter what a producer does, they’re stuck. And it appears that I have been wrong about the point regarding their actions in the next six months.

It has been the past culture of the bureaucrats not to concern themselves with “sunk costs” in accounting for their performance, or calculating the margin on a barrel of oil. And there has never been any accountability by the producers on this point. Investors have accepted the claims of the bureaucrats, that they were profitable. This alleged profitability lead to overinvestment which subsequently lead to overproduction creating systemic, catastrophic losses across the industry. The question today is, will they now include the costs of those losses that have been incurred in the past two years in oil, and the costs of the losses in natural gas over the past six years? Or are these just the past “sunk costs” once again and they don’t need to discuss or consider them. Or, should these costs be included in what is required to produce profitably in the future? For lack of a better word let's call these losses legacy costs.

The history of the oil and gas industry is that most of the producers have not made any money during their entire existence. That is a fair statement when your retained earnings are extinguished and your capital structure is exhausted by losses. Which is the current status of a number of producers including senior intermediates. Maybe I’m not up to date on investors behavior, and am unaware that they don’t read financial statements anymore and only listen to the narrative that is pushed out by bureaucrats. Or maybe the investors do look at the financial statements and wonder how it is the producer will produce oil and gas in the future with these legacy costs constraining their every move?

Therefore let's look at the various scenarios that an investor has to contemplate. Company A has been in business for 10 years, has a production profile of 100,000 boe / day and is losing money. They have lost all of the money that they may have reported as profits during those 10 years and a good portion of the money that was invested in them. They are heavily indebted to the banks who are expressing patience at the moment. You're being asked to invest an amount at very favourable terms in comparison to their valuation of a few years ago. The money will be used to pay down debt and maintain the production profile for the next two years. Management state they can produce at $48 / bbl.

Or, the investor can take the same capital and set up their own new producer firm that will compete in the new oil and gas industry. Use the People, Ideas & Objects Preliminary Specification and the industry configuration that is provided. Which imputes from day one they do not have to develop any administrative or accounting capabilities. Only access what they need from the service providers that provide the administrative and accounting capabilities on an industry wide basis. Purchase production on very favourable terms as the current producers are desperate for cash to give to their banks, and build a new dynamic, innovative, accountable and profitable producer. In this scenario there are no legacy costs. The investor's own 100% of the firm and there is no debt encumbering any of the assets.

The issue comes down to these legacy costs. The current producers would like the world to continue to ignore them as they feel they are irrelevant. However, in reality they are an albatross that each of the existing producers carry around their necks and will need to be addressed before they can approach the capital markets or suggest that they are profitable. These legacy costs exist in the form of the handsome levels of debt that the firm carries. And the legacy costs exist in the large number of shares outstanding. Providing a new investor little in terms of a percentage of the highly constrained operation. Their entire existence as a producer organization has been a failure, which most certainly will terminate once they get the investors money. The fact of the matter is the bank has encumbered all of the assets, or will soon, and will not allow the management to do as it pleases. Why would an investor volunteer their resources to these producers further destruction. They are guaranteed to lose! The industry as it stands today can never compete again with these legacy costs on the balance sheet. You can argue that the bank can’t take all of the producers over, which from where I sit is a very sound strategy. Because after all it was only about getting the bureaucrats paid.

So this is my advice for the oil and gas investor. When a producer says they can produce for $48 / barrel. Add $100 for legacy costs. That way you’ll have a better understanding of the kind of prices you’ll need to earn a profit from that producer and ever hope to see a return. It also helps to clear away a lot of the bureaucratic bullshit. And makes that other scenario, starting over with People, Ideas & Objects, a lot more interesting.

