Best Business Opportunity, Ever, Part XII

We’re at the very beginning of the changes that are happening in oil and gas. The destruction that has been realized by the existing producers is complete. However it may take some time for people to realize the extent of the damage and the resulting capabilities of these organizations. They’re finished, and the sooner we realize that the better off that we’ll be. The upswing in terms of the creative elements are at hand, and as we saw yesterday investments are being made. Now is the time for individuals to prepare and organize themselves to ensure that they maximize their exposure to the best business opportunity, ever.

Taking action now and on a sustained basis is what’s going to be necessary for people to participate in this opportunity. There are many things to be done. The absolute last thing that you want to be doing, and the absolute last thing that you will do, is leave where you're working now. Preparation now is the key to the success that you’ll realize in the future. The moment you set your mind to the process of this change you in essence make it real. That is how we’ll do this. The more minds working in this direction the better. That is the start.

Whether it’s an oil and gas company that you want to start or a service provider organization. The redevelopment of the industry is from the ground up from all disciplines. People, Ideas & Objects are providing the Preliminary Specification as the basis or vision of how the industry would operate in order to ensure that profits are the primary focus of everyone in the industry. Using this vision to guide you in the development of your organization will ensure that you’re consistent with the needs of a profitable oil and gas industry. With everyone in the new oil and gas industry doing the same we can leave behind the destruction and muddle along strategy of the existing producers.

I believe it’s necessary to read the entire Preliminary Specification. Although you will focus on the area that is most familiar to you. The understanding of how the industry operates based on the Preliminary Specification is very important. There are fundamental differences that make up the ability of the industry to focus on profits. The producer is reorganized, the industry is reorganized and the service industry is brought closer to the operations of the producers themselves. How this is done and why are important for everyone to know and understand. No one would undertake a significant journey without first studying a map of the area that they’re heading. The Preliminary Specification provides that level of understanding for those wanting to make these changes.

In order for the new oil and gas industry to realize the upside in the next 25 years. We need to be organized in a way that enables us to realize that upside. There is no way that an organization can function today without software defining and supporting what it does. At the same time that software constrain and cements that organization into an unchanging and unchangeable beast. To proceed down this path without the permanent software development capabilities of People, Ideas & Objects would be foolish. The ability to make changes to the software in the future will ensure that we don’t run into problems such as what we are experiencing today.

If we want to gain the upside of the the dynamic, innovative, accountable and profitable oil and gas producers by acquiring the existing producing capacity, realize the $25.7 to $45.7 trillion value proposition of People, Ideas & Objects and the upside from making North America energy independent. Then we need to ensure that the industry, the producers, the service providers and the service industry are configured in a way to make that happen. The path for that is 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. 

Best Business Opportunity, Ever, Part XI

The evidence that the startup route in oil and gas is the appropriate direction can be seen by these three startup announcements. (Here and here.) Backed by Blackstone and Quantum Energy Partners, Jetta Operating Company Inc, Guidon Energy and Sentinel Peak Resources California LLC were endowed with $1.8 billion. Sentinel has already leveraged their investment to purchase some properties. Now that super star engineer, the one that was passed over for COO at the large independent, who never lost a dollar of the company's money, passed over because he wasn’t as good at the big game politics, is thinking. What if?

I want to stress the difference in the way that the industry will be operated in the future will be on the basis of profits. Real, cash generating profits. That is why the investors are going with the startups, they believe in creative destruction as much as I do. The only way that we are going to keep the focus on profits is through the use of the Preliminary Specification. And I don’t want anyone to come along and say, ok put it in place. It needs to be built with someone's money. A big part of the way in which the industry operates profitably is the value proposition of the Preliminary Specification. Without it, you’ll have a remake of what we have today.

There are trillions of dollars that are available to the producers who use the Preliminary Specification for the next 25 years. This is the upside they receive for investing in the capabilities of having People, Ideas & Objects, our user community and service providers operational. Our compensation is defined in our budget. And I have to say that I am very pleased that I am bringing such a large monetary solution to what can only be described as the biggest issue the industry has ever faced. Information Technology is the means in which all industries are now operating. Without IT business and industry is in the dark ages. Use of the Preliminary Specification will bring the oil and gas industry well into the future of IT functionality and process management. People, Ideas & Objects also provide a permanent, dynamic software development capability to the industry.

Don’t cry on my shoulder if you miss out on this industry wide opportunity. I’ll be busy, as will many with the fortitude to make the leap of faith necessary to change the oil and gas industry. If you're not busting out of your skin right now then I suggest you stay where you are. The winds of change have become a category 5 hurricane wrapped up in a tornado. The opportunities for the people who are capable of establishing a startup oil and gas producer have never been better. The opportunity for those to participate in the development of the Preliminary Specification as a member of the user community exists today. Part time work that is an inherent part of the service provider organization that you’ll establish to provide the administrative or accounting process that you’ll conduct for the entire industry as your client base.

It doesn’t matter what discipline you're from the opportunities are open to everyone. The opportunity to invest in a startup oil and gas producer and service provider organizations is also available to everyone. If you think this much change is going to be a little chaotic, you're correct. If that excites you then there really is no choice but to participate. Creative destruction is inherently chaotic. It is the entrepreneurs, the people who can see their way through the disaster, who will make the difference in terms of the time and intensity of the chaos.

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. 

Best Business Opportunity, Ever, Part X

The establishment and development of a new oil and gas producer has been determined to be the best business opportunity, ever. The level of destruction that has occurred in oil and gas has been complete. What we have left are carcasses that have been hollowed out by losses that by any measure are catastrophic. Most if not all producers have, or will have, destroyed their capital base in this downturn. The net, sum total of the producers existence has been to destroy all of the money that was ever given to it. The only things that are left are a collection of assets whose operations consume cash to produce, and debts that far exceed any operational performance possibilities. The dire nature of the existing industry contrasts with the upside of the startup oil and gas producer.

When you begin your startup what will be your area of operations? What will be your expertise and capabilities? These will form the foundations of your competitive advantages for the lifetime of the firm. The existing producers have opened the proverbial WalMart of properties on offer. You can have whatever you want, and for some of the best prices ever seen in the industry. Just remember to time your closing to the seller's debt payment schedule. That way you’ll force the issue and secure the property.

Recall that Chesapeake “sold” their Barnett shale assets for the right to get out from under a $300 million annual cash drain. Consider that the economics of a startup are different than the existing producer. If a startup were to have purchased these Barnett shale assets they could have instructed Chesapeake to shut them in prior to close. The startup would then be incurring a “null operation.” No profit, but also no loss. There are other considerations to consider, such as technical capabilities, but the startup can build those subsequently over time. The point is there are two extreme economic dynamics in play between the existing and startup producers. These economic dynamics can be leveraged by the startups.

