Best Business Opportunity, Ever, Part XXX

We saw last week the news that all producers should’ve anticipated for the past decade. Higher interest rates are around the corner. Maybe not high interest rates but certainly moderate interest rates, or a return to normalcy will be probable under a Trump administration. In times such as what we are experiencing in the oil and gas industry, higher interest rates on the level of indebtedness of the producers will be the last thing that is needed.

The counterbalance to the bloated balance sheets is of course either debt or equity. In most cases the balance between debt and equity is within the region of what could be considered a well leveraged operation. The issue is that the amount of the assets are bloated due to the accounting policies of the SEC. By recording everything and anything as an asset on the balance sheet. And by limiting the amount of those capital assets recorded on the balance sheet to the known reserves of the producer times the current commodity prices. You have established the upper limit of what the assets could be recorded at as the total future revenues of the firm. Therefore the balance of the debts of the firm would also have the upper limit of approximately half of the total future revenues of the producer. An impossible number, particularly for an industry that doesn't have that old time religion of profits.

Even in a “reasonably” indebted producer these would be excess levels of debt due to the fact that the assets are so bloated out of proportion. In the third quarter of 2016 there were significant interest costs being incurred by many of the producers. The amounts of interest paid may have been distorted as a result of the high rates that were incurred during the junk bond boom of a few years ago. Nonetheless, I think with the scenario that we have put forward here, it is reasonable to assume that the oil and gas industry is heavily indebted due to the outsized bloated balance sheets. As producers continue down the road of continued losses. The amounts of these losses eliminate the equity in the company. Turning the leverage that they may have been able to enjoy during the good times, against them and pulling them into a debt spiral.

Organizational survival would assume that the producer could find debt or equity available in the market. Producers found these facilities were closed in the early part of 2016. I believe they will need to deal with the industry's issues before they’re able to source any more funds. What this debt spiral will involve is the further reduction in their asset balances and the erosion of their equity position. Leaving them with far fewer assets and all of them secured by debtor's.

Which leaves a heavily indebted producer subject to the increases in market rates of interest. Producers can’t afford to see these costs become more material to their operations. But that is what is going to happen. They have left the overproduction and oversupply issues to “market rebalancing,” which we now see as a completely ineffective tool. And frittered away the time that they should have been working on those problems. Now these issues remain with no resolution and the destruction of the industry well underway with the next big issue, interest rates, staring straight at them.

As I’ve suggested before, all of this assumes that the current administration in oil and gas cared about the situation. That is cared about it outside of the effect that it had on their own personal situation. After twelve years of trying to convince producers of these issues and the resolution of it, the Preliminary Specification, they’ve laughed at it and refused to consider it. A time when it was able to save the shareholders, service industry and the people who work within the industry. On several occasions during this time they’ve attempted to take our underlying Intellectual Property for themselves. Thinking that they could just take it, fail an attempt at it and prove that it couldn’t work. Each time I was successful in stopping them. What will their next step be? Or will it just be a continuation of that blank stare.

The fact of the matter is the foundation for the demise of the industry is well in place and in play. No value had been generated for decades, then value had been eroded in an unchecked manner, now the wholesale destruction of the industry is well on the way and the time provided to fix it passed long ago. This is creative destruction and the best time in the history of mankind, literally, to start an oil and gas producer to replace these destroyed organizations.

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 XXIX

I have argued that the accounting magic of the SEC has made the oil and gas industry appear profitable for the past four decades in which these policies have been in place. A time when bloated balance sheets were the only game in town. Whereas, these costs should have been moved to the income statement in a much more timely manner in order to better represent the actual costs being incurred in the producer firm. This would have created losses and reflected a lack of cash generating capabilities in the industry. Instead annual share issuances made up for the deficiencies in the producer's cash balances. Suggesting that these investors had in essence been subsidizing the consumers of the commodities.

Eventually, as can be easily predicted, this game with the accounting came back to bite the producers. You can only grow your balance sheets to such a size where the depletion of those assets becomes material to your income. On an industry wide basis we hit that point, then we discovered the means to produce shale. Some may feel now with the significant write downs that this accounting situation has passed and is behind us. Nothing could be further from the truth. The end of the beginning may have started, but we have a long distance yet to travel down this road.

In many cases, even with the large writedowns of assets over the past two years, the producers are still sitting with large asset balances. Although I suggested the other day that these balances represent the amount that the investors have subsidized the consumers in their consumption of energy. Which is the best way to look at it. It also represents the amounts of the future losses that the producer will be incurring. Or to put it another way, the industry will be in a state of consistent financial losses due to finally recognizing the capital costs they incurred in the past, in a capital intensive business. As an investor where do I sign up?

Many people will say these are not real losses that affect the cash situation of the producer. And I understand that argument. It is the same argument that has been used now for decades. The fact of the matter is the cash in the industry today is critically tight due to the bankers and investors seeing that the industry as a lost cause. Unable to generate a profit. If it continues to report that it’s unprofitable, will that change the bankers and investors mindset? I feel this strikes the point of why the industry has never achieved the religion of profitability. As long as there was cash no one cared what was happening to the business. Now that the business is caput, there are no earnings and no cash, with no foreseeable future of either turning around. Accounting is about reporting the performance of the management of the producer. For four decades the producers in the industry chose to defer accounting for their capital costs of a capital intensive industry. Now the importance of the role of accounting in oil and gas may be learned.

