Something for Everyone, Part IV

A quick update on the status of our fund raising for our first year's budget of $100 million. The total number of cold calls that I've made stands at zero. I therefore have doubled my quota for the entire fund raising period. As I've mentioned the producers will be waiting a long time for this one individual to do all this work. Producers need to move quickly and organise themselves to raise these funds collectively. No one else can do it in the short time frame that we have. Who’s issue is the lack of profitability and cash in the industry? Producers need to act to resolve their problems. I don’t think anyone else is going to rush to save them!

I would think the dynamic, innovative, accountable and profitable oil and gas producer would be appreciative of not having the burden of developing the accounting and administrative expertise necessary in the industry. The Preliminary Specification moves away from the fixed producer based accounting and administrative capability to the variable industry based accounting and administrative capability. Where the producer accesses the industry based capabilities that they need to operate. This eliminates the redundant duplication of administrative and accounting capabilities that are currently resident in each producer firm. These capabilities are essentially the same in each producer firm except that they’re a fixed cost and unshareable between producers. The costs of duplicating this overhead burden in each and every producer firm is one of the reasons the industry is not profitable.

Therefore we have chosen not to replicate this redundancy in the Preliminary Specification with the user community and service providers. The service providers will be provided with an exclusive license to operate their process for the entire oil and gas industry. (Some exceptions may apply.) These licenses will be granted through the Intellectual Property that is what holds this community together. Service providers will know that they will not have another service provider set up shop in the adjacent office space and begin undercutting the service providers price or service offerings. That is not the basis of competitive advantage that will be used in this sub-industry and we’ve detailed the basis of competition between the service providers two days ago.

Earning a service provider license will be based on the processes that People, Ideas & Objects software manages and the performance of the user community members during our initial development. If you’ve been an active participant in the area of the lease rental payment process, developed some innovative solutions to the issues in that area, and provided overall leadership qualities that make you stand out in that area, then our assessment would consider those and determine who was the appropriate candidate(s). Note we are looking ultimately for 3,000 members of our user community. These are the leaders in their areas of expertise. We will be managing, we believe, approximately 3,000 processes and will be issuing 3,000 service provider licenses. It is these elements that should also stand out in your application for user community participation.

One of the benefits of the service providers configuration is that they provide the industry with an objective and independent resource dedicated to the quality of the information in the Joint Operating Committee. Under the Preliminary Specification the concept of operator is somewhat expired. Participation by all of the producers in the Joint Operating Committee is required due to the reasons documented in the various modules of the Preliminary Specification. Having this objective and independent accounting and administrative resource provide these processes management will assure the industry that no favorites are being provided for. There will be some processes that are producer specific however the majority of the processes will be charged directly to the Joint Operating Committee.

The key attribute of the service providers is that they make the producers administrative and accounting overhead costs variable, based on production. With shale being as prolific as it is, and the costs being as high as they are, not all of the well bores can be exposed to the commodity markets at once. That is a losing proposition. Therefore People, Ideas & Objects Preliminary Specification, our user community and service providers turn all of the producers costs into variable costs. That way they can always achieve the most profitable means of oil and gas operations no matter what level of their production profile they produce at. This is how businesses and industries are operated. No one who owns a donut shop continues to produce donuts until the parking lot is full of donuts. And then, the only remedial action taken by the management of the donut shop is to buy more advanced, faster donut making equipment. Filling the neighbors parking lot. That wouldn’t work would it. And it certainly doesn’t work in oil and gas. Producers, like the donut manager, will lose all their money waiting for the “market to rebalance.” And shy away from the alleged manipulation of the market the Preliminary Specification recommends in our decentralized production model. Shale requires that supply be managed to stop overwhelming demand. That’s not collusion, it's operating a profitable business. The Preliminary Specification does this by providing the actual, factual accounting of the property to determine if it's profitable. If it’s unprofitable then it is shut-in. No collusion, no market manipulation just business decisions being made independently based on actual factual data. Why is this not common sense in oil and gas, as it is in every other industry?

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Something for Everyone, Part III

As a service provider you will be the key to the oil and gas producers profitability. While the Preliminary Specification is operational in the industry, as it is today, it will no longer be enough to just own the oil and gas assets. It will also be necessary to have access to the software and services that make those assets profitable. People, Ideas & Objects, through our user community vision have no direct contact with the producer firms other than to collect the fees for their use of our software. We look only to the principles of the service providers who are our user community members that direct what software we develop. It is here where the producers will engage the user community to have their issues and opportunities addressed in terms of their needs from the software and services that producers need to be provided.

In our user community vision we clearly define that the user community is funded by the financial resources that People, Ideas & Objects source from the producers. These part-time user community participation revenues will be a small percentage of the funds that are necessary to drive this new sub-industry. Review of the methods of how and why those funds are expended are detailed in that vision. Where do the service providers revenues come from? We’ve indicated that the service providers are replacements to the current accounting and administrative resources of the producers. The resources funds that are being incurred today at each of the producers would also shift to support the service provider sub-industry. This would include all of the costs of these resources. The salary and benefits, office space, support personnel, power etc.  Each of the service providers will have a service level agreement with each of the producer firms in the industry. These service level agreements may seem onerous and unnecessarily administratively inefficient, however, standardization and other tools could make this administratively efficient for both service providers and producers. Understand that much of the work that industry does with the user community is what would be captured in a service level agreement, although much more detailed, and that Microsoft has end user license agreements with any and all Microsoft product users and the simplicity of this comes into focus.

Making these changes to the industry structure and the structure of the dynamic, innovative, accountable and profitable oil and gas producers enables their overhead, and therefore all of their cost structures, to become variable. I believe that once producers fully understand this implication they will hold to the strictest interpretation of this model and turn over all of their accounting and administrative processes to the service providers for management. These tasks are not key competitive advantages of a producer firm and to turn a fixed cost into a variable cost brings about significant structural flexibility and profitability. Producers that understand this will move quickly to exploit this advantage.

The advantage to the producers is that it will relieve them of their overhead cost concerns. If they produce 100,000 boe / day this month, and as a result of some phenomenon, the oil price declines precipitously the next month to where they can only profitably produce 50,000 boe / day. They will immediately shut-in the unprofitable 50,000 boe / day in order to maintain their maximum profitability. The overhead costs of the 50,000 boe / day of shut-in production under the Preliminary Specification are not charged by the individual service providers as no work comes through to the service providers through our task and transfer network and hence no billings from the service providers will be issued to those Joint Operating Committees. However, that does not eliminate the service providers overhead costs associated with the 50,000 boe / day of shut-in production. These costs remain fixed for the service providers. And the cost control of the overhead costs of the oil and gas industry have indeed been shifted from the oil and gas industry on to the sub-industry of the service providers.