As a new oil and gas producer you have much to offer an investor, banker or bondholder. Zero dilution of their investment from a history of bad management and total destruction. The history in the industry is that producers never wanted to account for the capital they used in the business. So they didn’t. As a result their asset values ballooned, or is that a bubble? And their earnings soared. Making it appear like a profitable industry. This has been the case for almost forty years and is the culture of the industry not to consider capital costs in assessing performance. They believe capital costs are “sunk costs” and are therefore irrelevant. The fact that operating a business on this basis creates significant shortfalls in real earnings and cash generation didn't matter. The implications of doing that were offset by the annual share issues that every producer seemed to participate in. Trillions of dollars have been invested in the North American oil and gas infrastructure and it can’t generate $0.02 in earnings. Those being the real type of earnings that the startups will be able to earn, not the fake type of earnings that producers have been claiming for the past forty years.

The investors will have to deal with their past investments in their own time and place. What we can do is provide them with the necessary changes in the industry that will ensure that their future investments are managed appropriately and establishing the value that is available today. That being securing the producing infrastructure of the industry, the value proposition of People, Ideas & Objects Preliminary Specification and the ability to increase the throughput of the industry and achieve energy independence in North America. The point is we are not going to be getting anywhere with the producers that we have today. They are waiting for the mythical market to rebalance. What we need to do is to turn all of the industries production profitable at all times. Then expand the capabilities and throughput of the producers within the industry. And then look to secure the energy independence that shale provides. Without establishing profitability first, none of the rest is ever going to happen. Ever.

And when we talk about profitability we mean that all production that is produced is always profitable. Not just some of the time. Oil and gas commodities are price makers. These commodities react quickly and substantially to shortages and surpluses. What we need these startups to do is to do the rational thing of determining if a property is profitable, based on a detailed accurate accounting, it produces. If it is unprofitable then it will need to be shut-in which will incur what we call a “null” operation. No profit, but also no loss. Under the Preliminary Specifications decentralized production model all of the producers costs are variable. No production = no revenue, no royalties, no operating costs, no overhead, a null operation.

Existing producers seem to think that losing money on all of their production 75% of the time is acceptable. This is the culture of the industry. If you think you can change the culture of the industry, don’t count me in. Creative destruction is the tool that we are using to make this change. The existing producers have exercised the destruction part of the equation to a level that I didn’t expect was possible. They really made a mess of the place. Which makes our job easier and more exciting, so what are you doing?

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.

Best Business Opportunity, Ever, Part IX

The choice that people have today is to participate in the development of a new startup oil and gas producer. With all the upside we documented yesterday. Or we can stick with the current producers and rehabilitate them into viable organizations once again. The question is, in ten years from now, which would be the better choice? By choosing the startup route the industry would fund its development during that time by the profits that the startup earns on production. We also know that by keeping with the status quo we will continue to depend on investors to provide the working capital for the industries survival. What are the other differences in terms of this choice that we have at hand? Which is the preferred route to take?

Choosing the startup route has implications for all of the people that are involved in the oil and gas industry. First we should all think of ourselves as investors in one of those startups even if we are unable to participate directly. Secondly People, Ideas & Objects have demands for software developers, administrators and accountants being reconfigured to accommodate these startup organizations. Our user community and service providers being business opportunities themselves that will depend on the entrepreneurial spirit of the people involved in those organizations. By realizing the best business opportunity, ever, we are providing for business, investment and employment opportunities that can only be described as substantial for all involved in the industry.

It's always difficult to determine when the last round of layoffs will occur in a downturn. Things look relatively more positive in the industry since Opec announced their agreement to limit production. I’m seeing a lot of premature declarations that the difficult times are over now and some claims suggesting that shale will make up any reductions that Opec undertake. Our current producers can’t, won’t and will not ever change their behavior or understand that they’re a large part of the problem regarding oversupply and overproduction. Resumption of standard operating procedures is the implied consequence of these comments. There has been plenty of opportunity to change in the past decade. Nothing has been considered, and I can assure you that nothing ever will. This is why creative destruction is such a critical difference to the performance of our society.

It may just be me but I see the implications of today’s losses and difficulties in oil and gas as being fatal to the current producers. They have suffered a terminal event. One in which they are unable to recover from without superhuman effort and skill over a sustained, extensive period of time. With massive investment. Their operations demand cash to operate and will continue to do so. They are unprofitable even though they have employed significant volumes of capital. They’re operated as if they are viable going concerns, however, due to accounting foolishness have never performed as such. This culture has been systemic for four decades and is responsible for the leaderships misunderstanding of performance and accountability. The significant event that has damaged these producers has been perceived as a minor bump in the road, with regular operations resuming soon. I see no change in the operation or outlook of these producers. They will exist in a cash deficient environment where selling assets and producing as much as possible are the only means to keep the lights on. Their destiny is to contract rapidly with the most successful being able to shrink their debts proportionately.

In terms of the startup, they will be establishing their firms on the basis of a different operating model. The Preliminary Specification focuses on real profits and not the artificial accounting profits of the past four decades. Purchasing assets from the current producers will enable them to establish themselves in the industry and build their organization through the deployment of their profits. They will be able to leverage themselves over the next decade with debt based on solid financial performance. Taking the opportunities that we discussed yesterday to purchase the existing producing infrastructure, the value proposition of People, Ideas & Objects Preliminary Specification and the upside as a result of achieving energy independence in North America. They will be able to grow quickly and profitably over the decade to position themselves as a producer that have the skills, capabilities, profitable operations and dynamic nature to approach the subsequent fifteen years as an established producer in the industry.

I think the choice is clear. What are you going to do, start a new oil and gas producer, or rehabilitate an existing one for ten years with massive capital infusions. After ten years you’ll probably be able to have the existing producer standing on its own by itself. And the opportunity to start a new oil and gas producer passed ten years ago. After a decade where the upside has been as promising as the best business opportunity, ever provides. I can assure you the startup will be the more dynamic, capable, profitable and larger firm.

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. 

Best Business Opportunity, Ever, Part VIII

The competitive advantages of a newly created oil and gas startup are substantial. They include the ability to purchase the industries existing infrastructure of producing properties from the cash poor, failed producers of today. Realize the $25.7 to $45.7 trillion value proposition from using People, Ideas & Objects Preliminary Specification. Participate in the opportunity to further grow their firm based on achieving the overall objective of North American energy independence. Doing this in a manner in which all production will be profitable, based on an actual, detailed accounting of the property. Never before has such an opportunity been presented to those with the capabilities to participate in founding an oil and gas producer or making that investment in the startup. Now is the time to leverage these elements of value and to act to realize this opportunity for the next 25 years.