At some point the management will learn that the superhuman effort to turn the organization around is not that much fun. Any promises regarding your investment will just walk out the door. The point of this post is that you can ignore your fixed assets and overhead costs in the determination of your performance for apparently four decades or more. But one day, you will have to account for them. In summary, when we include the cost of capital and overhead I would estimate that it costs approximately $100 to produce a barrel of oil. That would be the cost of production for the producer under the People, Ideas & Objects scenario. One that is focused on providing the producer with the most profitable means of oil and gas operations with the strategy and capabilities to achieve that. The cost to produce from the existing producer would therefore be $200 when we include the legacy costs that they have conveniently ignored during the good times. I don’t know, I’m kind of on the fence in terms of my decision. How about you?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

We're All Virtual Now

I find it fascinating watching people who work in the physical world. How things don’t turn out as they’re expected, causing something to be reworked, delaying scheduling and turning the budget into a wishlist. As time and money expand with the level of sophistication of the project, the contingencies for real life problems come into play. Living in the physical world kind of makes me chuckle. Some might accuse of me of being delusional or dreaming, I do have my detractors. However, in terms of the People, Ideas & Objects user community the Preliminary Specification and its derivative works exist in the minds of the people who are user community members. When established, the user community will be thinking virtually about their portion of the oil and gas industry. How it operates today and how to make it more efficient and effective for tomorrow. Living a virtual world where the physical constraints that limit most people no longer exist and no longer matter.

As we have stated many times, mostly in our budget, the user community will consist of approximately 3,000 individuals. Who provide their understanding of the industry to our software developers to ensure that the People, Ideas & Objects applications they develop are correct and what they need. It is anticipated that there will be 600 user community members in front of our developers at any time during the development of the Preliminary Specification, and in these next 25 years as a minimum. The user community member is a part time position. It is not their day job and in many cases will not be where they spend their day.

Most of their day will be spent operating the service provider that they’ll own and establish to manage the industries process they’ve specialized in. It is in this area that they’ve provided the know how to the People, Ideas & Objects software developers, developed the software application that they use in the service provider, and will have a continued relationship with the iterative software developments of this process for the next quarter century. Managing the service provider that they own will be their primary source of income and focus. It will be their hands-on understanding of the industries issues regarding that specific process. Determining what is needed to enhance the quality and speed of their offering to their oil and gas producer clients. As the principle in the service provider, our user community member will be able to have constant access to the People, Ideas & Objects software developers to make any changes to the software that they use. It will be their domain, their world that is in many ways a virtual representation of the possibilities and difficulties they face in the industry.

We therefore need to get the Preliminary Specification in the heads of the user community. And that is what we have been doing for the past two and a half years since we published the Preliminary Specification. Developing the user community. It's one thing to state that you are user community based software developments and it's another thing to do it. Many people have been involved in ERP integrations where the user was going to be front and centre to the implementation. Promised that you would get the systems that you want. And then when the project team is selected, the project manager looks at the timeline and budget and the first thing that has to go is the user community involvement. That’s not the case here. One look at our budget and the fact that we will not start developments until the full user community is established should assure you of that. Our user community vision should also go along way to providing you, as a potential user community member, with the seriousness that I take user community based software developments. Everything else is a waste of time and money. Or have we learned that 1,000 times already.

A user community of this size has not been assembled in oil and gas before. And it will not be an easy undertaking. It will however be a permanent undertaking for at least the next 25 years with defined revenue streams for those that do join. You will collectively be taking command and control of the administration and accounting of the oil and gas industry. You will be taking over the work that the bureaucracy does today. Rendering them unemployed. It is important work that’ll exists in a virtual world, unconstrained by the physical. Providing the oil and gas producers with the most profitable means of oil and gas operations. And there is more. You’ve all heard me state that the Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the industry. That by moving the compliance and governance framework of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee. We achieve a speed, innovativeness, accountability and profitability in our producer firms. This speed is attained through this organization of the user community and service providers. They are the dynamic and capable elements of the industry infrastructure, the means in which to accommodate and initiate change as they see the need in their day-to-day interactions with producers and our software developers.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

A Career's Worth of Work

We have clearly identified that the existing producer firms are inadequate to meet the needs of the future energy consumers demands. These hollowed out carcasses that call themselves producers can’t, won’t and will not ever make the changes necessary to deal with their issues. When it comes to addressing the point about the accounting for capital and overhead you know you read it here first, and have only ever read it here. There is no desire to deal with any of the problems facing these producers. Sticking their heads in the sand and hoping that the issues will all go away on their own isn’t going to work. Or “market rebalancing” which we know is the willful destruction of the industry. In addition to of all this destruction we have a difficult job to do in order to meet the demands of the future energy consumers. Freezing in the dark is the extreme of this thinking. However, it is important to remember that the U.S. is the most advanced economy in the world and the largest consumer of oil and gas. Which country will be the first to volunteer to hold their economy back to ration the energy that we do have?