As a service provider you will understand that at anytime during the year you may be faced with up to 15% of your revenues declining as a result of industry shutting-in production. Or whatever percentage of the industries deliverability is shut-in at that time. I believe, this can be managed within the scope of a service provider operation with revenues of $6.67 to $10 million per year through the budgeting process. Enabling for the first time true overhead cost control capabilities for the oil and gas industries overhead costs.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Something for Everyone, Part II

As a service provider you would have in the range of $6.67 to $10 million in annual revenues. These revenues would be generated by providing People, Ideas & Objects software and your services to the oil and gas industry as a whole. You would also have the incidental, part-time, income from the work that you would do with the People, Ideas & Objects software developers as a user community member. This part-time income would also be a permanent source of revenue as we are a change based software development capability provided to the dynamic, innovative, accountable and profitable oil and gas producers. Therefore you would have a team of 20 to 30 individuals, on average, who would be managing the process that you were responsible for. It will be your focus on the specific process that you manage that provides the quality service to the oil and gas producers. You will have the ability, as a member of the user community, to make the changes to how and what that process is, and the way that it is managed by the People, Ideas & Objects software. Therefore you will be able to continually iterate the way in which your process is managed and the services and software that you deliver to your industry clients.

Your field of competitive advantages are many and far more diverse than what are available today. Certainly technical capabilities and industry understanding will be features of your service provider offering. However there will be much more. Automation will be a key part of your tool set. Through your work as a user community member you will be able to move more of the process to an automated process. This may concern people that jobs will be lost in the industry as a result, just as this concern was raised when computers were introduced in the 1960’s. We are focusing on the work that humans do best in these processes, the leadership, issue identification and resolution, decision making, creativity, collaboration, research, idea generation, design, planning, thinking, negotiating, compromising and innovating. And leaving the storage and processing to the computers. This will open new areas of opportunity to build value for the oil and gas producers and increase the quality of your service provider offering.

All economic development is a result of the expansion of specialization and the division of labor. For the industry to achieve energy independence we will need to increase our capacity and capabilities from the same resource base. Therefore to achieve that higher level of industry throughput, service providers will have to develop ways to increase their throughput through the application of specialization and the division of labor. It will be these tools that will become the competitive environment that exists between the service providers. If for example you are licensed for the lease rental payment process, you will be the exclusive provider of lease rental payments. There will be no other service provider that comes in and undercuts your pricing or offering as a result of the manner in which the Intellectual Property is developed and distributed in the user community and service providers. That process that you manage will be your domain exclusively and the means in which you will compete with other service providers is through iterative levels of automation, specialization and the division of labor.

Review of our user community vision is a worthwhile reread at this time. The combination of user community member and service provider is the means in which the industry moves forward. Each service provider actively moving their process forward into areas where we can’t imagine at this point in time. This won’t be a mindless application of going through a mountain of data each month. The processes that will be managed by the service providers will become highly scientific and determine new and quality information that is otherwise unknown today. All the while enabling the dynamic, innovative, accountable and profitable oil and gas producer to produce only profitable production through our decentralized production model. Only as a result of the service providers existence.

Granting of the service provider licenses will be based on the performance of the individual user community members. In some cases service providers may have multiple user community members. And user community members may have multiple interests in several service providers. These will be assessed based on the outcome of the software’s process management requirements and the participation of the user community members during our initial developments. The key at this point is to submit your application for the user community.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Something for Everyone, Part I

How People, Ideas & Objects and our user community propose that we rebuild, refurbish and develop the oil and gas industry to achieve energy independence is through profitability. That is the key part of our 25 year plan and our $25.7 to $45.7 trillion value proposition. If the oil and gas reserves in the ground are as valuable as they’re represented to be, then they should be leveraged profitably to fund these needs. The investors in the oil and gas producers have had enough with the dismal performance to date. Expecting investors to now generate the additional $20 to $40 trillion in future capital investment is beyond their capabilities and capacities, and most certainly beyond their desires. If the investors did fund these capital requirements, and based on the producer's current and past performance, how would these investors prosper?

As a practical matter then the Preliminary Specification is the industry's first step to move down this road where profitability fuels the industry. We can then organise ourselves in a manner in which only profitable production is produced in North America at anytime in the next 25 years. Leveraging the investors installed base of investment in the existing reservoirs profitably. Providing them with the long awaited return on that investment, payoff the debts of the producer firms, and fund the capital expenditures that we noted in the first part of this post. That is our plan.

Our plan involves the development of our software that we’ve defined as the Preliminary Specification. People, Ideas & Objects, our user community and service providers are commencing developments of our software on September 25, 2017. What we need from industry is our first years development budget of $100 million and the securing of our complete budget by September 2018. We also need their active participation with our user community. Expressing to the user community what and how it is they do their work. Software developments only provide value to those who actively participate. You only get out what you put in. This by necessity will have to be an industry wide initiative.

Producer firms who may consider letting others do the heavy lifting are mistaken. Coming in to use the software and services after the software has been built will be too late for your firm to benefit. By then those that will have participated in our development will be on a different performance trajectory and I would seriously question the producers ability to bridge the ever growing gap in their performance. Did the record store manager ever respond to iTunes, or Nokia to the iPhone? What makes you think that deferring your participation in the development of the Preliminary Specification will enhance your position?

The reality is that Information Technology is changing every industry on the planet. New business models are replacing ones that no longer perform. Software defines and supports the organisation and the industry. To make any change in the makeup of the industry will require that we develop the software first. Why wouldn't you need to be a part of that?

And for the community of people who would be interested in participation in our user community. We believe at this time that this community will number about 3,000 individuals. Subsequent to our initial developments these user community participants will form the service providers organisations that deliver our software and their services to the dynamic, innovative, accountable and profitable oil and gas producers. These will be replacements to the existing producers accounting and administrative capabilities. These are therefore substantial business opportunities for that community. I expect this newly defined sub-industry will have annual revenues in the region of $20 to $30 billion per year. An average of $6.67 to $10 million to each service provider. Each user community participant / service provider will focus on one process and manage that process for the entire industry based on the vision of the Preliminary Specification. Please proceed quickly with your applications for consideration for our September 25, 2017 start date.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Battle Lines Being Drawn

Al-Falih, in a clear message to the U.S. industry, said it would be "wishful thinking" to expect that Saudi Arabia and OPEC "will underwrite the investments of others at our own expense" through production cuts.