The past forty years was a heck of a good party though wasn’t it. From a physical point of view the production and infrastructure of the North American industry is impressive. However, functionally, literally and financially it is worthless because it depends on hundreds of billions of dollars per year in investment to operate. And that will continue for the foreseeable future. The next 25 years could be the most interesting and dynamic time in the industry. Do you see a way through that period with the assets and organizations that are in place? The culture of the industry is contrary to commercial, productive interests. Where will the money come from to fuel this future of the existing oil and gas industry.

As a startup oil and gas producer the opportunity to purchase this production and infrastructure of the North American industry is about to be put on sale. At firesale prices. Just last week Conoco put $8 billion of properties on the market. Expect to see much more of this happening in the very near term. Rehabilitating these assets as a startup producer. To make them always profitable is the first order of business for the startup. They can do this by implementing the Preliminary Specification. Which will ensure that they obtain that old time religion of profitability. Secondly they can organize themselves to approach the opportunity of expanding their deliverability to achieve profitable energy independence in North America. A worthwhile and attainable goal.

Remediating what exists in the industry and in the hands of the producers today, particularly after the battle that I have had in selling them the Preliminary Specification, isn’t possible. They didn’t think the issue was material to their operations. They were more concerned with the impact the Preliminary Specification had to their job security and did not want to work that hard. Building the Preliminary Specification will be difficult and it will eliminate the redundant elements from the existing industry. That is my assessment of the past twelve years that I’ve tried to solve this problem. But then I’m 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. 

Best Business Opportunity, Ever, Part XXVIII

One of the surprises of the third quarter was not only the loss of value of the producers but the cash situation they’re dealing with. In some cases a few fortunate producers were able to raise some substantial amounts of funds from either equity or debt issues. In those cases the cash was incinerated by the time it hit the bank account. The rest of the producers were struggling with no working capital whatsoever. The statement of changes showing in some cases that capital expenditures were slashed in order to deal with the lack of cash or working capital. Yet all that we heard through the third quarter was that producers were profitable at the prices that the commodity markets were providing. Seems that there is a difference in how profits are calculated to issue a press release and to prepare financial statements.

If a producer is struggling as mightily as these producers were to manage the few quarters they found in the couch. Why would they state that they were profitable? It’s my understanding that profitable operations would generate cash. It is this cash crisis that will cause the focus of the producers to begin to pay attention to the issues that they have chosen, so far, to ignore. The crisis in the oil and gas industry. I’m sure every investor and banker have the producers lined up ten deep in their waiting room, with some of them pitching tents. Making life for an investor or banker that much easier. When there is this much demand for your money, then there’s a problem. Those fortunate few producers that were able to raise some cash in the third quarter sold their souls in order to get the money. So we know that the bottom feeders have had their fill now too. That leaves the couch cushions.

Oil and gas production consumes cash. That is what unprofitable operations and this cash crisis means. To continue operations requires cash. In today’s environment the producer has no choice but to produce. If they stop producing the cash consumption increases. Under the Preliminary Specification this doesn’t occur. If the property is unprofitable, shutting it in does not create a cash drain. It creates a null operation due to the fact that we have reorganized the producer and industry to enable the null operation to occur. With the abundance and prolific nature of shale, overproduction will always overwhelm the commodity markets. Therefore the producers are going to have to allocate production on some basis. People, Ideas & Objects Preliminary Specification have chosen the fairest and most equitable basis of production allocation. That being on the basis of profits. If the property is profitable at the current price it produces. If not, it’s shut-in.

What do you do now? When you never had that old time religion of profitable operations. When no one, and I mean no one, will invest in you. Your company consumes cash at a voracious rate and you have nothing in the kitty. Well we’re about to find out. What I suggest is you start an oil and gas producer. Never has there been a better time than now to start an oil and gas producer. We have detailed what the upside consists of. The next 25 years will be, by far, the most prosperous time ever for those that are positioned to capture the value that is available. The approach that the startup pursues is going to have to be different than what has been done in the industry before. We’ll need to be smarter about what it is that we’re doing and more strategic and tactical in the business approach. Mindlessly drilling wells until your out of business is the old way of participating in the oil and gas business.

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. 

Remembrance Day

Best Business Opportunity, Ever, Part XXVII

Rarely does an industry, and most particularly the oil and gas industry, find common cause with the U.S. administration. That is the position that we find ourselves in this morning with the resounding election of President elect Donald J. Trump. He has made it a foundation of his policy platform to have the U.S. achieve energy independence. Not just a worthwhile goal, but one that is possible and probable with the discovery of the means to produce shale reservoirs. Other energy policies look to the removal of regulations and opening of federal lands. There is work that needs to be done before we can approach the objective of energy independence. Building the Preliminary Specification, making the industry profitable, expanding the throughput capabilities of the industry and then expanding its output so that North America is energy independent and profitable. That is the plan we are taking here at People, Ideas & Objects. No other plan exists. Any other plan is going to have to address the state of affairs in the industry today. The systemic overproduction leading to the losses and our current cash crisis.