If a group of like minded people were to gather to approach a period of time in an industry with such difficulties. The first thing they would want to do would be to organize themselves to approach this new environment. Make sure everyone was in the right place and all pulling in the same direction. It would seem to me, in this day and age, that might be a good job for software to define and support that organization. That is the job of our user community here at People, Ideas & Objects. To reorganize the industry based on the Information Technologies that identify and support our modern organizations.

We’ve talked about leadership in the past week and the role that it plays in this initiative. I particularly want to point out that we are user community based software developments. We are establishing our user community now and will not commence development of any software until such time as our users are in place. They are the critical element of our softwares quality and ensuring that we’re building the appropriate systems for the oil and gas producers and service providers, and their futures. The Preliminary Specification provides the foundation of our user communities work. It is a vision of how our systems are different. How the producers, industry and service providers will be structured and operated when we use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer.

The leadership from our user community during the initial developments of the Preliminary Specification will be key in providing our software quality and the foundation of the industry Very important work that will be a necessity for these next 25 years. But there is much more. Our user community is not a one off and done scenario that the industry can then continue on without. What will be critical for the industry in these next 25 years will be the user communities capability to adapt to any situation that it finds itself in. That it deals with the issues and opportunities that are discovered. Without our user community as a defined oil and gas industry capability then all we are doing is sealing the industry under the constraints of the Preliminary Specification for the next 25 years. Certainly a better situation than today, however with the user community continuing their work throughout the remainder of the industries existence then the industry can make the changes that it needs when it needs them.

This is how I see things continuing from here. A future in which the industry becomes adaptive and reactive. Exploiting its opportunities as they appear. Where the needs of the industry are anticipated by our user community, instilled in the software of the producers, service providers and industry. And the industry is changed with little deliberate thought by the producers to make the change. Dynamic is what I would call the characteristic that I would want the industry to become. What are the bureaucrats offering?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Leadership's Goals and Objectives

Our last number of posts have discussed leadership in the oil and gas industry. Leadership which will be needed to guide it through the difficulties that it’s in. We see in the current administration no initiative to address the problems that are systemic and critical to the survival of the industry. Continuing on as we are is not an option when we consider the next 25 years and the demands that will be placed on us by energy consumers. It will be a progressively more difficult era than at any time in the history of the industry. That is a given. We’ll need to focus on North America as the exclusive region of our concern. We’ll have to turn the industry over to the basis of profitable operations in terms of all of its production. And we may have to consider the objective of energy self sufficiency as an overall goal. This latter goal only attainable once we have all of North American production being produced profitably. Now we begin to see the breadth and depth of leadership that is needed to make the oil and gas industry fulfill its promise.

We certainly won’t be meeting these goals and objectives on the basis of the producer organizations that exist today. We are far short of meeting North America’s demand for oil. All of oil and gas production in North America is unprofitable. The producers themselves have destroyed the faith the investors and bankers have in the industry. It will be those investors and bankers that will be needed to make the investments to achieve these goals. And it is these producers who are in such dire financial condition as to need at least a decade in rehabilitation before they can approach the dynamic, innovative, accountable and profitable demands of these goals and objectives. Are we suggesting that we will approach this industry's future, with these organizations, when we discuss our capital needs with future investors? Or should we get our act together by implementing the Preliminary Specification first?

When we extend these current difficulties over the next 25 years and compare that to what we are able to provide in the Preliminary Specification. We are assessing our value proposition. It has been our critique of the industry that the costs of capital and overhead are almost never considered in the accounting by the producers. We would change that basis of accounting and begin to calculate the costs of production that include all of the costs that are incurred. Capital, operating, royalties and overhead. As a result, the producer would need to be generating much higher revenues to cover the cost of capital from the prices that are realized when they sell their production. Under the Preliminary Specifications decentralized production model we use the price maker strategy for all the producers. Only profitable production that considers all of these costs will be produced. The remainder will be shut-in until the prices rise or innovations are found to produce the property profitably.