Clearly, in the mind of the North American producer, OPEC exists to accommodate them. The precision planning undertaken by these producers to make OPEC do exactly what they wanted them to do is impressive. So what’s the plan now? Maybe they could exert this mind control over the Chinese and have their people consume twice as much energy. The sky's the limit really. People say I should cut these producers a break and maybe they’ll fund the project. If the producers only deal with people who kiss their feet we may have identified another critical issue in the industry. Kissing the bureaucrats feet only generates an industry full of blind sleepwalking agents of whomever would feed them. My aim is at the bureaucrats who in a self serving manner have destroyed the producers and the industry.

Oil prices fell on news of the renewed OPEC agreement. Primarily as a result of the phenomenon of “buy on the rumor, sell on the news” and the reduction of the OPEC production doesn’t deal with the real overproduction and oversupply issue, the North American shale producers. Of course with producers only mirroring the commodity prices, all of their stocks were down too. Leading one to ask if investors might be better off just trading in the commodity? It used to be the belief in management that managers added value in up and down markets. But these rules don’t apply to oil and gas bureaucrats.

The reason producers are able to survive in such a difficult financial environment is because oil and gas is a capital intensive industry. Where the return of capital from operations is being diverted to fuel the bureaucrats pocket book and keep the lights on. That may be the primary point that the investors are trying to express to the producers. That although they have capital discipline and judiciously spend the money that is raised through stock issuances and banking, the return of that capital from operations are directed towards lining the pockets of the bureaucrats. Now that the investors and bankers don’t support the industry with new capital, there is a critical cash crisis. Producers should ask themselves why in the world would this happen?

I used to believe that our appeal to the oil and gas investors would have them direct their oil and gas producer firms to develop the Preliminary Specification. I’ve changed my thinking on that. I now think that the oil and gas producers are going to have to deal with their problems constructively before they receive the focus and attention of their investors again. Their investors continue to own the producer firms, and as noted here earlier, with the diversion of cash flow to the bureaucrats, these producers are not going to go out of business, they are the walking dead. Therefore investors will continue to hold their financial interest and not invest any more cash into the industry. Putting more money in will only waste financial resources, dilute their current interests, and provide no one, other than bureaucrats, with any upside. Therefore it’s up to the producers to act to develop the Preliminary Specification in order to set the industry right before any investors show any interest.

Information Technology is disintermediating every industry on the planet. Oil and gas is not immune. The Preliminary Specification eliminates the bureaucracy from the scene and they chose in 2004 to begin our sessions with the baseball bats. Things were really good in the industry in 2004. When I began saying that we provided the most profitable means of oil and gas operations these bureaucrats laughed and said no one in the industry is concerned about profits, its cash flow. It would seem in 2017 that profits have become the issue. The producer's problem is that they may be profitable, but they’re fake profits as they don’t have any cash and their companies are consuming cash at phenomenal rates. So much for cash flow too. With investors on strike, the only source of cash is new production and they can’t get enough. Which of course leads to more of the overall problem.

People, Ideas & Objects, our user community and service providers have chosen to do something about all of this. I find it great sport pointing out the deficiencies of the bureaucrats. However, if we’re sitting here complaining about the bureaucrats a year from now then we’re no better than them because we won’t have done anything either. We have a plan to solve this through the Preliminary Specification and a start date for our software developments of September 25, 2017. As we’ve noted above, the producers are going to continue as the walking dead and as a result the bureaucrats know that their franchise is safe for the next few decades. Therefore it will be interesting to see how this log jam gets broken. Someone needs to fund our first years development costs of $100 million. With follow on financing of our entire budget. I’ve drawn the battle lines, which side are you on?

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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

No posting today.

What's in a Name

People, Ideas & Objects is a bit different in terms of a name for a company. The explanation of how I came about this name might provide you with some insight into our priorities and focus. In 2001 Professor Paul Romer published his economic New Growth Theory. It suggests that economic growth in the future will not occur as a result of the traditional increases in capital and labor, but through People, Ideas and Things. We as object based software developers made the change from Things to Objects to reflect that our focus was on economic growth through People, Ideas & Objects. In the abstract of Professor Romer’s paper he notes a particularly interesting point that we should take into consideration regarding our development start date.

Societies that generate and tolerate new ideas, and that continuously adapt to changing economic and technological circumstances are a precondition to sustained economic growth.

This makes People, Ideas & Objects user community, the way that it is constructed, critical to the success of the oil and gas industry. And why our September 25, 2017 start date is important for those potential user community members to be working on their applications. This point is also the basis of my commitment to user community ERP systems development in oil and gas. We will not build software without the involvement and direction of the user community. Our software and services quality is represented in the ability of the user community to provide the oil and gas producer with the most profitables means of oil and gas operations. And to do so by moving producers forward economically. There is no more important role, in my opinion, than what the user community will hold in both our software developments and the oil and gas industry.

It is the user communities strategic competitive advantages that come to mind. The producer firms are currently burdened with developing accounting and administrative capabilities. None of these capabilities provide any incremental value to the producer. They are necessary as a result of compliance and governance, and mostly regulations. Whereas our user community will be able to provide a replacement to these capabilities as part of their strategic competitive advantages. That will be their business offering and they will be able to provide these in the most innovative and valuable way that they can. And as a result of the configuration of the user community, and the configuration of their service provider organizations, they will enable the price maker strategy of the Preliminary Specification for the oil and gas industry. A substantial value proposition for the oil and gas industry.

When was the last time that accounting and administration was discussed from the point of view of strategic competitive advantage, value propositions, economic growth and dynamic change. That is what we are able to provide the dynamic, innovative, accountable and profitable oil and gas producer. With your participation in the user community this will be our future in the oil and gas industry. The process of completing your application is the beginning of that future. It’s that simple.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

T Minus Four Months and Counting

We began our 26th year earlier this month, now we look forward to the developments of the Preliminary Specification on September 25, 2017. Potential members of our user community should complete their applications and submit them before this date in order to be considered in this first years development. We are looking for a total of 100 people to make up 33 man years of effort in this first year. User community participation is always a part-time paid position. However the majority of the time spent and revenue that a user community member will generate will be through the service provider organizations that they develop to meet the needs of the oil and gas industry. These are substantial business opportunities, in my opinion. As the service providers are the replacements to the current accounting and administrative capabilities of the individual producers. Producers will have limited if any accounting or administrative resources employed within each of their firms under the Preliminary Specification. Instead they will engage with the service providers to manage their processes. Service providers in turn will use specialization and the division of labor, automation, innovation based on administrative or accounting expertise, making computers work for us and quality as their key competitive advantages. Managing one process, and only one process, service providers will administer that process across the entire industries data set.