We should thank the current producers for messing things up so badly. Investors putting money into the current producers would have to be hell bent on losing it as quickly as they can. What upside is provided by an investment in one of these companies. The opportunity to line up with thousands of other investors if there were ever any dividends. Share any upside with so many investors that you end up with next to nothing! This of course assumes that the producer will have the good fortune to have “cash flow” to pay the interest and debt payments that are due. The history of the industry is that capital investments were always treated as a “sunk cost.” Not to be considered in the forward thinking decisions. While at the same time, the other hand was always stretched out taking the money that was raised in the most recent stock offering. They took the money but never wanted to account for it. Now, they have the legacy of billions of shares outstanding and debt so high that it's about to sink the ship. Leaving the only opportunity for the investors is to treat the existing producers as “sunk costs.”

The existing producers need cash. Flooding the marketplace with production is the easiest method to raise the cash that’s needed. The other method is to sell properties. There are a lot of desperate, cash hungry producers out there. The ability to purchase a property off of them at fire sale prices is rather easy. Just check their debt payment schedules and time your offer so that you will close the deal just before the debt payment is due. Guaranteed purchase. Investors are more interested in this due to the fact that the startups have no capital structure. They have no legacy of debt or history of an annual shareholder fleecing. Investors can take a controlling position in the firm and manage it in a way that avoids the difficulties that the industry is in today. Or, in other words, still have a controlling position in the producer in 25 years based on today’s initial investment! A startup oil and gas firm is a highly competitive offering to an investor in comparison to the existing producer.

Doing the same thing expecting different results is a sign of insanity. The startup oil and gas producer will therefore need to be using People, Ideas & Objects Preliminary Specification to operate their firm. Reestablishing the industry on the basis of profits. Real profits, not the fake ones the current producers have been reporting. As a result the startups will be the ones who are able to earn the value proposition that People, Ideas & Objects have identified. This value proposition is calculated to be in the range of $25.7 to $45.7 trillion over the next 25 years. The key element of this value proposition is our price maker strategy. Instead of dumping all of their production onto the commodity markets and watching the prices collapse for 75% of the time. The startups will have detailed and accurate accountings of each property. They will be able to determine which properties are profitable and which are not. Shutting-in the unprofitable properties which will remove the excess production from the commodity markets and the commodity prices will therefore find their marginal cost. The differences in commodity prices between these two methods of production, our price maker strategy vs. chronically overwhelming the marketplace, is the majority of our value proposition. Which is inherently understandable and logical to those who don’t manage a current producer.

Everyone can see the opportunity for North America to become energy independent in both oil and natural gas. Shale provides. There is no way that investors are going to fund a bankrupt industry with producers who don’t have a clue what a capital cost or a profit is. Expecting this industry to increase its throughput at investor's expense is a non starter. Energy independence has to be achieved on the basis of a profitable industry. It’s the only way. It’s really the only way to run an industry but that hasn’t happened in oil and gas for more than four decades. Expecting that the investment community that has supported all of the unprofitable activity in these past four decades, to continue and expand the throughput without profitability is about as ridiculous a notion as there is.

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. 

Under The Weather, Part II

No posting today.

Under The Weather

No posting today.

Canadian Thanksgiving

No posting today.

Best Business Opportunity, Ever, Part VII

Startup producers that are forming today will have significant competitive and capital structures in comparison to existing producers. Investments into these startups will ensure that the money that is invested will provide their investors with large, and maybe even controlling interests in the startup firm. Allowing the startup to participate in the market for oil and gas properties as a buyer. We expect, with commodity prices below their operating costs, the demands for cash to cover these operational shortfalls will maintain the market for properties as a buyer’s market for the foreseeable future. This represents what we consider to be the best business opportunity that has ever existed in the oil and gas industry. The time in which to act will therefore soon be upon us.

It’s difficult for me to understand any desire to continue with the producers that exist today. They are hollowed out carcasses that have experienced a terminal ending to their existence. When a “strong” independent such as Apache reports annual losses of $28.2 billion for 2015. Or when a former darling such as Chesapeake reports annual losses of $19.1 billion. And they continue to both generate significant losses for 2016. We see the functional end to the business model that these firms employ. These firms will continue to function as long as there is the ability to raise some cash to meet payroll. Whether increasing production or selling properties, it doesn’t matter, what the critical focus is to raise cash in whatever manner. The startup however has tactical and strategic advantages that are far more appealing than this cannibalizing and suffering.

Doing the same thing over again and expecting different results is a sign of insanity. What is there to ensure we don’t return to the destruction this industry has been responsible for. We need to ensure that the Preliminary Specification is the basis of the new industry. With its focus on profits so that the industry can grow and prosper. So that people who work in the industry will know that their employment won’t terminate as a result of external events like low commodity prices. Where investors can safely invest based on their understanding of the earth science and engineering capabilities of the producer. And society can be provided with the resources it needs to fulfil its possibilities. None of these things is available from the current lot.

So what happens now. We saw in the second quarter reports the viability of the producers being clearly displayed. The demand for cash is horrendous. An industry in that position will not attract the capital that is needed to keep the lights on. It is a slow painful march towards the inevitable demise of the firm. The sooner we realize we are at the end the better off we’ll be. But history doesn’t work that way. It is, as Winston Churchill stated.

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong – these are the features which constitute the endless repetition of history.

I am not of the opinion that Opec has an agreement in mind. Their strategy has cost them many billions of dollars. The North American producers are at a tipping point, and that is the point that Opec blinks? They are more playing with the market and people’s expectations. The belief that these difficulties have passed is a hard one to overcome. If Opec doesn’t put a deal together, coincidentally around the time that the third quarter reports are issued, maybe then we’ll here that jarring gong. I expect the third quarter reports to represent a significant decline in the health of the industry. No one has ever made any money in oil and gas for over 40 years. The demand for capital was constant and chronic in order to supply it with the cash that it needed. With these last two points I’m of course talking about how the industry was in the “good times.”

This is the point in time in which your personal preparation towards the future will pay significant dividends. Starting a new producer, applying to People, Ideas & Objects user community. There are more business opportunities in oil and gas now than I’ve ever seen in its entire lifetime. It is this point where it becomes evident that it’s over, that we will then proceed with the developments 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. 

Best Business Opportunity, Ever, Part VI

What we see in the response of the producers to the difficult times we are in. Is the cultural capabilities of the industry. To accommodate the changes to correct the situation would require this cultural inertia to be overcome. Which of course is not possible. If we don’t change what we will find is in four or five years time the same situation will be plaguing the industry and the same complacency will be evident in the producers. The changes needed to deal with overproduction and oversupply are beyond what the current producers are capable of. They can’t, won’t and will not ever change. The only method that has proven itself are the forces of creative destruction. As the old no longer meets the needs of society, the new will be able to generate value in different ways.