We will also be moving forward with the objective of building value in the economy. These past eight years have had the current administration focused on any and all objectives other than building value. Is it a wonder that the economy is not moving forward? The Keystone Pipeline should be reviewed once again on its commercial basis. The point being that we will now be focusing on the real objectives and opportunities of building value, jobs and the economy for the betterment of society. It's in the best interest of the oil and gas industry to ensure that these developments are done in environmental ways. Climate science will fade from people’s memory now that the National Science Foundation is no longer directed by a president that funds any and all proposals that provide support for the effect of climate change. Maybe, President Trump will fund only proposals that support that climate science was always a myth. That is how science is subject to the political influence of those in power and has been so severely distorted.

Whether it’s four years or eight years that President Trump is in power I don’t think it matters to us. What we need is this alignment of the political and business interests and objectives over the next decades. That is what has been provided as a result of his election and what we are working towards. For me that was the loud clap of the starter’s pistol on Tuesday night. The startup producers will have the flexibility and speed in which to maximize this opportunity throughout their lifetime. The existing producers will at best be retiring debt through the sale of properties. Creative destruction on steroids is now happening in the oil and gas industry and everyone who is willing to participate in this new frontier is able to do so. If you don’t have the screaming desire to get out there, then there’s nothing that I can do for you.

Those that can structure an oil and gas producer to optimize this opportunity may not be large in number. There are however opportunities to invest in these startup producers. There are opportunities for those in the administrative and accounting disciplines to participate in the development of the Preliminary Specification as members of our user community and establish their own service provider. These are substantial business opportunities.

We’ve got a lot of work to do. These opportunities are on top of providing society with abundant, affordable energy. A responsibility that I feel the current producers have put in jeopardy and we’ll have to safeguard. These next 25 years are going to be challenging and exciting like none other. What are you going to be 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 XXVI

The future of the oil and gas industry had been left in the hands of the producers and those in power decided to use it for their own personal benefit. This has opened what we consider to be the best business opportunity ever, for the startup oil and gas producer in North America. The epic destruction of the industry is occurring at a pace that has never been seen before. Not one producer is immune to the effects of this downturn. The analogy of producers as swimmers, with the stronger ones being taken down by the weaker ones is apt. Everyone in the industry today will eventually fail. This is creative destructions finest hour. For many years the destruction was hidden by the accounting magic that the SEC dictates the industry use. For decades the accounting showed profits when in reality the industry wasn’t sustaining itself. Over time the industry began to lose value, but the accounting still showed profitability. This began the slow erosion of value from the industry. Value that would have otherwise sustained an industry during a recession. And now during these commodity price declines we find that the cupboards are bare and the industry is a hollowed out carcass on life support.

The producers are still carrying vast sums of asset balances. Chevron has almost one quarter trillion dollars of them! Why! These are the costs of exploration and production and should have flowed to the income statement long ago. All they do now is represent the amount that the investment community has subsidized the consumers of energy. By not recognizing these costs, the consumers never had to pay for them. The investors did. What kind of industry accounts for their costs on the basis of the customer never paying the costs?

The secondary result of never recognizing the costs of exploration and production are that the industry looks good to the investors. The producers become spendaholics which makes their assets grow, and should they happen to find any oil or gas, it will be profitable because there are no costs recognized against those revenues. Making for the investment boom that we have seen these past few decades. Which in reality was based on some accounting magic, not on the basis of building any value. If we look out the window now, is there any value in the oil and gas industry? This decades long investment boom led to overinvestment which has led to overproduction which has led to collapsed commodity prices. Who would have thought?

It truly is the Saudi’s fault however. The question now is what do we do. There is no value left in the industry. What people thought the asset balances on producer financial statements represented, the value of the organization, are really only past costs that have not been recognized by the prior production. Which gives you a sense of the scope and scale of the destruction. I don’t see much purpose in trying to remediate this. It’s also not my decision. I can point out that the best way to look at the oil and gas industry is as a sunk cost and we begin the process of rebuilding it for the future. A future that holds the promise of building significant value. A future that doesn’t assume the accounting deception that has become the culture of the industry today. One that looks to real profits and the generation of value as the guiding principles and strategies. Not just to muddle along.

I expect to see the existing producers begin the wholesale, firesale, dumping of their properties over the next decade. The need for cash will be critical until the organization is terminated. Startups can purchase these assets and rehabilitate them and the value that they should have held today. This value would be in the trillions of dollars. These trillions won’t be sitting on the balance sheets, it will be reflected in the market value of the startup producers. Accounting is about performance, it should never attempt to reflect the market value of oil and gas properties. Secondly the startup will realize the value proposition of People, Ideas & Objects which is estimated between $25.7 and $45.7 trillion. These will be reported on the financial statements as revenues. Then finally they can move the industries production profile forward to achieve North American energy independence, which will also show up as incremental revenues on the financial statements. People, ideas & Objects are focused on providing the most profitable means of oil and gas operations. Building value for the industry. That is how I propose we deal with this situation.

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 XXV

Changing the dynamic of the industry to focus on profits, as opposed to cash flow. is one of the key differentiators of People, Ideas & Objects Preliminary Specification. Why is this change necessary, and is a focus on profits the appropriate position for the industry to be based upon?

I read something from a blog called “Master Resource, A Free Market Energy Blog” regarding the thinking of energy supply and pricing. Reflecting what the thinking was of the oil and gas producer in North America. It was written by Richard Sigman. “Cutting production ultimately decreases your own market share and subsidizes your competitor.” Which is what passes for logic in the industry today. Therefore keep producing, despite the implications of shale, the collapse of commodity prices and the destruction to the financial and capital structure of the industry.