As a result of this price maker strategy the future oil and gas investor will be able to safely invest in oil and gas with an understanding that the producer will only be producing profitable production. However, also understanding that those producers that don’t know what they are doing may still be reporting losses as a result of unsuccessful drilling and completion operations. That they however, will not be destroying the commodity markets with overproduction which is the propensity of them to do for the past number of decades under the current bureaucracy. In addition, since the cost of capital is considered in the calculation of profitability their capital will be returned to the investors through profitable operations. Unlike today where producers have had their hand out at least annually for additional capital. Diluting previous investors interests as bureaucrats spend themselves blindly into overproduction.

Therefore there are two basic elements of our value proposition. One is our price maker strategy that provides producers with the most profitable means of oil and gas operations. Lifting the price of the commodities in the marketplace to the marginal cost. This will move the prices of oil and gas to substantially higher values than what have been realized over the past two years in oil, and past six years in natural gas. The second element is that return of capital in the form of dividends that will be possible when the producers recognize the cost of capital by passing them through to the income statement in order to recapture that invested capital. It is these two elements that have put our value proposition in the range of $25.7 to $45.7 trillion over these next 25 years. $5.7 trillion is attributable to the increase in the commodity prices as a result of our price maker strategy. This portion of our value proposition is significantly below what a calculation would generate based on today’s prices. The second element is based on the estimate of what is necessary in terms of capital investment in the industry over the next 25 years. Which includes the return of the capital that is sitting on the bloated balance sheets of the producers today, which the bureaucrats have never thought of ever returning.

Leadership from stem to stern, everywhere and within everyone will be necessary. One of the things that People, Ideas & Objects is doing is making a change in the work that people in the industry will be doing. We will be leaving the work that computers do to the computers. And that includes the processing and storage of information. Too much time and effort of good people are spent in these mindless tasks today. And we will instead spend our time on the things that people are good at. The leadership, unstructured problem solving, decisions, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromising and innovating. What exactly are the bureaucrats offering over these next 25 years.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Season's End

Bill Gross the bond king intimated that there is always someone with a sandwich board predicting armageddon. Well if the shoe fits, I’ll certainly wear it. But that’s not the case here at People, Ideas & Objects. There is a deep, fundamentally broken oil and gas industry in North America. A once in a millennium fire in Canada will be resolved in the short term. This fundamentally broken industry has manifest its issues since the late 1970’s and will not be resolved until action to implement the Preliminary Specification is taken. If you believe that I am predicting demise on the basis of some apocalyptic theory then that’s fine, you can stop reading. If you believe that I am trying to solve an issue then we can continue.

If you believe that the commodity markets have rebalanced and the bureaucrats have fixed the problem, then there is nothing here for you either. To me these commodity markets appear to be capitulating. Going through the process of having major participants leave the industry as there is nothing for them. Abundant losses, no discussion about the issues and no thought that there is a problem and certainly no action to resolve the problem. These have a negative impact on people’s confidence. So yes I’m in no way optimistic about where the price of oil and gas will be heading. Gas storage will be filled this summer leading to another major step downward in pricing. Oil has Iran and Saudi Arabia competing for new customers and new demand from current customers to the tune of 4 million barrels per day. Bureaucrats, I think, have been effective in running up oil and gas prices in the short term to provide a narrative that offsets the losses they’ve incurred. Losses that in many cases wipe out the entire capital base of the producer. If that doesn’t scream at you, nothing will. Now that the agm season is over, we’ll see if the commodity prices normalize.

It is these low commodity prices that people believe is the issue. I would suggest that it’s a symptom of the larger issue addressed by the Preliminary Specification. That being, the accounting in oil and gas makes it appear to be a profitable industry because none of the actual costs are being recognized. This keeps an unprofitable and unviable industry continuing on the basis of the chronic and continual investment of capital from investors and banks. The comprehensive and continued support of producers capital programs, when continued, make the industry appear a viable going concern. Take away the investment dollars and you have a cash starved beast that can’t maintain its asset base, which is marketed as an advantage under the narrative of “market rebalancing.”

What is particularly disappointing to me is that this has gone on for so long it’s the culture of the industry. The entire industry has been raised, educated and trained on this basis and never questioned if it was a valid, functioning business model. When the producers continue to report that they’re profitable. Despite what may or may not have occurred within the producer firm. It attracts more investment. And in the case of oil and gas, more investment than the industry can handle which has lead to overproduction in the commodities. We saw this phenomenon play itself out for almost two decades in the 1980’s and 1990’s when oil prices were too low. Nothing was done, no one questioned the actions of the producers, it was just “oh woah is me,” another bad year has passed. And muddling through continued. That’s not how you operate a business and in 1991 I set out to do something about it and today that something is the Preliminary Specification.