In terms of that complacency or acceptance of the way things are, these being ever present in the industry. I am reminded of a quote from Winston Churchill. On May 19, 1943, a full year before the second European front was launched, Churchill told the U.S. Congress regarding the war effort.

No one can tell what new complications and perils might arise in four or five more years of war. And it is in the dragging-out of the war at enormous expense, until the democracies are tired or bored or split, that the main hopes of Germany and Japan must now reside. We must destroy this hope.

People, Ideas & Objects have a lot of work to do. Our budget is based on 5,000 man years of effort to bring the Preliminary Specification to commercial release. All industries and companies now operate solely on the basis of the software that they use. If you want to institute a change in behavior of the industry or producers, first it must be captured in the software that the industry and producers use. We live in a time where the software defines and supports the organization. Change is impossible without changing the software first. So when we talk about change, complacency, the scope and scale of our development efforts. This won’t be done with the flip of a switch and then all is well. We have hard work to do. It should be the expectation that the difficulties in oil and gas will continue until such time as People, Ideas & Objects Preliminary Specification is operational. We can blame the Saudi’s for all of our troubles, however it should be understood that they don’t import any natural gas into North America. And the difficulties in natural gas are going into their seventh year with no prospect of anything changing. It’s not a matter of us getting “tired, bored or split.” It’s much more, shale has fundamentally changed the industry.

Energy powers our economy. It is a viable option for the North American continent to achieve energy independence. However not from the current industry configuration. Changes as represented in the shale based reservoirs are fundamentally transforming the business from scarcity to abundance. What bigger change could there be? I saw the mechanisms leading to the oversupply and overproduction evident in the 1980’s and 1990’s low oil prices. A time when oil prices depressed the industry. Where no leadership or action left the industry to suffer for more than a decade. The configuration of the producers today remains the same and is inappropriate for either an industry with or without shale. Shale only makes the issue hypercritical.

Software makes society more complicated. To leave “things” to be resolved by themselves is inappropriate when the organization is defined and supported by the software that is used. To effect change cannot be done without changing the software first. Today ERP systems lock the organization and seal it in concrete. Producers will be unable to change without the defined software development capabilities of People, Ideas & Objects. Oil and gas have ceased to change in ways that provide value. We need to be proactive in our software developments in order to grow and prosper. I have frequently referred to these oil and gas overproduction and oversupply issues to be that of a modern software bug. And that is why starting a new oil and gas producer today is the best business opportunity, ever. Creative destruction is the last and only tool that we have to make the changes that are needed.

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. 

Best Business Opportunity, Ever, Part V

Once the Preliminary Specification is operational in the industry it will be the new startups that will reap the benefits from it implementation. Organizing a new oil and gas producer today is by far the best business opportunity, ever. The existing producers have destroyed their competitive and capital structures. They are now unable to compete in the industry and they will not be supported by a plurality of the investment community. Their demands for capital just to produce is beyond the appetite of those that are intelligent investors. Establishing new startups will be able to offer high percentages of their firm without their new investors realizing the massive dilution that the existing producers well established shareholders and over indebtedness provides. And enable the investment community to leverage the demise of the old oil and gas industry through the purchase of properties being sold by those cash poor producers. Creative destruction is the process that has renewed many industries. All that is needed then would be for a way to avoid the same issues that plague the producers today.

The focus of the new startup is on profitable operations. Profitable from the point of view of considering all of the costs of production. Capital costs have traditionally been ignored by the existing producers as a “sunk cost,” and as a result, were never considered in business decisions. These “sunk costs” representing the investment capital they were entrusted with. This is what has caused the overproduction and oversupply that we have today. Investors were led to believe that the industry was profitable based on the gross margins that are quoted by the producers. This accounting sleight of hand is still in play today. The difficulty in accounting for your operations inappropriately is that it eventually leads to difficulties when the investors find out that things were not as they were represented. Then they stop investing, which is where we are today.

The only way that the new startup oil and gas producers will be able to capture that old time religion of profits is by implementing the Preliminary Specification. Where dynamic, innovative, accountable and profitable oil and gas production is the focus. This is done through the eleven modules of the specification that address the specific issues of the industry today. And they provide a dynamic capability to the industry in terms of addressing its future administrative, accounting and operational issues. It eliminates the “muddle along” strategy that is used throughout the current oil and gas industry and replaces it with specific capabilities that resolve those issues. One of the key capabilities that is gained is what we call the price maker strategy.

Our price maker strategy uses the fact that the oil and gas commodities are “price makers” in terms of the impact that they have in the marketplace. Excess production has a material effect on the pricing of the commodities. Instead of producing everything and expecting that the market will “balance” or some other such nonsense. The Preliminary Specification enables the producer to produce only profitable production. Profitable based on an actual, factual, historic and detailed accounting of the facts. Then producers who have properties that are unprofitable simply shut-in the property. Incurring a null operation, no loss but also no profit. Doing this ensures the producers profitable properties are not diluted by any unprofitable properties. Saves those reserves for the time in which they can be produced profitably. Removes the marginal production from the commodity markets. And keeps the cost of the property from having to carry the additional losses that would otherwise have been incurred as an additional cost to be recovered in the future.

Existing producers run away and hide when they hear the term “price maker strategy.” They don’t like to think in business terms. The industry is a science experiment that operates in the sense that everything it does brings more production on stream as soon as possible. When they hear “price maker strategy” they think collusion. If you chose to not produce a property because it is unprofitable that is called common sense. When that decision to not produce is based on the actual, factual, historical and detailed accounting of that property. I am at a loss to determine how that is collusion. What’s really going on is the inability for new ideas to permeate the stale existence that is the oil and gas industry. And the preference being to destroy the industry as opposed to consider these new ideas. Or, that calling it collusion is the only thing they can think of to offset their ridiculous behaviour of producing everything and destroying the industry.

Taking an industry with this twisted and convoluted means of logic. Establishing a new producer to compete with this insanity is the opportunity that is available to those that can see the value of implementing the Preliminary Specification. How could you lose with this bunch? And that is why this is the best business opportunity, ever.

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. 

Best Business Opportunity, Ever, Part IV

I want to point out another issue that’s present in the oil and gas industry. That being the ability of the producers to focus beyond today’s headlines, or apply themselves in any direction for more than the extreme short term. They have the attention spans of hyperactive infants. Normally you would look to the leadership for the direction that the industry needed to take in order to resolve its issues. The only thing we see is the parade of cheerleading that today’s producers have come to be known for. Their attention spans are normally focused on the price of the commodities and only strike up the band when commodity prices are rising. When prices are falling, which of course is half of the time, they keep quiet and hide under the table.