In none of the annual reports or quarterlies that I’ve reviewed over the past decades, has any producer mentioned that accounting or administration were their key competitive advantages. The dynamic, innovative, accountable and profitable oil and gas producers key competitive advantages are their land and asset base, and their earth science and engineering capabilities. The closer they move to a strict interpretation of this division of labor the more focused they’ll be, and the more variable their cost base will be. The Preliminary Specifications takes all of the producers overhead costs and makes them variable costs that are accessed from an industry wide capability. No longer will each producer have to generate accounting and administrative capabilities in-house that are fixed in terms of costs, unshareable and replicated within each individual producer firm. This reorganization under the Preliminary Specification allows for an enhanced profitability across the industry.

This industry based, variable accounting and administrative capability of the service providers enables the price maker strategy of the Preliminary Specification. Each service provider assesses the Joint Operating Committee for their service fee. Not the producer itself. Therefore when the producer finds that a property is unprofitable and shuts in that property no information will be generated as a result in our task and transfer system, our system that drives the service providers. As a result no work will be done by any of the service providers and as a result no invoices will be sent to the Joint Operating Committee. Enabling that property to record a null operation. No revenues, royalties, operations or overheads. No profit but also no loss, a null operation. Therefore the producers profitability is maximized due to the losses on operations are no longer diluting the profitable properties, as they do today. The marginal production has been removed from the commodity markets, enabling the oil and gas prices to increase. The reserves are saved for the day in which they can be produced profitably and those reserves costs will remain constant as none of the losses that otherwise would of occurred would be added to the reserves cost base.

People, Ideas & Objects user community is the critical source of quality for our offering. The user community is endowed with significant and substantial power to affect change within the oil and gas industry. This is not your grandfather's user community. They will be the ones that our software developers work for. We are blind, deaf and dumb to anything and everyone else. The user community is also in complete control of the Intellectual Property that makes up the Preliminary Specification and its derivative works. As a result of these two key components, significant power is attained by them to ensure that they are not blind sleeping walking agents of whomever will feed them. And are able to develop and direct the changes that the oil and gas producers need in order to ensure that their future issues and opportunities are addressed. We do not want to lock the industry into the Preliminary Specifications business model permanently if there are better ways in which to manage the industry. Review of People, Ideas & Objects Revenue Model shows that we are change oriented software developers. That is how we generate our revenues. Through the changes that are initiated by the user community. If you want change based, user community driven ERP systems in the oil and gas industry, what are waiting for?

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Some Deep Soul Searching

The solution to this chronic industry malaise is for the producers to jump on board the People, Ideas & Objects, user community and service providers software developments. These are beginning September 25, 2017 with the initial $100 million in funds that will be sourced from the producers. Enough to fuel our first years developments. If the bureaucrats believed that I would be nice to them after they’ve destroyed the industry to such an extent, then they’d be mistaken. I have many competitors that would tell them all the sweet nothings that their losing propositions have mythically obtained. If bureaucrats take what I’m saying personally then they’re being unreasonable. I have tried to solve this problem for 26 years now and received nothing but a repeated and frequent disciplining with their baseball bats. If they want to fix their business this is the place in which to do so. The question they need to ask themselves is, if they undertake to build the Preliminary Specification will the investors see that as the beginning of a new industry in which they would be interested in investing in? Breaking the log jam of the investors non-participation these past number of years. Their investor's concern is regarding the commercial viability of shale reservoirs. Producers financial statements are showing that the industry is not commercially viable and as a result investors are on strike. Creating the critical cash shortfall all producers are experiencing.

Within the first year of our software developments, and well before September 2018, producers will need to fund People, Ideas & Objects entire development budget. Stopping and starting is not an option, there is only stopping and failing. User community participants need to see that the producers themselves can take the actions necessary to resolve their problems by funding our full budget. There is no other way in which these overproduction and oversupply, and unprofitability issues will be resolved. We should also be concerned with the short attention span of the producers. If the marketplace should happen to temporarily improve this may lead some bureaucrats to believe the follow on financing of People, Ideas & Objects et al is not necessary. This lack of follow on financing would be a critical and fatal mistake and something that I would point out now to the oil and gas investors.

And what’s in it for the producer to follow our recommended course of action. People, Ideas & Objects, our user community and service providers provide the oil and gas producer with the most profitable means of oil and gas operations. We do this with our business model as defined here. Our software defines and supports a reorganization of the industry and the producers to operate a new business model that deals with today's issues. Our value proposition is priced in the trillions of dollars over the next 25 years. With our price maker strategy producers will be able to only produce profitable properties which will remove the marginal production from the marketplace. Producers will then be able to recognize the capital costs they’ve stored these past decades in property, plant and equipment by passing them through to the income statement. This way they will be able to replace those balances with balances in the accounts of current assets and then be able to pay dividends, pay down debt and fund their own capital expenditures.

These changes can only be done through the deliberate act of developing our software. Any attempt to make the changes without the commensurate changes in the software first, will cause the industry and producers to regress back to what the software that exists today identifies and supports. We need to take control of the development of the software that the industry uses in order to take control of the ways and means of the industry. Spontaneous order, of which we have relied on for centuries, is circumvented by the software that we use. Software cements the organization in an unchanging structure. Until now it has been convenient for the bureaucrats to distort this fact and ensure their position remains unchallenged by never changing the organization's software. However the damage to the industry and all concerned is tragic and will only continue to escalate. We may find days which are acceptable intermingled with days where everything is falling apart. What we do know for sure is that the overall trend is on a steep downward trajectory.

Later this week OPEC is meeting to discuss the extension of their production sharing agreement. North American based producers believe they’ve proven that their costs are lower than OPEC’s and have established themselves as the priority in terms of who produces. This may be incorrect. If as the BP Chief Economist suggested a few months ago. That there is adequate oil to supply the world twice over up to the year 2050, and as a result, the low cost producers, which are OPEC, will find the economics of production at any price is better than never realizing any value. This would preclude the North American producers from the oil and gas marketplace, because of their high costs, until the year 2050. There has been an acceptance that North America is the new swing producer. However, there is a misunderstanding as to what that means in the North American marketplace. The swing producer will be the first to curtail their production to support the price. Something producers would achieve dynamically with the Preliminary Specification. I would suggest some deep soul searching on behalf of the North American producers and suggest they develop a plan to deal with the next 25 years. A plan that is consistent with the reality of shale reservoirs, which happens to be the one that we recommend and are moving forward with the commencement of its development on September 25, 2017.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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 Producers Choice

The worst performing stocks of the first quarter of 2017, on a global basis, are the North American oil and gas producers. Even though OPEC has tentatively committed to extending their production cuts until March of 2018. Oil prices remain barely above $50 due to the shale producers zeal to fill any void left by OPEC’s production sharing agreements. Producers all claim that they’re profitable at $34. This is attributable to the fact that they never recognize the capital costs of past production. The capital costs they do recognize are so insignificant, due to the fact they recognize them over the usual 15 year period of depletion. Causing their property, plant and equipment balances to bloat excessively on their “well protected balance sheets.” In the first quarter of 2017 our sample of 23 producer’s spent $10.2 billion on capital expenditures and recognized $14.3 billion in depletion. Reducing the property plant and equipment balance by $4.1 billion to $459.2 billion. At this rate another 112 quarters should clear these balances. The point of the exercise is clearly to store these costs for as long as possible, to never recognize them and pretend that they’re profitable under the basis of a perverted SEC ruling that is the exception and counter to all other industries.