The other day I unilaterally declared that I had the credibility going forward to fix the issues in the marketplace. This caused some laughter and commentary from my friends the bureaucrats who feel buoyant now that oil prices have recovered to as much $50! I would warn the bureaucrats not to declare anything too prematurely. The credibility that I claimed was with the investors who have not necessarily been inspired by their management. If all you’re providing them is a mirror image of the commodities activities, both up and down. Followed by a wholesale destruction of the firm in the long run. Then I would be more concerned about your credibility in that sense, rather than your momentary ability to predict an upswing in a commodities price. These problems are not solved. They aren’t accepted as being a problem and the industry has rejected the thinking contained within the Preliminary Specification by not yet adopting it. This is due to the self serving reasons that the Preliminary Specification disintermediates the bureaucrats. We are the Uber, and they are the taxi commissions. And therefore, maybe I too have misdiagnosed what really ails the oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

This is All About Leadership

We are at an inflection point in the oil and gas industry. If you believe that “market rebalancing” will have a remarkable effect on commodity prices, and the good times are just around the corner then there’s nothing here for you at People, Ideas & Objects. This is the point in time when those that will be leading the industry in its next iteration stand up and say that “this” is no longer good enough. It comes down to the point of what do you believe. Are we in a minor disruption that will clear itself, or is this a wholesale upheaval of the industry. One that requires action by many people to clear out the stale and non-functioning elements of the industry. Creative destruction at its finest hour.

If you’ve been reading this blog for a while you know I appreciate the work of the oil and gas bureaucrats. I won’t go into their many deficiencies but will point you to this blog's long history on the topic. I’ll assume instead that you are that leader who is tired of the status quo, who is concerned about the state of the industry and the lack of action by the bureaucrats. If you are, this is the place you want to be. We have 5,000 man years of work ahead of us in developing the Preliminary Specification and moving the industry onto a commercial footing. And that is just the software development portion of the task that we are undertaking. Leadership everywhere and at all levels of the industry is going to be demanded to fix “this.”

The other day we talked about the Leadership teams within People, Ideas & Objects and our user community. These are the leadership positions that are necessary for just the software development, and only those that can be clearly identified at this time. There will be many more as we proceed. Those members of the user community, the 3,000 people we’re looking to provide our software developers with the precise details of how it is the oil and gas industry operates. These are leadership positions as well. The user community member will have to know what it is that is necessary to make the Material Balance Report everything that it could possibly be. For example. And have the resources within the industry to verify that information. Our user community is the critical element of our softwares ultimate quality. Their leadership will be something that we will be looking for them to provide.

The secondary role the user community member fills is that of the principle in the organization that will be developed to provide the People, Ideas & Objects software and that organization's services to the producers. Our “service providers” will be established by the user community members who will own and operate them. They will be the ones that lead these organizations and develop the service based organizations that the producers will need in the new industry configuration that is required to provide our price maker strategy. Recall the service providers will be providing the entire oil and gas industry, as their client base, the process management of one individual process. This may seem like an onerous data driven task that would be monotonous and boring to undertake. I disagree, this will be a dynamic and exhilarating place to work. The competitive advantages of the service providers are their automation, specialization and division of labor. With the access that the service providers principle, the user community member, has to People, Ideas & Objects software development capabilities. The service providers will be able to iterate and constantly improve the software they use, and their service offering to the producers, both in terms of their speed and quality. Service providers will undertake all of the industries administrative and accounting capabilities. There is movement away from each producer developing their own similar, redundant administrative and accounting capabilities that are not shareable or usable outside the producer firm. It is this overhead that is also inhibiting profitability in the industry.

Again we have only touched on the leadership that will be necessary in the software and services areas as a result of the changes that will be instituted by the Preliminary Specification. The producers themselves will be going through a process of rapid change as well. Leadership will be needed to see them through the changes that will be made through this software and service development process. A leadership team to match the activities occurring in the People, Ideas and Objects software development, our user community and service providers. Investors and bankers will be taking a different attitude towards investing in oil and gas. It will be a while before they come back. That is, they will not be back until we can prove that the industry is consistently profitable based on a detailed, actual accounting. An accounting that looks at the performance of the management, not an accounting that tries to emulate the valuation of the company. Only then will they return. Therefore additional leadership needs will have to be met within the producer firms with an understanding that the old guard will be gone and the new ways will have to have new corporate leadership.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.