The third quarter reports will soon be released. Based on the actions of the producers in these past three months they seem to expect that the difficulties as expressed in their second quarter reports of 2016, and 2015’s annual report are history. I suspect that the third quarter reports will be as bad if not worse than those presented in the second quarter. What’s changed? It may be difficult to fully understand the extent of the damage that has been done in the industry. As I’ve indicated both the competitive structure and the capital structure of the existing producers have been fundamentally destroyed, permanently. That means they are no longer cost competitive in terms of producing oil or gas. And the investors, bankers and bondholders are in the position where they will never receive anything of value from these producers, ever. Arguments could be made that the stock prices of these producers are up. I am talking about the business and its total financial failure. If a producer holds out their stock price increases as evidence that they are viable then they exhibit shorter attention spans than I give them credit for. As I stated, there is a difficulty in comprehending the destruction of the competitive and capital structures and that has not yet been fully realized in the marketplace.

I want to add another myth that the oil and gas producer has been deluded by. That being their balance sheets are “strong.” Nothing further from the truth could be the case. It has been our argument that the SEC prescribed full cost and successful efforts accounting methodology allow the producer to capitalize everything under the sun to the property, plant and equipment account on the balance sheet. The spendaholics like this because it makes them look “well capitalized” and their earnings are highly overstated when they never recognize the capital, in a capital intensive business. The question that should be asked is what is the value of the oil and gas industry today. Since it’s not profitable, and it demands cash to be injected into the business in order to produce. That cash drain being substantial. The value of the industry is therefore nothing. It takes the investors, bankers and bondholders cash to keep it alive. And this has been the consistent history of the industry for the past 40 years. A fundamentally failed industry that is incapable of building value. The leadership within the industry have a two hour attention span and see nothing wrong with this. Therefore any reasonable person is going to avoid any involvement in the industry. I think it’s therefore appropriate to take the account of property, plant and equipment and move it directly to the income statement. The assets of the business are not worth anything and should be written off. Evaluate the company on that basis and you’ll quickly come to my point of view.

Anyone who has read the Preliminary Specification can see the means in which our value proposition is generated. Valued in the trillions of dollars by simply choosing to develop the People, Ideas & Objects Preliminary Specification you would think an industry in such desperate condition would jump at the opportunity. You need to understand that the implications of implementing the Preliminary Specification do not help the status quo producers. So we are left with a scene where the closing chapter of the existing oil and gas producers is devastation and destruction. Armageddon came about as a result of poor accounting practices since 1979. Raising a generation of leadership that cannot discern what value is. Creative destruction is the process that we are using, and witnessing, to make the changes in the industry in order to address these issues. The destruction is complete in my estimation. Producers may think my criticism is over the top. However, who could support this level of destruction when the solution, the Preliminary Specification, has been in the market for as long as it has. The Preliminary Specification enables the creative rebuilding of the industry on the basis of it being the best business opportunity, ever.

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. 

Best Business Opportunity, Ever, Part III

My response to Opec’s announcement of an agreement that will be resolved before November remains one of belief that these Opec countries are trying to impress upon the North American producers that the commodities they produce are price makers. Nothing material has changed in the situation other than the tactical methods being employed by Opec. They are telling these North American based producers to look in their own back yard for the solution to oversupply and overproduction. In November when the agreement falls apart, then the North American producers will see that when markets see production increases, prices fall. The inverse of this past week.

The capital structure of the producer firms in North America no longer exists. It has been destroyed through bad policies and management over the past four decades. The only thing that would enable the North American producer to continue as a viable going concern would be the allocation of a trillion dollars to recapitalize these zombies. If you expect that we will achieve energy independence from this group of producers then People, Ideas & Objects have nothing for you. If you critically review any financial statement of any North American based producer the financial difficulties of each and everyone are unresolvable. Expecting a mouse to run like a horse is foolhardy, you’ll only be disappointed. Decisions need to be made. Do we pursue the best business opportunity, ever, or recapitalize these defunct organizations with additional capital for them to squander? People, Ideas & Objects are recommending that we proceed with the best business opportunity ever by starting with the development of the Preliminary Specification.

We have stated that the opportunity to establish a new oil and gas producer. One that avoids the debt and capital structure of the existing producers is the best business opportunity, ever. Providing profitability and growth in the production of oil and gas that these new startups would be able to generate is one aspect of the opportunity. Another is the upswing available to them as a result of North America achieving energy independence. People, Ideas & Objects value proposition of implementing the Preliminary Specification and following through with this opportunity is $25.7 to $45.7 trillion over the next 25 years. That is the vision that we are proposing here at People, Ideas & Objects. A new oil and gas industry, based on profitability and growth, that achieves energy independence. We are creating this new industry from scratch so to speak. Using the process of creative destruction to deal with the issues in the industry and establish a new foundation of profitable growth.

To help to define this opportunity more clearly it is necessary to dispel a number of myths that the current oil and gas producers are operating under. I have argued that the current industry is nothing more than excellent engineering and a science experiment. The business aspect of how the industry does what it does doesn’t exist. That the level of understanding of business by the producers is indeed very low and that accusations by them that our price maker strategy is collusion is the strongest evidence of this. The myths that we need to dispel today are that the producers costs have come down since the decline in energy prices. Another myth that operates throughout the industry is that the oil and gas commodity markets will clear themselves leading to higher prices.

With respect to the first myth we can state unequivocally that historical costs are fixed. There is no way in the world, if a producer has spent $15 million on a well, that any process can be undertaken to reduce that cost. Oil and gas is a capital intensive business. The cost of capital is the highest cost that is incurred by the producer. Having producing wells, from an operational standpoint, are not where the costs are incurred in the industry. Operating costs may have come down somewhat, and royalties are variable so there are those aspects of the cost are decreasing. But the historical fixed costs remain $15 million. If the producer is stating that they can now drill that well for $14 million then they are correct in asserting that their future costs are coming down. But to assert that their costs of production is decreasing in line with prices is kindly classified here as a myth. Some may find it to hold elements of misrepresentation. The industry operates on the mythical “recycle cost” which is not based on historical fact. To determine recycle costs to produce at today’s prices they would therefore need a recycle cost that falls under the prices realized. And so that is declared. That is how the industry is reducing its costs. By declaring that their “recycle costs” are lower than the prices realized in the market.