There never seems to be any consideration for the losses that are incurred by the producers. Losses are just unfortunate events, that once they’re incurred, evaporate and have no further implications anywhere in the producer's life. Nothing could be further from the truth. The capital structure of the North American industry has been eroded away by these producers losses and is in rapid deterioration. This has implications to the cost structures of each producer. The cumulative losses are represented in higher capital costs, those being the inclusion of the losses themselves, that need to be recovered from future revenues. That is to say that if a property had a reserve life index of ten years and $1 million unrecovered capital cost. If losses of an additional $1 million were incurred the reserves would need to earn the $2 million in order to be deemed profitable. You can’t say that a $1 million property that loses $1 million is profitable after the recovery of $1 million. Higher costs are also represented in higher distributions to the additional shareholders or issuance of debt that the producer has had to carry to offset the effect of the losses in the organization. Losses are not free, and just because the SEC dictates an accounting methodology that is difficult to incur losses under, doesn’t mean the producer hasn’t been incurring losses for many more years than 2015 and 2016. Losses destroy value.

If all you did was lose money as a producer there would be consequences. And the costs would be that you would lose control to the debtors or shareholders as your cost structures became uncompetitive. Acceptance of losses is acceptance of loss of control of the organization and eventual loss of the competitiveness of the producer and ultimately the industry. This is where the industry stands today. At the very end of this road. It may not seem that way, I have consistently asserted that there has been an accounting anomaly that has hidden the losses and these effects for the past four decades.

When I first suggested that we provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. People laughed at us and said that the industry doesn’t operate on profits, just cash flow. I understood that then, and I think everyone understands that now. Profits are what make the world go round. With a profitable oil and gas industry producers pay royalties and taxes, hire people to do the work that is needed, establish appropriate sized service industries to support the producers and enable them to look forward to resolving the issues and opportunities that they face. Issues such as the difficulties in securing long term supplies of engineers and geologists and to approach the opportunity of energy independence in North America. If anyone thinks that the current producers can approach either of those two objectives in the condition that it’s in today, I think you’d be mistaken. A profitable industry is the only way that we can approach the challenges that we face in the next quarter century. Continuing to rely on the abuse of the investment community, which has failed, will lead to disappointment and dependence on others for our energy.

I’m surprised by the fact that we’re not hearing anything regarding the “market rebalancing” during this quarter. I don’t think I can point to a specific talking point that has come out of my review of the third quarter reports. Producers have run out of excuses it would seem. All of this may seem dire in its outlook. However the contrast to this dark message is that it paints an opportunity for the start up oil and gas producer that 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 XXIV

From my corner of the Internet I hear the echo of this blog pretty clearly. What is surprising to me is that outside of this little corner, there doesn’t seem to be too much concern for what’s going on. Reading the quarterlies, as far as the producer is concerned, is left to those two or three people who actually read them. Otherwise it’s on with show. This is very disconcerting and alarming. Producers are not generating enough cash in order to qualify as viable businesses. In the past they had hedges. Those dropped off in early 2016 and now the producers are fully exposed to the commodity price collapse. In some cases 2016 revenues are barely half of 2015’s. Producers are not covering the cash costs of their operations. Clouded by refinancings the drainage of value from the industry is epic. And it's at a pace that won’t take long before the doors start closing. Of course this is based on the fairy tale accounting of the SEC which puts a gloss on everything as it is anyway. These firms continue to sit on outsized asset balances which make the situation look better than it is.

I heard the other day an economist state that the commodity price declines are over. And that the industry could now begin the rebuilding process. Sorry, which industry? Which leads me to believe that economists are always optimistic, and generally wrong. Which begs the question why are we still listening to these people. When did they earn the credibility that they lost during the financial crisis. Only one economist, Nouriel Roubini, warned about the financial disaster that was about to occur in 2008. The rest were laughing at him. Anyone looking out the window could generally see that Noriel was right. It’ll be a long time before I start listening to economists again. Especially when the financial condition of the industry is this bleak.

What is needed is some adult supervision. Some industry leader needs to stand up and say that this situation is untenable and begin the process of righting this ship. Or we will all be going down with it very soon. The operating base of the industry. The core of what provides value in the industry has been eroded to the point where it is not safe for anyone. The healthy producers, those that can swim, are being drawn under water by those that are desperate for cash. Producing anything and everything despite the consequences. Selling anything and everything, irrespective of the price or costs they paid. Making the value of everything for everyone worth less. As more healthy swimmers are pulled underwater they are forced to hang on to other healthy swimmers and soon everyone drowns.

In all cases the value of the producer has been substantially eroded in the third quarter of 2016. No one is able to deal with this situation on their own anymore. Everyone, the startups, intermediates and the integrateds are all being affected severally and comprehensively from this collective drainage of value. Any remedial efforts on an individual producer level are moot. It's a collective issue that is industry wide. The decline in commodity prices was the beginning. The accounting masking the losses for so long. Now the losses being fully realized only show that the momentum is against the industry.

If we don’t stop this it will get the better of us. Looking the other way, which is what the producers are doing, is not the answer. The business is deteriorating. The deterioration is accelerating at a remarkable pace. I may be biased but the only way to turn this around is to have the Preliminary Specification in place. And that won’t be a timely solution. But if the industry doesn’t hear that “jarring gong,” then it won’t be too long from now.