Memorial Day Holiday

No Posting Today

Third Friday Off

Leadership Roles

In addition to the CFO position that we need to fill, People, Ideas & Objects is developing the following Leadership Teams. These teams will be permanent full and part time members of People, Ideas & Objects and the user community, a separate entity. Ownership of the user community is held by People, Ideas & Objects but will have its own Leadership Team. This is to accommodate the unique characteristics of the user community and ensure that the focus remains on providing the producer with the most profitable means of oil and gas operations. Members of these Leadership Teams will be those that can make a difference in the industry, who see this as an opportunity to make the changes that are necessary to reset the industry on an appropriate commercial footing. People who are interested in a challenge and are not afraid to jump in.

In terms of the needs for People, Ideas & Objects we are looking for two people. The CFO which we mentioned the other day. And the President & COO. These two positions are based in Houston and report to me. The President & COO will be wholly responsible for the software developments. If either of these positions interest you please contact me here. These are the key elements of the Leadership Team of People, Ideas & Objects. There will be more positions open as the funds begin to flow. Be sure to keep up to date here.

The user community has been our priority for the past number of years. Our biggest impediment to the development of the Preliminary Specification is getting the ideas contained within the specification into the heads of the approximately 3,000 members of the user community. We have been pushing the Preliminary Specification out to the industry at large for the past two and half years since its publication. And we are generally unaware of where we are exactly in terms of achieving that number. It is important to note that we will not start developing software until the user community in its full form is in place. User community based software developments are the key to quality and that is the only basis that we are approaching the development of the Preliminary Specification. I can assure you that many people are reading the Preliminary Specification each and every day. It's important to get these ideas in the heads of the user community so that they can think on this new basis and ensure that they implement their piece of the system based on this new, fundamentally different understanding of using the Joint Operating Committee.

The Leadership Team of the user community consists of a large team of people who will be involved. I will be sitting as the Chairman of the organization, and there will be a board of four other directors. In addition there will be a CEO, CFO, and COO. These are the standard fare positions that will undertake their standard roles within this organization. Please note they are separate from the software development team. They are exclusively concerned with the process and functionality of the applications of People, Ideas & Objects. Please read the user community vision if you haven’t. To understand how this user community organization is uniquely structured within the oil and gas industry. A structure that ensures it has the power and control over the Intellectual Property that makes up the applications they are responsible for.

The last set of members in the user community Leadership Team are the Product Owners. In an agile development team a product owner is part of the software development team. They are responsible for the product and will be required to prioritize the software teams developments. Funnelling the user communities contributions into a coherent and usable application will be part of their responsibilities. We are making these Product Owners key parts of the user community Leadership Team. We have allocated a section in our budget for these individuals with healthy compensation, administrative support and a discretionary budget. We are looking for a total of 25 product owners to join our team. One for each module of the Preliminary Specification. The remainder are allocated to specific areas such as the user interface, mobile, data model, etc. As with all of the members of the Leadership Team, their background will be in oil and gas with a strong aptitude towards technology, augmented with some post secondary education in Information Technology.

#!/bin/sh is the starter's pistol for everyone to begin the competition. The industry needs these positions filled and people to start working and organizing the solution for the industry. I am working on the money and you’ll have to take it on faith that the producers will act. What choice do they have? Bankruptcy. Therefore it’s up to us. This will be a difficult task and there is no certainty of success. We will not fail because we can not fail. The industry would be out of options if we did fail.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

More Bureaucratic Abuse

Producers actions in these next few months will be the critical difference to their success or failure as an organization. Sitting around praying for “market rebalancing” will be the most effective way to achieve their demise. Pretending that they’re a viable going concern and continuing to fleece their banker and investors for more capital isn’t going to work anymore. At the same time bureaucrats will have to find that cash from somewhere. As the banks put the brakes on realizing the proceeds of any material transaction, their only source of cash is production. Which of course is the only source of cash anywhere in the industry. Which of course leads to further declines in the prices of the commodities due to further overproduction. We’ve seen this play out a few times now. What is it that bureaucrats think will change this time? They need to act now. People will be looking back to this time to see what they’ve been doing to solve these issues. If they find the producer has been hunkering down waiting for the “market to rebalance” that producers bureaucrats might find the office taking on a streetscape like appearance.