The next myth that we need to dispel is the idea that the “market” will clear itself. Producers have convinced themselves not to do anything in the face of declining commodity prices. That doing anything would first of all involve work and thinking. And secondly “markets” are magic things like dragons and wizards. Just wait for the “market” to reflect what you desire. This passive attitude has lead to what we call “willful destruction” and is the source of the industries financial destruction. The price system is how markets work. If you’re competitive and profitable at the price the market is offering then you produce. If the prices are unable to provide for a profitable operation you need to shut-in that production to conserve the firm's overall profitability, save the reserves for the time in which they can be produced profitably, remove the marginal production from the commodity markets and reduce the costs of your reserves by not adding the additional losses onto those reserves to be recovered in the future. That is how a market works. It is the price system, it's not a fairy tale. Markets don’t clear themselves unless people take action. What we have is producers continuing to produce irrespective of the financial consequences and refusing to act in their own best interests because the “market will clear.”

The deception that producers management kid themselves with is that their historical fixed costs continue to decrease and that they are therefore profitable at the current prices, and that eventually markets will clear. Can you see the circular logic that underlies their thinking? They continue to state they’re profitable but then produce financial statements reflecting they’re losing more money than they have ever had their hands on. So how does this make the best business opportunity ever? When you go into business you want to have your competitors logic and thinking this twisted.

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. 

Third Friday Off

No posting today.

Best Business Opportunity, Ever, Part II

People, Ideas & Objects have identified what we consider to be the best business opportunity in oil and gas, ever. This opportunity is inversely correlated to the scope of the issues present in the industry as a result of overproduction and oversupply. Which are the biggest issues that the industry has ever faced. This opportunity is for investors and individuals in oil and gas to create a new producer firm that doesn’t have any of the legacy baggage and issues that the current oil and gas producers have. That baggage being decades of capital expenditures that need to be repaid in the form of debt, or large pools of disgruntled shareholders, unhappy with the situation in the industry today. This business opportunity comes with the further upside that they’ll be able to participate in the development of North America’s energy independence. And experience the profitability and growth that these new producers will be able to achieve as a result of the clean slate approach and energy independence.

In the depths of this crisis we see the producers “believe” that things will be better soon. This is foolish. They are poorly prepared for any further difficulties. They are financially destitute and have no plans in which to approach the future beyond the weekly inventory reports. They have capitulated all responsibility and authority to the “hope” that things will get better. I am not the only one who sees this situation. Having a plan to deal with this crisis is what is necessary to focus the energy of those within the industry to act in the best interest of the industry. As a result, for the producers to be the first to anticipate better times is irresponsible and foolish. People, Ideas & Objects plan is to implement the Preliminary Specification in the industry with the new, well capitalized start-up producers leading the way.

Certainly existing producers are welcome to join in the developments of the Preliminary Specification. There is nothing here that says they’re not welcome. It’s just that we are relying on creative destruction to renew the industry. With new producers that are well capitalized, profitable and with healthy growth prospects. Just as every producer needs an ERP system to manage their operation. People, Ideas & Objects Preliminary Specification needs creative destruction to implement the changes within the industry and producer firms that are inherent in our design. For us to make the scope and scale of changes that are necessary for this transition, within a status quo environment, would be a non-starter. There isn’t enough energy in all the shale formations to overcome the organizational inertia and make the changes. We are leveraging the changes that are a result of the issues in the marketplace. Overproduction and oversupply will destroy the existing oil and gas industry as we know it. Just take a look around if you don’t believe me.

Therefore we are tasked with the investors and entrepreneurs in oil and gas to rebuild the industry brick by brick, and stick by stick. In the vision of the Preliminary Specification. One which profitability is the key focus of the industry and the producers. One which will provide a return on investment to those that step up at this time and make these critical investments. People have a choice as well. They can stay where they are and make do with what they have. Deal with those lawyers and auditors that chose to kick dead horses for a living. Or they too can make the break and participate in the new oil and gas industry. In the past it was the earth science and engineering talent that made up the leadership team of the producer. And I don’t expect that to change in the new oil and gas industry. What I do expect however, is an enhanced role for the CFO to ensure that production discipline is respected and implemented within the producer firm that they are part of. The most profitable means of oil and gas operations comes about by only producing profitable properties. The need to shut-in unprofitable production will be a discipline that needs to be learned by the new producers, and I think implemented by the CFO and financial people who will be safeguarding the investors interest. People, Ideas & Objects can provide the system in the form of the Preliminary Specification, it is the individual producers that will need to adopt production discipline as their new religion. Or we’ll just end up destroying the industry again.

Energy is the lifeblood of our economy. I see the North American marketplace providing society with abundant energy supplies to meet its needs for the remainder of this century. Enabling the oil and gas industry to be the source of energy that fuels the dynamism as a result of the marriage between mechanical and intellectual leverage. The only way in which this is going to happen is we have to have a profitable oil and gas industry. One that ensures that the capital for this capital intensive industry is managed effectively and efficiently. There are not enough people willing to sacrifice their life savings in order for the oil and gas producers to just fritter and waste anymore. The need to have a profitable industry can not be emphasized enough. We have a job to do, it's time now to start down the road that leads to this opportunity.

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.

Best Business Opportunity, Ever, Part I

In terms of the business opportunity that we’ve been discussing here these past few days. The one in which investors were establishing new, start-up oil and gas producers. One that is present today, that sees the investors skip the dilution from other shareholders, bank and bond indebtedness of investing in the existing producers, and in turn, purchased properties from today’s cash strapped producers. For it to qualify as the best business opportunity that has ever existed in oil and gas. There would need to be an opportunity for those start-up producers to pursue some lofty goal after they had secured the properties. One that would focus the energies of the entire industry for the mid to long term. I think the opportunity that the North American continent becoming energy independent in terms of profitable oil and gas production is that lofty goal that makes this the best business opportunity, ever.

This opportunity is being presented to us at this time. And it is the biggest opportunity in terms of setting up a new oil and gas producer, ever. And if Donald Trump gets elected, the industry would have his administration pushing for this objective as well. When was the last time the oil and gas industry had a positive relationship and was on the same page with the U.S. government. This scenario paints a much more vivid image of an industry that people want to be associated with. One where the doom and gloom of the day to day is eliminated and we can all focus on rebuilding the industry bigger and most importantly, profitably.

With the implementation of the Preliminary Specification in North America, the oil and gas investor that this opportunity appeals to, has a guarantee that all of the production from the continent would be profitable. It is the only thing that the producers will pursue as it is in their best interests. If only production that is profitable is produced, each and every day, each and every year, then the investors know that their risk is limited to the capabilities of the earth science and engineers that they have in the producer firm, and the quality of the assets and land position that they’ve secured. If their oil and gas team are unable to find profitable production in commercial quantities then the producer would be a failure on the basis of the underlying performance of the producer. Not on the basis of the overproduction and oversupply that is chronic within the Industry and prevalent today.