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 XXIII

What the existing producers refuse to accept is that the oil and gas commodities are “price makers.” In economics there are price makers and price takers. One characteristic of price maker is that small changes in supply / demand have a significant impact on price. Price takers, bottled water for example, are not affected by increases in supply / demand. There could be five new bottled water providers in the market tomorrow, the price for a bottle of water would be the same. These are established economic principles that are in effect in economies everywhere. Oil and gas does not compete with any other form of energy. They are monopolistic in their use. This also supports their classification as price maker. You can’t lubricate your engine with nuclear power, carry electricity in a bucket or establish a chemical plant near a hydro dam.

The Preliminary Specification makes the assumption that oil and gas are price makers and have adopted that as the strategy for the dynamic, innovative, accountable and profitable oil and gas producers. Using our decentralized production model which is designed to allocate production across the industry based on profitability. If the property is profitable, based on a consideration of all of the costs, then the property produces. These decisions will be evaluated independently by the members of the Joint Operating Committee based on the detailed, actual accounting of the property. When the existing producers see our price maker strategy, they state that its collusion and walk away. The line being sold to the investors by the existing producers hasn’t been questioned, yet. Some day someone will look up from these financial statements and suggest that enough is enough. Today, for now, it's impossible to challenge the conventional wisdom.

What need is there for the industry to consider the decentralized production model and our price maker strategy? Crisis, what crisis? Certainly it's bad for the investors, the service industry and the people that work in the industry. Have we seen any action in the C suite? Husky had their CEO retire but that may just be in the normal course of business. There’s no crisis when it comes to the people who are making the decisions in these producer firms. They’re fine thank you. Why would they want to expend the effort and disrupt their lives in order to make changes that wouldn’t have them sticking around for very long?

And so it is the industry gets drawn down into a bigger pit than the previous quarter. The hope that things will turn around ever present and endlessly promoted. The damage being done day by day is tragic and irreversible. Commodity prices will not turn around until such time as the North American producers institute some method of production allocation. In natural gas we’ve seen for six years this overproduction and it doesn’t stop. In oil it's the same thing over almost a three year period. Everyone has cut their capital budgets but that only cuts the marginal activities and in turn focuses the producer on sharpening their pencils. It's the same story each quarter, only the losses are getting larger. The cash being generated is smaller and the difficulties more substantial. They won’t stop wasting away, they just don’t care.

Which leaves us with the evidence that the startup producer needs. They won’t be challenged at any point by the existing producers, who won’t be in business for long either. The kind of damage being done to the established producer today is permanent. Therefore by using our price maker strategy, the startup oil and gas producer will be able to ensure their investors that they’ll be able to provide them with the most profitable means of oil and gas operations at all times. Something that should’ve always been the case in an industry where the commodities hold characteristics of “price makers.” Oil and gas is just not currently managed as a business, more of a personal petty cash for those fortunate few.

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 XXII

Review of producers third quarter reports is very disheartening. As I suspected nothing has changed in the steep and downward decline of the industry. What’s the plan to deal with the way the industry is losing money? What’s the plan to reclaim the money that has been lost in the past number of years? Nothing, not a word. Just “muddle through” as before, as it will be in the future. How have these losses and overall destruction become the accepted norm in the industry? What are the origins of this attitude and why is it happening? Difficult questions, to which all that I get in response are blinking and stares back from those that I ask. The optimization of quarterly performance over the past decades have eroded not only the business, but also the capabilities of the producers.

Natural gas prices declined 15% last week. The biggest decline ever. Seems that storage is almost full and the winter isn’t going to be that cold after all. Oil is well below $46. Seems none of the Opec producers were that serious about the agreement that was prematurely announced. This is what passes for planning in the industry. Hoping that commodity prices will rise. That someone else will do something to make things better. Nonetheless, the implied commentary during the second quarter was that the third quarter would bring the turnaround of the industry. 2015 was the worst year ever. 2016 is looking even worse. Being asked to be patient is one thing, but when no actions are being taken, there is being fed a line.

There are trillions of dollars at stake. Don’t believe me, run the numbers for yourself. Determine what prices it would take for the industry to be profitable. Deduct the current prices and apply that across the production profile of North America. Then determine what it would be for the next 25 years. Add in the amount of capital expenditures that have been incurred but never accounted for. Add the future capital expenditures that will be accounted for under the Preliminary Specification, as we will be returning those dollars back to the investors too. My numbers are well known and I’m certain that your’s will be much higher.

We have clearly defined that the startup oil and gas producer has a prosperous future for the rest of this century and most particularly the next 25 years. They have the opportunity to purchase the current producing infrastructure from the existing producers as they wither away to oblivion. Selling assets to meet the cash shortfall is the future of those without any plans or ability to deal with the issues and opportunities in the business. The startups will acquire these assets and rehabilitate them into profitable operations by using the Preliminary Specification. Building significant value for themselves. Then, they will be able to access the value proposition of People, Ideas & Objects that we have determined to be in the range of $25.7 to $45.7 trillion for North America. Lastly the startups will be able to generate even more opportunity and value by way of ensuring that North America achieves energy independence.