Running a producer as a business is the solution. Moving the balances of property, plant and equipment to the income statement in a timely manner would have recorded a collective net loss of $397.3 billion. Providing key evidence to our claim that producers need a tripling of oil and gas revenues to survive. This would therefore also represent the amount that the investment community, the source of the capital to fuel those losses, has subsidized the energy consumer. With these costs sitting on the balance sheet for eternity the industry will always look profitable. Oil and gas is a capital intensive industry, the real costs are in the drilling and fracing operations not in the operation of pumpjacks. This is not just ludicrous from a business point of view, but from a practical manner as well. If the producers only produced profitable production as with the Preliminary Specifications decentralized production model and price maker strategy. They would obtain the prices necessary to eliminate the property, plant and equipment balances and recognize the real costs of the oil and gas business. In turn the “business” would generate cash that could be used to pay dividends, pay off debts and fuel future capital expenditures. Their property, plant and equipment account on the balance sheet would be replaced by current asset accounts they could use. That would however require they begin running a business.

Our price maker strategy is the issue the bureaucrats point to as being unacceptable. They will never intervene in the market to “make” prices. They want to see the “market rebalance.” Markets do one thing and only one thing and that is provide information by way of price. If the price is adequate for you to produce and make a profit, you produce, otherwise you don’t. And that is the way markets everywhere and our price maker strategy work. If the property earns a profit, considering all of the costs, including capital costs on a reasonable basis of recognition, then it produces, otherwise it’s shut-in. This is not collusion as the bureaucrats claim, its independent business decisions being based on actual factual accounting information. You’re in business to earn a profit. Why would you produce if you didn’t earn a profit? You wouldn’t. With the Preliminary Specifications reorganization of the producer and industry the shut-in production incurs a null operation, no profit but also no loss. The shut-in property will incur no royalties, operating costs and no overhead of any kind. Therefore the producers profits are maximized as a result of only producing profitable properties, no unprofitable properties are diluting their earnings. The commodity markets find the marginal costs of the commodities due to the marginal production being removed from the market. The reserves costs remain constant due to the fact that consecutive losses are not added to the reserves each year. And those reserves are saved for a time when they can be produced profitably.

I’ll admit that People, Ideas & Objects our user community and service providers are part of the lunatic fringe as a result of this thinking. We are absolute evil, and how dare we suggest that the industry be operated as a business. It’s just what we do. This industry has been operated on this basis now for four decades. Most of the people in the industry don’t know anything different. It is culturally ingrained and the destruction is beginning to be recognized. Note the word beginning. When you don’t recognize your capital costs for the first few years, or even decades, it’s an advantage. Then as the balances of property, plant and equipment build up, that advantage turns into a disadvantage in order to equal things out. Mostly due to higher depletion rates, large balances of debt and large numbers of shareholders offsetting these very high balances of property, plant and equipment on the balance sheet. Where’s the upside for a new investor? Outsized balances of property, plant and equipment will be the albatross of these producers for decades to come, under the current methodology. The other consequence of not recognizing your capital costs is that you report healthy profits in the early years which draws in excessive amounts of capital. You remember those good old days don’t you. That excessive capital leads to overproduction or over capacity. Which from a business point of view, I don’t think there is a more dire and difficult business problem to overcome. Most businesses can’t survive when they’ve invested into too much capacity. The increased overhead of the surplus capacity eats you alive. The oil and gas industry has invested into too much capacity. What will happen as a result? Will it be that the producers support one another by participating in the development of the Preliminary Specification, or drag each other down? With the only source of cash being “more” production I think we have our current answer.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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

No posting today.

Third Friday Off

No posting today.

Our Developments in Sight

In as little as four and one half months from now we begin the developments of the Preliminary Specification. Not a lot of time to complete the things we need to do. People interested in our implementation or our plan can follow those links. If you’re interested in being one of the one hundred or so members of the user community that we’re starting with in our first year then you should complete your application as soon as possible. Remember these are part time positions that we are looking to fill approximately 33 full time positions with. We are looking for our user community to provide us with a broad scope of understanding of the industry. To fill out a detailed outline of the Preliminary Specifications deliverables for September 2018. Therefore we need a reasonably large number of user community applications to select from. Selection for the first year does not preclude those that are not selected from joining the user community in subsequent years. We will be looking for a total of 3,000 user community members making up 600 man years of effort per year when we are in full development.

Our software developers are a different story as they are full time hires and employees of People, Ideas & Objects. We are therefore looking to fill this requirement somewhat dynamically in the first year, if that makes any sense. These will be critical team members for the long term of the project. Therefore user community members may see rapid turnover in some of the developer positions in the initial phase of this development. This is one of the reasons that we need to start this development now. Our products and services are needed in the marketplace today, but nothing like what they’ll be needed in the next few years. As long as everyone understands that I’m sure we’ll be able to work through it.

Another aspect of what our developers will be working on is having the Oracle Fusion Middleware and Oracle Fusion Applications operational in a cloud computing environment. That way the user community will be able to see the base of the applications that they’re building upon. And they will be able to see their iterative developments as the developers code is committed and run on that environment for the users to see and use. It will be this facility that will enable us to move much quicker and the user community increase the quality of their offerings. Our only constraint is the speed of the user communities ability to think. Oracle also has one third of the costs of our initial budget made available to them to begin the technology transfer from their organization over to People, Ideas & Objects. We’ll need to learn many things and Oracle will be able to bring us up to speed in the shortest possible time. They will also be able to support their applications and our developments at a much higher level than what we would otherwise be able to do. We have a large technically challenging task ahead of us. Oracle has fully one third of all of the costs of our entire budget to ensure that these objectives are achieved in the long run. I have worked closely with Oracle in this capacity during our 1992 - 1997 joint development efforts. It is the superior methodology to ensure that we mitigate the technical risk we face and achieve the success that the oil and gas industry requires.