The key to this knowledge is the way in which the producer can approach the business once the Preliminary Specification is implemented. If the producers maximum deliverability is 200,000 barrels of oil per day then that is their capacity. If they could produce all of that profitably then it would be the best opportunity from the producers and investors point of view. However, if only 100,000 barrels of oil per day was profitable and the other 100,000 was shut-in. They would first of all, have a large inventory of shut-in properties that they would be able to apply their engineering and earth science skills towards in order to turn them into profitable properties. But most importantly, under the Preliminary Specification, the amount of overhead and administration that was incurred if they have the 200,000 barrel per day capacity is not what they would incur if they produced 100,000 barrels per day.

One of the key changes that we make when we implement the Preliminary Specification is the conversion of the individual producers administrative and accounting capabilities to become the industries administrative and accounting capabilities. Changing the dynamic of these costs from fixed within the producer firm to variable across the industry based on profitable deliverability. Turning these costs into a variable cost has the dynamic, innovative, accountable and profitable producer able to scale their production profile up and down with all of the producers costs (royalties, operations, administrative and accounting) being variable in nature. The producer is therefore never diluting their earnings from profitable properties by losing money on unprofitable production. They can eliminate the unprofitable production from their deliverability and ensure that only profitable operations are produced and the firm continues to be the most profitable at any level of their capabilities from 1 to 200,000 barrels per day.

This is the source of the solution that the Preliminary Specification provides the industry from overproduction and oversupply. Currently each producer is looking to offset their administrative and accounting costs by allocating them to the highest level of production that their capacity provides. Creating the chronic overproduction and oversupply. Then, on that basis, their overheads do not look as far out of place. To eliminate this inherent contradiction within the industry the Preliminary Specification reorganizes the producers and the industry on a different basis. Enabling the producer to focus on their key competitive advantages of their earth science and engineering capabilities, and land and asset base. With the establishment of service providers, which are configured from the administrative and accounting personnel in the oil and gas producers, which will focus on one specific process and apply it across their client base of the entire industry. Using specialization and the division of labor as two of their many key competitive advantages.

Then if the property produces, the service providers receive data and information that reflect that production. Their process is completed and an invoice for the specific administration or accounting cost is charged directly to the Joint Operating Committee. If there is no production then the service providers receive no data or information and hence no services and no invoice for the administrative and accounting services will be rendered. The costs of administration and accounting have in fact shifted from the oil and gas producers. Where today they can only lay people off in terms of matching overhead costs to production. To where they will now reside with the service providers who will know that at any time the oil and gas industry may see up to 15% of their productive capacity decline across the industry. A situation which can be easily budgeted for on an annual basis within each service provider.

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. 

Creative Destructions Finest Hour

The business opportunities that are available to investors, bankers and bondholders are spectacular. When this much destruction is occurring in the oil and gas industry, the opportunities become more prevalent. The thing is you have to pick your target. Buying Crescent Point and Encana may make you comfortable by being in a room full of likewise dissatisfied investors. There is however a new path that should be considered by each and every oil and gas investor. That is the establishment of new oil and gas producers. The advantage here is that your investment is the only game in town. When the company is formed you have the majority of the shares or the debt that the company has been established with. No dilution of your investment as a result of the past bad behavior of the producers over the last 40 years.

By investing purely and cleanly into new organizations you are able to skip the lineup when the dividends or interest payments are made. You're the only game in town. That there is such a strong “buyers” market in oil and gas property market, which makes it ideal for the dynamic, innovative, accountable and profitable oil and gas producer. Entering the market now will provide you with a world of opportunity as the only ways and means that the existing producers can survive in the short term is by dumping their properties. And these producers will all soon be trying to raise as much cash as possible. The rush to the door may have already started, but I can assure you that the number of properties that will be put up for sale will make a well capitalized start-up leverage this crisis to their benefit.

The trouble with this strategy is that the real brains in the oil and gas business, and the brains are a critical aspect of the success of the firm, are all trying to workout the difficulties in the existing producers. What the investor may want to do is to offer some options or a piece of the producer firm for those brains to bolt the existing producer and run the start-up. Their choice would be to struggle through the difficulties of the existing producer. With every investor and banker shaking each and every skeleton in the closet from the past forty years. Or start fresh and new with the chance to eliminate the mistakes that were made before. Everyone can see the appeal of a fresh start.

The opportunity that this process provides is approximately equal to the extent of the difficulties in the industry. I have stated that the overproduction and oversupply are the biggest issues in oil and gas, ever. That would make the opportunity to establish a new producer the best, ever. Which is the case. To ensure that the new producer doesn’t fall into the same old problems they will turn to People, Ideas & Objects and have the Preliminary Specification built. Maybe the principles of the existing producers could fund our budget for the development of the Preliminary Specification as their last official act. That way the new producer would ensure the investors that they have the system built to ensure they are the most profitable. And in the meantime the start-ups could use the existing producers capabilities in operating the properties that they’re purchasing. All for the measly costs of the COPAS overhead allowances.

This is creative destruction’s finest hour in oil and gas. I am pleased to be providing the creative elements to this process. Look to the existing producers if you think you can stomach the destruction. Where do you stand in terms of this opportunity? Is the drudgery and destruction appealing to you? The existing producers competitive structure and prior obligations have completely destroyed the viability of the producer. Paying investors and bankers back for the decades of capital expenditures doesn’t appeal to many people. Or is it the expectation that these existing producers will suddenly right all the wrongs and live that fairy tale life? Business decisions having been made in good faith on the basis of what was the old oil and gas industry. These decisions were wrong and there is no one to hold to account for them. Unless you appreciate the art of kicking dead horses, the best approach is to start anew and avoid these same bad decisions once again. I propose the industry do this on the foundation of the Preliminary Specification. But then my recommendation, so they say, is biased.

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 Exception that Proves the Rule

I have argued that the equity markets were closed to the oil and gas producers. It would seem that there are some with a higher threshold for pain and suffering than I have. Crescent Point and Encana, two Canadian producers were in the market last week raising funds for their 2017 capital expenditure programs. Crescent Point had the luxury of issuing their shares on a bought basis. These were both sizeable offerings, however, upon their announcements both stocks dipped well below the offering price. In each case investors were displeased with the further dilution being realized by the offering. In the case of Crescent Point this is an annual ritual going back to 2002 with only the 2013 year being missed. Almost the entire life of the company, or should I say science experiment.

Under what basis would a producer go to the market to raise money today? You can’t earn any profits. You’ve lost all of the money that was ever raised in the equity markets by the company. You continue to bleed cash at a pace that is shocking. Your field operations consume more cash than what they produce. You are unable to deal with this reality and look to passive, obscure events like “market rebalancing” as the methodology to cure the problem. And refuse to address the real issues of overproduction, oversupply and prolific shale formations. I guess the fact that you need the cash is one reason to go to the markets. A recent Deloitte survey of the industry states that its sunshine and rainbows as far as anyone in the industry is concerned.