Setting out with a startup today would be a worthwhile journey for these next 25 years. What is the long term future of these existing producers. What are they planning on doing? Will the investment community continue to sacrifice themselves for these producers? Complaining about Opec’s overproduction of natural gas in North America, or other such nonsense. And it will be to muddle along. So which side of the fence are you on. Which side of the fence is the producer that you work for on. Is a change necessary? I can understand that a 25 year horizon is too far for some people to contemplate. They may want to retire in 5 years or so. Which is fine, they should stay with their existing producer and ride that train to the end of the line. It’s just important to choose.

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 XXI

The realization that investors and bankers have been subsidizing the consumption of energy for the past four decades is beginning to permeate the minds of those in the marketplace. Investors have invested in good faith, the producers report those investments on the balance sheet as property, plant and equipment. Yet the entire producing infrastructure of the industry isn’t worth $0.02 because it takes billions of dollars each year to keep it operating. This issue is clearly evident today, finally, as a result of the shale reserves causing the overproduction to be so acute. The issue has been present in the industry since the time the SEC began this foolish accounting methodology and it should have stopped long ago. Was it only me that saw things this way? No.

The amount of assets sitting on producer balance sheets is enormous. Amounts that, when you calculate the annual capital expenditure increases and depletion decreases, will last for at least a quarter century or more. At which time they’ll become collectable, I guess. These are the costs of exploration and production. They need to be recognized and deducted from the prices of oil and gas and passed onto the consumers who use the commodity. Investors don’t frame the property, plant and equipment account balances and put them in with their precious works of art. Letting these balances balloon to ridiculous levels is the reason that this downturn has no resiliency in terms of its return to normal. All the value that was invested or built up in the industry has been frittered and wasted with nothing left but a producing infrastructure in critical care and on life support.

Today the solution is we need to implement the Preliminary Specification. It will do two things that are not being done in the industry today. It will recognize all of the costs of oil and gas. And it will allocate production volumes across the industry fairly and equitably. Moving these capital costs to the income statement won’t be done quickly. Producers are going to need to do it. Just because the SEC dictates the methodology doesn’t mean that every producer reaches the outer limit of acceptability of that methodology every year. The SEC provides a range of what is possible and the lower limit should be used to rapidly accelerate a decline in the balance of property, plant and equipment. That way industry can be self funding, pay investors a dividend and pay off the debts it has incurred. That then would qualify them as a business.

Shale based reservoirs make the allocation of production volumes necessary. It seems everyone these days is walking around with at least 5 tcf of gas. All of this gas is currently rushing to market as quickly as possible. A similar situation is occurring in oil. Allocating production based on profitability is therefore the only reasonable and fair means in which to allocate production. Profitability has to consider the capital costs under a reasonable depletion methodology. Deferring all of the capital costs depletion for 25 years is not a means to calculate profitability in a capital intensive industry.

Within the Preliminary Specification these issues are resolved through our decentralized production model and price maker strategy. Our software defines and supports a reorganization of the producer and industry. The producer is reduced to the C class executives, the earth science and engineering resources, some land and legal, with some support staff. The remaining administrative and accounting resources are reallocated to service providers who focus on one process and use the entire industry as their client base. Then, based on a detailed and accurate accounting, when a property doesn’t achieve profitability the decision can be made to shut-in the property. This enables the producer to save that properties reserves for a time when they can be produced profitably. Increase the producer's profitability by eliminating unprofitable production. And reduce the volume of the commodity in the market, enabling it to find the marginal cost.

Within the Preliminary Specification and the service providers that are defined and supported by our software. That shut-in property does not create any information in People, Ideas & Objects task & transfer network that distributes data to the service providers. Therefore the service providers will not be providing any services to the property, no billing for any services will be rendered and no costs for administrative or accounting services will be incurred by the property. The shut-in property will therefore incur what we call a null operation. No revenues, no royalties, no operating costs, and no overhead.

This is how we can turn the industry back to profitable operations. Start to rebuild the value that has been destroyed in the past four decades. This is part of the plan contained within the Preliminary Specification. The existing producers think that they have it under control. They have no plan, and have not identified the scope of the destruction that they’ve created. If you think it’s bad in oil and gas now, just wait, it will get worse. However, with this level of destruction, the level of creation is inversely correlated. Making this 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 XX

I may be over the top in terms of my criticism of the industry. Which may be, but it doesn’t matter, they’ll never act to fix these issues. I find it difficult to watch the demise of so much value. Particularly when you have a solution in hand that sets the industry on the path to reclaim this value, establish a new basis of operation that will ensure that the producer is provided with the most profitable means of oil and gas operations and we would then have the means in which to approach energy independence on the North American continent. With the Preliminary Specification we have a plan in hand to make the industry achieve these objectives. What’s the plan today? Where are we going and how are we going to get there? Who’s driving the bus? Clearly no one is and we’ll just limp along until some tragic event comes about and we can all say, “no one thought of that.”

To set out a plan in this day and age requires the software for the organizations within the industry to be defined and built. Nothing happens anymore without software being in place first. Want to fix the overproduction issues in oil and gas, you’ll need a plan and the ability to build some software. People just can’t move into the positions that are needed anymore. When the economies were simple it was obvious what was needed and people filled the gaps and growth was the result. Now we stand on the shoulders of giants and we need to build off a very highly defined specialization and division of labor with a defined objective to be reached. That can no longer be done in the way it was in the past. In the past we relied on “spontaneous order” to make the changes in the division of labor for us. Spontaneous order can no longer function when the process and functionality of the organization are cemented in by the software that it uses. Without a defined software development capability our organizations are permanently cemented and sealed in the software that the organizations use.