What producers need to do instead is subscribe to the development of the Preliminary Specification. They’ll need some money to do this so they’ll have to find some to make the necessary commitment. To determine their share they’ll need to calculate our budget times the amount of their deliverability, in relation to the total deliverability of oil and gas for North America. That share of our costs will be their upfront commitment to this development. No one said this was going to be easy. The scope and scale of this problem demands that a solution be provided. The upside is that they might be able to fend off any attempts to run them out of the business by the bankers and investors. Showing them that they have a plan as to how to deal with the situation might make the investors and bankers feel more comfortable than they do now. Secondly, the upside of doing this, that is our value proposition is in the range of $25.7 to $45.7 trillion over the next 25 years. This as a result of our price maker strategy and the ability of the industry to begin to return the capital that’s invested in it. Establishing the industry on the basis of the most profitable means of oil and gas operations. Making it a commercial enterprise not this daycare inspired activity exercise.

I’ll bet that stung a bit. Take a critical look at the industry today. The present value of the North American industry is worthless. Nothing of value is being generated by it as a commercial business. Its activity for the sake of activity. Doing rather thinking. Is this the best that the industry can do? Can we take what we have today and rise to the challenge of meeting the needs of our investors and consumers over the next 25 years? Not on the basis of this lot. And not on the basis of kneeling down and praying for the “market to rebalance.” It’s time to shape up and start doing the job that has been entrusted to the industry. Take a position; lead, follow or get the hell out of the way.

Why did we have to take it to this level of destruction? That is the question that I guess we’ll never know. It seems human nature to want to keep trying the old ways until it's obvious they no longer work. The point is that we can start to focus on the solution now and begin to make the changes that are going to turn the oil and gas industry into the dynamic, innovative, accountable and profitable oil and gas industry that it needs to be in the long run.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Wanted, Our CFO

In anticipation that we are about to begin the process of building the Preliminary Specification. I am announcing today that we are seeking our first employee. Our CFO. We are looking for a world class CFO that can fill the position that is needed within our organization and will provide for the needs of the oil and gas producers, our user community and the service providers. As a startup there will be much to do for this individual. That pretty much defines the position, we need everything and have nothing. Those that are interested should email me here.

In follow up to our Friday post in which we discussed the demise of the credibility of the oil and gas producers. How it has been spent with the investment community as a result of the bureaucrats self-serving ways and running the industry into the ground. I want to announce as well that the line forms to the right. That is to say, as I noted in last Friday’s post, that to reestablish yourself as a profitable oil and gas producer is the credibility that needs to be earned. Therefore for oil and gas producers to earn that credibility and to prove that they are focused on profits, will be achieved by subscribing to the software development of the Preliminary Specification.

Continuation of the status quo is always an option. However, just as with ideas, choices have consequences. Going it alone will possibly enable the bureaucrats to make it through without the support of the banking and investment community. That's a tough road to hoe. The easy route would be to pay the subscription for our budget and, here’s the other requirement, actively participate in the developments. The broad scope of industry understanding needs to be captured in the software that we are developing. That is not going to happen without the user community being in the leadership role in terms of how these applications function. The user community will need the producers participation for a variety of reasons to ensure a quality of the final product and to ensure that it meets the producers end use needs. There is no solution that is going to meet your needs without your blood, sweat and tears on the floor. Paying the bill for our budget is the first step and should be representative of the understanding of the significant commitment that you as a producer are undertaking to ensure that your needs are effectively communicated and captured in the software. If this initiative fails don’t look to me or the user community, failure will be 100% attributable to poor producer participation and producers do not have the option of failure.

If you're still sceptical that I can raise your sinking boat out of the water. Talk to your bankers and talk to your investors. They have some skin in the game. They have no interest in your organization failing. If you told them that you had an initiative that you were participating in that would return your firm to profitability, has a price maker strategy, and that you needed their support to turn your producer firm around. The skies might turn and a little less black and bit more blue. What do you have to gain.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Victoria Day in Canada

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