And People, Ideas & Objects Preliminary Specification is rejected out of hand due it being “collusion.” It’s not collusion, it's treating the industry as a business, not a science experiment. By each producer evaluating each property based on an actual, factual, detailed and complete accounting of the property. And that accounting reporting that the property is profitable, then the property continues to produce. If it is unprofitable, then it is shut-in until such time as it can be produced profitably. That is how a business operates. This is foreign and unacceptable to the producers who operate in the industry today. They believe it is “collusion” which proves their level of understanding of business is extremely low. Why would you continue to produce properties that are unprofitable? Yet the entire industry currently is substantially unprofitable. And they don’t see that as an issue. As long as there is more investor money to fund next year's capital expenditure program, everything will be ok in their corner of the daycare.

These are unsustainable businesses without outside capital being invested annually. Whether that is debt, equity or bonds the oil and gas producer has always had their hand out. Even in the alleged good times when prices were higher. The industry uses a methodology of accounting, dictated by the SEC, where the investments made in annual capital expenditures sit in Property, Plant and Equipment for decades on the balance sheet. Producers stuff this category with capitalized overhead and interest payments. Making field operations appear like their “cash flow positive” because they recognize none of the capital costs of the operation, in a capital intensive business, and always include the annual investor grant as part of that cash flow. This has destroyed the industry fundamentally and completely. An industry which apparently now believes that the good times are just around the corner. That what People, Ideas & Objects are selling is illegal and wrong. How backward can this industry be?

Tomorrow we will hear "definitively" the news that Opec won’t be making any production freeze agreements. And the producers will respond by saying that Opec doesn’t matter anymore. In direct conflict with what they were saying about the promise of an agreement last week. Hope, fairy tales and soothers are what pass for comfort in the industry today. There is just no way these companies are ever going to see the light that their unprofitable overproduction is the problem. Which leaves us with the creative part of their destruction. As with many industries before, the old gets washed away by the new. This week we’ll detail the phenomenal business opportunities that exists in oil and gas today once we turn our backs on these big baby’s.

This overproduction and oversupply is the greatest issue the oil and gas industry has ever faced. It's not business as usual under any basis. Those that think they will just resume normal operations are kidding themselves regarding how much damage has been done in the industry. Issues such as this, left unaddressed for this amount of time, fester into more difficult issues to resolve. People, Ideas & Objects believe only creative destruction will resolve this. However, to make matters worse producers have not been minding any of their business and will soon have to deal with the increased interest rates that are appearing on the horizon. It is conceivable that interest rates will double the amount of interest that producers will need to pay in the very near future. Unaddressed problems fester, and additional problems become more difficult to address. The industry is behind the eight ball and I don’t see them finding a way out.

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. 

Head in the Sand

Producers may be finding the “market rebalancing” storyline getting a little thin and not playing as well to their investor audience as they might have expected. We hear many pundits are starting to calibrate the time in which the chronic production surplus in both oil and gas will subside. With many of these projections being pushed further out as far as two years from now. Just as they were two years from market rebalancing six years ago. We anxiously await the news from the Opec meeting, only to dispel the impact that they’ll have in the market when it’ll inevitably be announced that once again they won’t do anything. The problem is that the producers have no cash and the only source of cash is production. Therefore the producers will produce. That is their business model. That none of the production is profitable is irrelevant. And in Alberta we hear that producers have stopped paying their freehold royalties. Therefore not earning title to the oil or gas. Cash is very tight indeed.

Raising money in this market is impossible. Investors and bankers have had enough of what the producers are selling. Bond holders of Chesapeake won a court case last week in which they were awarded an additional $300 million in compensation. The court’s seem to think that oil and gas is a business. We know it as a science experiment where paying the investors, bankers and bondholders holds mythical status. Why would the industry pay those that provide the capital to run these science experiments? Wilbur Ross was also on Bloomberg last week stating that he was back investing in oil and gas. This would seem contrary to what I’ve been stating, however, Mr. Ross says that he is only buying the producers bonds in the distressed bond market. Which of course doesn’t provide any money for producers to pay any of the bills. And is in essence, just a gamble that the price of the bond will go up if the Saudi’s do freeze production.

I wonder what would happen to a producer's prospects of raising investment and banking capital if they had a plan on how to get out of this malaise. One in which the producer could be an active participant in dealing with the issues in the industry. A plan like that which the Preliminary Specification provides. Where profits were the focus of the organization. Strange but true. Then when you stated that you were profitable, you might earn some credibility in the investment community when you did earn a profit. Today an investor hears you saying you’re profitable at $43 and then you publish financial statements that show you're losing record amounts of money and have no cash. I’ll bet the investors would get behind those producers, that had a plan, new what a profit was and could start building for the future. Producers need to stop this nonsense and fund our budget.

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. 

An Out of Control Science Experiment

Faith in “market rebalancing” takes a hit as the IEA states.

The surplus in global oil markets will last longer than previously thought, persisting into late 2017, as demand growth slumps and supply proves resilient, the International Energy Agency said.

World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, said the agency, which just last month saw the market returning to equilibrium this year.

“Supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance—it looks like we may have to wait a while longer.”

The problem is none of the producers that I’ve seen have the financial resources to make it through these tough times for another year. And doesn’t this change in the forecast sound just like the previous changes in the forecast? Where the “markets rebalancing” will somehow always magically appear within a two year time frame. The problem is it never happens. Just as we saw in the 1980’s and 1990’s the producers continue to produce, complain about the low prices and say it’ll get better. The difference today is that shale makes it devastatingly difficult to call the industry commercial. Its really just an out of control science experiment.

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 Calm Before the Storm

I am taking a couple of weeks off. This may be the last opportunity that I’ll have for a while. I don’t see good things coming about as a result of the current leadership's betrayal of everyone’s interests. And it's going to happen soon. I may post here during the next two weeks however, don’t expect anything during that time. There are going to be tough times in the oil and gas industry and we will have much work to do to build the Preliminary Specification. Capitulation by the commodity markets will occur. I think within the fourth quarter of 2016. Both natural gas and oil prices will decline precipitously to new levels. And they will stay there until such time as the North American producers attain production discipline. The only manner in which to attain production discipline is through the Preliminary Specification and that will take some time to build. It is the solution to what can only be described as the biggest issue in oil and gas, ever.

It didn’t have to be this way but that is the way that change is made. The old ways fail to operate and they have to be removed. The current producers have no back up plan on how to deal with the situation if “market rebalancing” is determined to be a failure. Which is what capitulation will imply, as well as the lack of faith in the current administration. They also have no financial reserves remaining to cover off their continued losses and will not be able to shore up the business's survival any longer. Confidence in the producers that they have things under control will evaporate. Time to prepare for the storm.

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.