We published this knowledge in our Preliminary Research Report in May 2004. It is derived of Professors Anthony Giddens Theory of Structuration and Wanda Orlikowski application of Structuration to technology. People, Ideas & Objects were then beginning the process of the work that we’re doing today. We were seeking support from industry to build ERP software on the basis of the Joint Operating Committee. It was the time in which the industry turned against us and ostracized me because of this work. They also took this understanding that software defines and supports the organization and perverted it by never changing the software that they used. And hence establishing their franchise to be unimpeachable.

Where we go from here is we establish the permanent software development capability that People, Ideas & Objects have proposed in the Preliminary Specification. We establish the user community as a permanent organization within the oil and gas industry. User community members are independent, qualified people who are trusted with the vision and direction of the Intellectual Property that is the Preliminary Specification and its derivative works. Our software developers only look to the user community for their definitions of the software that we build. We have detailed the user community vision here. It provides an understanding of the unique way in which this organization has been established and why this is not your grandfather's user community. User community based software developments are the only developments that I will be associated with. They are the only ones that meet the needs of the users.

For the startup oil and gas producer the Preliminary Specification sets in place all of these components. Providing everyone with the plan on how to deal with the industry and producer related issues for the 21st century. Giving them the tools in the form of the user community and software development capability that form the Intellectual Property that ensures their organizations maintain this as 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 XIX

The extraction of value from the oil and gas industry as a result of the accounting methods dictated by the SEC may be difficult for some to comprehend. It is believed that having big asset values on the balance sheet of your producer firm is the ideal situation at all times. With People, Ideas & Objects argument being counter to this, these capital costs should be recognized by moving them to the income statement as soon as possible. Which has large implications in terms of the value that is generated in the industry. Currently all of the costs of exploration and production are “stored” on the balance sheets of the producers. These costs have generally never been recognized on a timely basis and since this is a systemic, industry wide, multi-decade issue, this practice has created serious distortions in the oil and gas industry. By moving these costs from the balance sheet to the income statement you will either incur a loss, such as what the industry would have done, or the commodity prices realized should have been adequate to cover all of the costs of production, returning the invested capital in the form of cash, which industry hasn’t done and have therefore had the investor's cover the annual cash shortfalls incurred from production.

Firstly, without fully recognizing the costs of exploration and production, the oil and gas production appears to be highly profitable. Which attracts more investment leading to more capital costs which increases the productive capacity of the industry which “appears” to also increase its profitability. In reality none of the investment dollars are being returned to the business when these capital costs are not recognized in a timely manner. Therefore the investors and bankers have to make up for the annual cash shortfall of the producers created when the commodity prices are unable to cover the entire costs of the business. The business is still incurring these costs, however the accounting is reporting that these costs are ballooning assets that hold some mythical value for the producer. Nothing could be further from the truth.

Do this for four decades and the hollowing out of all measures of value of the industry will be complete. Producers have been reporting profits when in reality, if all of the costs were considered, oil and gas has been a lost cause, supported by investors, for decades. The residual infrastructure does not have the capital or financial base or the performance capabilities, because the overproduction as a result of the chronic overinvestment has systemically collapsed the commodity prices. Then, add shale!

Certainly my thesis of the willful destruction of the industry, as noted last Thursday, is one possibility. It is very easy to run an industry when it generates no value. Producers would assert that prices being what they are is the cause of the difficulties in oil and gas. That the “market” is responsible for those prices being the other part of their argument. The Preliminary Specifications decentralized production model contains the price maker strategy that enables the producers to “make” the prices necessary to earn profits in the industry. And it would also be my assertion that the producer's role in society expands beyond just what the oil and natural gas prices provide. That they may have a role beyond partying when prices are high. Again, our relationship hasn’t been harmonious or lucrative for me but at least I can say I make an honest living.

In addition to the financial wreckage that is occurring the people in the industry have been destroyed and displaced as well. This will hold long term consequences for the industry in whatever form it takes in the future. People who have been educated in a discipline, who have dedicated themselves for decades to a producer and an industry shouldn’t find themselves out in the unemployment lines with unskilled labor. It is however the easy way to run an industry, once again.

Industry could have built the Preliminary Specification but passed on that opportunity, now the consequences of their inaction are being realized and the situation is their responsibility. The Preliminary Specification has been available in the market for a long enough period for it to have been adopted. That hasn’t happened because it is contrary to the best interests of those in the industry. It is counter to the vested interests. On a go forward basis they will need to rebuild the value that has been destroyed within the industry. If all of the North American infrastructure can’t stand on its own without significant capital investment each and every year, that hemorrhaging will need to be stopped first.

If it is believed that those who destroyed the industry. That passed on our solution to resolve the issues that were leading to that destruction. Will be the ones that come up with the means in which to right the wrongs, rebuild the value that has been systemically drained for four decades, and realize all the value we have identified that is available to the startup oil and gas producer in the next 25 years. Then pigs really do fly.