I have been abusive towards the oil and gas producers throughout the history of this blog. We have a MAAA (Mutually Assured Abuse Agreement) in place and I adhere to the spirit of that agreement. If they want to stop abusing the group that is providing the most profitable means of oil and gas operations. Who are conducting the only issue identification and resolution in the industry. Then I’m game. We are unquestionably the personification of evil but producers could easily overcome this by funding our first year's $100 million budget in a timely manner. Producers need to think and ask themselves critically, do they have the situation under control, and are their investors convinced that they have a plan for the future? Or do they need to address the business model in which the industry is operated and implement one that provides the oil and gas producer with a dynamic, innovative, accountable and profitable footing? As I said the other day, the writing's on the wall and my focus in on getting this software and the user communities services operational in a successful manner in the oil and gas industry. They are certainly welcome to join us here at anytime before our start date of September 25, 2017.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Onward and Forward

The one thing we should be grateful to the producers for is that we now have tangible proof. Proof that spending money like drunken sailors never made anyone rich. We’re doing something about the issues in oil and gas so we don’t look like the bureaucrats, developing our software beginning September 25, 2017, otherwise we are no better than the bureaucrats who do nothing. And therefore we are at the very beginning of the delivery of the Preliminary Specification to the oil and gas industry. Key to this delivery is our user community that we see as the source for the quality of our software and the services that these user community participants will provide through their service provider organizations.

Almost three and one half years of user community development is the investment that has been made by People, Ideas & Objects. It had to be made. The user community is the critical point of success and quality of our offering. It is now the only major impediment to our speed in delivering our solutions. For the industry to move and implement the necessary changes the user community can be deployed in rapid fashion and deliver on the vision of the Preliminary Specification. It is the speed in which the user community can think that will be the constraint that we are now limited by. That multi-year investment has been made and now it's time for us to act on that investment and the vision of the Preliminary Specification.

I published the Preliminary Specification in December 2013. It provides the overall vision of how and what the industry and producer needs in order to to become dynamic, innovative, accountable and profitable. Since then we’ve worked to develop the user community. There is a saying that I think is appropriate for everyone to consider at this time.

‘Vision without action is merely a dream. action without vision just passes the time. Vision with action can change the world!’

With the participation of the user community in the development of the Preliminary Specification we can change the oil and gas industry to one that is dynamic, innovative, accountable and profitable. With no bureaucrats allowed! It comes down to the individual decisions of the people within the user community who have and will decide that enough is enough. What the producers believe today is that everything will soon return to normal. Shale is here for the very long term. Outsized balances of property, plant and equipment will be here for a long time. The debts will be here for a long time, and most probably, growing. The overproduction and oversupply issues are systemic and chronic and prompted me to seek a solution in 1991 to the overproduction in the mid 1980’s that caused the oil price collapse. Producers then just continued to lose money and increased production until the day they died. Sounds familiar doesn’t it. These problems are not going to disappear under these current administrations. These issues appear to me to be a feature of the business model that’s in use. Continued inaction, without any vision of the future, has us wasting time that is too expensive for all concerned. Which is exactly what the bureaucrats want.

I would argue that these problems will only become more protracted and difficult for the producers to deal with. The lack of cash is the current symptom that is plaguing the industry. And there are many ways to remediate that cash shortfall, none of which the producers are finding that they would consider affordable. And so they will muddle along and do nothing. It is now clear to those within the industry that shale production volumes increase at much lower price levels than first believed. Of course they would, it’s the producers only source of cash. Even in natural gas it was believed that shale production volumes stopped increasing last year. Now we find that to be untrue. Natural gas prices began their precipitous shale induced decline in the summer of 2008. Other than lose vast amounts of money and time since then nothing has been done. This business model is truly flawed. Our changes need to be made in the oil and gas marketplace and now is that time. Otherwise we’ll be stuck here forever.

It is the user community that is the source of the quality of the ERP systems that we’ll use in the future. People, Ideas & Objects have invested heavily in the development of our user community and now is the time for you to begin your participation. The issues in the industry are not being actively discussed and there is no vision and no plan to deal with them. More time will be wasted as a result and based on the financial performance of the industry a lot more money too. We can remedy this with the vision of the Preliminary Specification and the individual actions of the user community participants.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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 Are The Standard

Yesterday we detailed the issue that oil and gas producers face as a result of their inaction and covering up the difficulties they’re experiencing. Chronic and systemic overproduction and oversupply are now a permanent feature of shale based reservoirs. And commercial financial performance has never been attained anywhere in the industry over the past four decades. This has set the investment community on strike, creating a cash crisis that deepens with each successive quarter. Continued avoidance of the issues by the producers can only continue for so long. At some point they will need to regain the trust and confidence of the investment community, and banks, in order to function as viable going concerns operating commercial businesses. How can that trust and confidence, the integrity that they have things in hand, be earned by the industry?

People, Ideas & Objects, our user community and the service provider organizations that they’re developing will be the means in which the industry regains the trust and confidence of the investment community. Primarily by providing the oil and gas producers with the most profitable means of oil and gas operations. Something that we’re dedicated too and have developed as key elements of the Preliminary Specification. Everything that is done in the Preliminary Specification is to generate the profitability that a commercial industry needs. This is done so that society can prosper as a result of a healthy oil and gas industry. People will continue to be gainfully employed. People will be able to look to the industry as an area of interest to pursue through their university education. People in the service industry will be able to develop businesses that continue as going concerns and not risk everything on the “cyclical” nature of oil and gas. These people will pay taxes, as will the oil and gas producers. Who will also pay royalties. And lastly the investors who have made this all happen will be able to see the day when their investments have actually paid off. That is how an industry contributes to society. Other than the bureaucrats, whose benefited in the past four decades? No one.

People, Ideas & Objects, our user community and the service providers are the standard of expectation and the standard of performance that the industry will attain. Our Revenue Model specifies how we are able to source the resources that we need to achieve this. We are not blind sleepwalking agents of whomever will feed us. We are delivering the systems, accounting and administration that is necessary to achieve the most profitable means of oil and gas operations. By running the industry as a business we will be able to achieve much more than what’s been done to date. What will be expected of us in the next 25 years will be the most demanding period that the industry has ever faced. Where is the current discussion of this future? Muddling along through the next 25 years will only bring more of the poor performance we’ve seen throughout the past four decades. Muddling along and doing nothing are abject failures as the strategy of every producer. It was an inane strategy, ridiculous to consider and foolish to pursue. Now the evidence shows that it’s been a financial disaster.

We commence developments with our user community of our software on September 25, 2017. Producers need to realize the situation that exists today and take steps to remediate these problems. Otherwise the end is clearly in focus. Their participation is a necessary element of this development in a number of ways. They hold the financial resources that we need to build our product and services. We need the $100 million for our first years development costs in place by our start date. We then will need our full budget in place by September 2018. Producers should ask themselves if the act of funding our budget will satisfy the investors to the point where they’ll call off their strike? Another aspect of our need for producers participation is in terms of software quality. They need to work with our user community to ensure that they are receiving the software that they need to function. If you put nothing into this development I can assure you’ll get nothing out of it. There are fundamental and significant changes being made to the producer firms and industry. Being unaware and unknowing of these would be terminal to your operation. There would also be, in my opinion, no opportunity for you to catch up once the software is operational. The speed of the producers on our system will overwhelm your performance in the marketplace.

The writing's on the wall. What will you do? Try the junk bond market again? Muddling along will certainly be the operative strategy. However the difficulties will be about as high or higher as they have been these past two years. A constant chronic and regressive struggle throughout your future. Or you can choose to make the change that will end this destructive cycle that began long before most of the people began working in the industry. The culture is flawed and needs to be shelved. We need to adopt the dynamic, innovative, accountable and profitable culture that is the by-product of the Preliminary Specification.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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.

ROFLOL

Earnings of the producers for the first quarter of 2017 have all been published for the most part. I have been critical of the earnings and accounting of the producers on this blog. On many occasions I’ve stated that they did not have any real profits for the past four decades and that they were not innovative. They’ve certainly proved me wrong with this first quarter's performance. In most cases the producers did report somewhat healthy profits in comparison to the past two dismal years. The problem for the producers is that there continues to be no cash. Although there were profits, no real cash was generated. Which seems odd doesn’t it? What they’ve done is increased the number of years in which their depleting their property plant and equipment. Extending it out to 15 years in some cases. Which dropped the amount of depletion recognized in the current quarter by, you guessed it, the differential in this quarter's profits. When a producer says their innovative don’t forget to include the innovations that occur in accounting as a key part of that. For the last year we’ve heard the producers claim that they reduced their costs to ensure that they were only producing profitable operations. I guess that’s true when you reduce the amount of depletion per barrel of oil, that is a reduction in the cost of oil and gas. Bernie Madoff is proud of this bunch.

This farcical and comical act reflects the bureaucracy doubling down on their positions. It reflects the position that they will stick their head in the sand and avoid the problems in the industry, at whatever cost. The quarter generated no cash, producers have no cash, no working capital and no access to any capital markets. They’ve been cutoff now for the better part of a year from the serious money that traditionally invested in the producer's annual stock offerings. I saw no money being raised by any of these firms in the first quarter. Banks have stopped all material lending of any money. Those that were fortunate enough to have raised any cash from banks spent that cash on dividends. Otherwise they would’ve had to cease the distribution of those dividends. Profitable yes, in an obscure accounting sense, but cashless.

My analysis of the quarter determined a new factor that I think effectively reflects the distorted nature of what I’ve been talking about here. That bloated balance sheets of property, plant and equipment exist everywhere in the industry. And as a result none of the producers recognize the capital costs of past production and as such have never been profitable. It does no one any good to have these capital costs, in a capital intensive industry, sit for 15 years. If the industry would have recognized them in an appropriate manner, as a business, these costs would have flowed to the income statement. Where, if they were receiving commercial prices for their products they would have been able to report real profits and return those capital investments in property, plant and equipment back into cash for further investment. This would be a commercial operation. But why would you do that when you can just hold an annual share offering.

This factor that I am speaking of reflects this distortion but also shows that the fake profits that they’ve reported over their lifetime don’t amount to a hill of beans. I reviewed 23 companies and compiled a summation of those companies into a representative sample of the industry. These are North American based producers that have 7.688 million barrels of oil equivalent per day output. Their undepleted property, plant and equipment currently stands at $459.2 billion while their cumulative lifetime earnings as represented in retained earnings sits at $61.9 billion. Most if not all of these producers are in excess of 20 years old. The return of dividends in 2016 was $8.5 billion or 1.85%. We’ll assume that has been the case for each of the prior years. Nonetheless, returning only 13.5% of that investment over the life of those assets, above the possibly 37% in dividends over that period. Is abysmal. And that is on the basis of an accounting that is highly questionable. On a reasonable accounting basis this producer sample would have reported $397.3 billion in losses.

This is the issue that the bureaucrats need to focus on. Chronic, systemic overproduction, oversupply and unprofitability. If they don’t see that problem I’d be surprised. They certainly went to great lengths to try to hide these facts in the first quarter 2017 reports. The issue is performance, and clearly there is none, and never has been. I have detailed the number of reasons that this issue exists. The remedy is the Preliminary Specification, its decentralized production model and price maker strategy which we are undertaking to begin developments on September 25, 2017. Please note the change in the date. I have moved it back three weeks.

I doubt that I am the first to look at these numbers from the point of view of an investor. I’m sure that’s why there is no further investment being made in the industry. And these first quarter 2017 accounting shenanigans will not have changed any minds. Clearly there is a problem and the investors were only adding to it by participating in the annual stock offerings. Why would that continue? I see no reason for that until the producers deal with the issues at hand. I think they’re fooling themselves into believing that this is fixed.

This is the history of the industry. And we all know that accounting doesn’t matter in oil and gas. But accounting is about performance. Clearly the industry in the past four decades has not performed. It is reasonable to state that it never attained a level of commercial operations. Investors had expressed their concerns that shale may not be a viable commercial operation. We are nowhere near answering that question. Is a continuation of these non-commercial operations for the next 25 years in the industry's future? What’s the plan? It's one thing to avoid the problem, it's another to publish quarterly reports that represent the wholesale dishonesty of what has been said in the past year. “We are profitable at $40.” etc. Integrity is a hard attribute to reclaim once its lost.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

2 millionth word

I estimate that we are now in excess of two million words on this subject.

Third Friday Off

No Posting Today

Earnings Season, Once Again

First quarter reports of the producers began being published yesterday. This will provide us with our first look at what 2017 has to bring in terms of losses for the producers. If there are any earnings I’ll be more than surprised. I have been writing in preparation for this time since late September 2016. Beginning with our series on the “Best Business Opportunity, Ever” which details the opportunity to invest in oil and gas has never been better, that is when the Preliminary Specification is operational. Our next series detailed why it is we should have the Preliminary Specification in the marketplace. This series was entitled “My Argument.” And finally in addition to proposing a product in the form of the Preliminary Specification we submitted our plan of how it will be developed beginning September 4, 2017 in our series entitled “Our Plan.” Not giant steps but certainly more than what our friends the bureaucrats accomplished.

I believe these first quarter reports will stand in direct contrast to the optimism that has been spewed over the past six months by the producers. The Saudi’s and OPEC’s agreement put the North American producer in the position where they had no one left to blame for their poor financial performance. Therefore they have been out leading the parade of promoters that all is well and banging the big bass drums as loud as possible. The increase in oil prices to $55 was all that was required for them to return to their heydays. Rigs have been put back to work at a record rate and the increase in U.S. production is breaking records too. This behavior is in the cultural DNA of the bureaucrats. They can’t, won’t and will not ever change. With no one to blame for their continued poor performance, who will believe them that “next time” they’ll get it right. That all they need is a bit more “time.” With the aggravating factor of the prolific nature of shale, you can be sure I won’t be buying it.

In the next two weeks we’ll know the truth. Is $55 oil all that is required to make producers profitable. Not even close. There is however one key component that is now irrefutable and should be common knowledge for every person that works in oil and gas. I could even see the bureaucrats agreeing to this point. The OPEC agreement has shown the industry that the oil and gas commodities are price makers. Anyone who doubts that is being foolish. Just as the Preliminary Specification enables the producers to manage these commodities. What is needed now is the implementation of the Preliminary Specification and our recommended tripling of the oil and gas prices to put the industry back on a (real) profitable footing.

Our point of view, our solution and our plan can now be critiqued against the performance of the producers. 2015 and 2016 were the two worst years in oil and gas. Nothing has changed other than a production sharing agreement between OPEC members. There is a choice that needs to be made. Which direction will the oil and gas industry proceed. One in which it continues to “muddle along” and “do nothing” or proceed with the development of the Preliminary Specification on September 4, 2017.

Our budget captures the scope and scale of the issue at hand. It’s publication in early 2014 shows that we understand that issue and what is required to deal with it. To begin our developments we are seeking $100 million for our first years developments costs. That will enable us to start developing our software effective September 4, 2017 and continue with our fund raising until September 2018 when the remainder of our budget is secured. Then proceed until we finish our product. As I’ve pointed out elsewhere I’m no longer in the business of herding cats. If the industry wants this solution they can raise the money amongst the producer firms quite quickly. For the industry to rely on me to herd cats and try to cobble together the money will only cost them many years of unnecessary and very costly time which they have none of.

I’ll be taking two weeks off from writing returning May 15, 2017. I think the world has heard enough from me on this topic. Please review the three series of blog posts that have been written in the past year. They will provide an understanding of where I think we need to go. Also look in detail at the producer's financial reports being published in the next two weeks, and ask yourself, what is it that these people are offering?

P.S. Cenovus reported their earnings on Wednesday. They have the misfortune of trying to finance the $13 billion acquisition of Conoco’s heavy oil assets. This would effectively double the size of the company. Cenovus has no capability to finance a deal of this magnitude at this time. I would suggest it's questionable whether they could finance it in the most lenient of financial times in the industry. Therefore desperate people do desperate things. The quarterly report, note I said quarterly, not pro forma, has recorded a transaction where $2.5 billion of assets that were listed for sale on March 31, 2017 have been moved from Property, Plant and Equipment to Current Assets. These assets were noted in an April 25, 2017 Motley Fool report that quoted the company as saying "Cenovus indicated that it had received “several” inquiries from CEOs of other energy companies interested in purchasing some of the non-core assets Cenovus now owns." It will be interesting, in my opinion, to see who, the CEO or CFO, goes to prison for this. My thinking is that they'll be cell buddies. This is a material misstatement of the facts. It is not an error or a mistake. It is willful and designed to deceive those that would provide the $13 billion in financing. And is therefore accounting fraud. This is what has become of our industry.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Risks

When we consider the damage that has been inflicted on society from the downturn in oil and gas. Where governments are sending out tax refunds to producers instead of collecting corporate taxes. Royalty holders incomes are stripped to the bone. The service industry, which is the backbone of oil and gas, continues to somehow survive. Investors and bankers look at the giant money pits they’ve been duped into. And the people who work in oil and gas realize maybe working in this industry was a critical mistake. The resolution of these issues, even the identification of them, is something that our friends the bureaucrats don’t have the time or energy to consider. Therefore the risk that we run by not having the Preliminary Specification implemented in a timely manner is that this situation will continue. And I would suggest that the period of time that this current state would remain would be about the same amount of time that shale based reserves will be with us. We’re humans, we have the capacity to see the risk of inaction and take the appropriate steps to mitigate the losses. That is except for in oil and gas. Where “muddle along” and “do nothing” are the strategy and operating procedure that the industry has been built upon and religiously adheres too.

Natural gas has been depressed since 2010. It was 2014 when oil prices took their downward turn. What steps have been taken to mitigate the risk of any further losses being incurred in the industry? I am unaware of any. There has been significant blame tossed around that the Saudi’s this and OPEC that and prayers for cold winters. But outside of this there’s been nothing. There is no leadership in the industry whatsoever. It is sit on your hands until things turn around. Shale has fundamentally changed the industry from scarcity to abundance. Demanding that we recognize the need for a new business model in which to operate the business. If we don’t recognize this change and solve it by implementing the Preliminary Specification with its decentralized production model and price maker strategy. Then we run the risk that we will lose the capabilities that we’ve developed within the industry, regress and begin to lose our capacities.

There are no guarantees that the Preliminary Specification is viable. At this point it is little more than a functional business model that deals with today’s issues. It needs to be built. And that requires the participation of the industry to make it work. Will that happen? Does it need to happen? The risk is that the industry never realizes productive operations again. Producers are proving that they are incapable of identifying or dealing with this issue. In the 1980’s and 1990’s it was “oh whoa is me, we had another bad year financially with record oil and gas production.” Sound familiar? The industry is not financially viable anymore. The oil and gas prices that it receives have destroyed the financial strength of all of the producers. It now doesn’t receive the prices nor have the financial strength to carry it through any more difficulties. Therefore there is no more resilience in the industry. What we do know with all of this devastation is that nothing is said or done about it. This level of risk is unnecessary and very dangerous. I feel we will have real trouble in the very near future.

I should be the one that is the happiest of all about this state of affairs. I’ve always known that the Preliminary Specification could not be implemented within the industry during “normal” times. It needs to be done during times of duress when the status quo has failed completely. That seems to be where we’re headed. Yet I and many others affiliated with this project are the only ones that are concerned. We know it's politically incorrect to care, yet feel somebody should.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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.