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 XVIII

I thought for sure the producers had these commodity prices under control. Yet they seem to be in steep decline again. And those losses, as bad as last year, if not worse and it was supposed to be a good quarter! With rising prices and an Opec agreement to make operations run smooth! Only neither of those seems to be coming about. What’s a producer to do? Soon the talk in the industry will shift to the next talking point. This is a critical time because the focus will be on the producers to account for their poor performance from now until the American Thanksgiving. That’s November 24th, one of the longer stretches of time in which they may be asked to be accountable for their actions. Who, or what, will form the basis of the “talking point” that gives them the excuse for these poor performances and lack of action. What hymn will they all turn too to make it sound “real” to those that have lost everything as a result of having faith in our oil and gas producers.

And so it will go. It may seem that we’re doing the same thing over and over again at People, Ideas & Objects. But I think the insanity is with the producers continuing on with the losses and destruction of people's money, time and energy. It's the same thing over and over, nothing ever changes. Chronic overproduction in natural gas has caused the storage to fill to capacity and the prices are in freefall. I, like the producers, don’t understand why Opec can’t get an agreement in natural gas as well. It’s always someone else’s fault. Chronic overproduction and massive losses. And it just never stops. It went on for about fifteen years in the 1980’s and 1990’s but the natural gas prices were able to carry the producers then. Eventually the oil prices moved up and the producers were able to party like there was no tomorrow. Only today is tomorrow and no one has taken care of the business of the business. And refuses to do so.

The problem is systemic. It’s identified and documented in the Preliminary Specification. It’s also resolved there and the solution provided through the services of People, Ideas & Objects, our user community and service providers. The problem starts with the accounting magic of the SEC which was mandated in 1978, or there abouts. Enabling the producer to capitalize almost everything they did. And then slowly deplete those capital costs over the known petroleum reserve base. Therefore the producer, in effect, never recognizes the real costs of exploration and production. These costs are stored on the balance sheet for decades while the producer reports “profits” as a result of realizing the very few costs that are left after capitalizing most of the costs, in a capital intensive industry. This overreporting of profitability has led to overinvestment which has led to overproduction which has led to price declines. Shale makes this feature a permanent bug for the oil and gas industry. Producers will now always overproduce, and they will now always lose everything they have. Just look at their quarterlies.

The issue we face now is that for the past four decades of reporting on the basis of the SEC anything and everything of value has been incinerated in the industry. When you report profits that are not supported by an accurate accounting of the business you create distortions. The distortion that was created in oil and gas was the shortfall in cash. This cash shortfall was made readily available through the generous donations of banks and investors who thought they were investing. Only in reality they were just lining up behind the other investors that went into the abyss before them. As long as there were new investors and bankers, the profits would drive the new investment. Now, after investing all of those trillions, we pull back the curtain and find the hollowed out carcass of the oil and gas industry. An infrastructure built on investor money that generates no monetary value whatsoever and requires a fresh load of new, naive and flush investors each and every year. But in reality, they say, it’s the Saudi’s fault.

Everyone associated with the oil and gas industry, in any capacity, are having such a pleasant time that they look forward to the collective “talking point” in order to adopt the appropriate posture. It’s not a business, business people fix things. The Preliminary Specification has existed in a vacuum since December 2013. There was ten years of research before that. What I am saying today is not newsworthy it’s more of an annoyance and frustration to those that find this environment comfortable. I think it has something to do with their pensions, their retirement and their expertise in avoidance of hard work. They’re more than prepared to ride the destruction phase of the creative destruction that oil and gas needs to go through. What more proof would there be, or do you need? What we need to do is to get on with the creative phase and that starts here and now with 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 XVII

Taken from the perspective of the next 25 years. Starting over with a startup organization, a clean slate, to pursue the oil and gas industry doesn’t seem unreasonable and is actually the preferred choice. Where will the existing producers be in 25 years? That question requires too much speculation and I’m too biased to provide anything objective. What we do know is there currently exists significant upside to those producer firms that have a current start date. They will be able to purchase the existing producing infrastructure of the North American industry at affordable prices. Maybe not today, but soon. When the only opportunity for survival of an existing producer is to sell properties, the market will be saturated with properties for sale and the prices will be affordable. There is also the additional upside that is provided by using the Preliminary Specifications decentralized production model. With its price maker strategy the incremental value that will be earned is $25.7 to $45.7 trillion over the next 25 years. And lastly the opportunity to make North America energy independent in both oil and gas provides substantial upside on its own.


There is no way that we’re getting to that upside from here with the organizations that we have in place. They’ve proven themselves incapable of action. If we don’t do anything we’ll be sitting with the same issues and questions that we have today. Oil and gas will muddle along on investors money and continue to experience huge booms against the backdrop of protracted busts. Doing nothing is something that oil and gas has excelled at. The Preliminary Specification eliminates the muddle along strategy and replaces it with a dynamic, innovative, accountable and profitable oil and gas producer. The two contrasting visions could not be more different.


Information Technology has been the variable that has determined the outcome of many industries in the past number of decades. Whether it’s computers, cellular phones or music to name just a few. Information Technology was used to leverage change within the industry and remake who and where the industry operated. I have stated repeatedly that it's not necessarily the important thing to own the oil and gas asset. The important aspect of the oil and gas industry will be to have access to the software that makes the oil and gas asset profitable. Without access you will have what we have today, which from my point of view is a mess. People, Ideas & Objects Preliminary Specification defines and supports a revised producer and industry structure that enables the producer to earn the profits that they are unable to earn in the current industry. That is the difference between the old industries and the new industries. The new industries understand that software drives the business. The old businesses believe that buggy whips are good investments. If I can’t motivate you with the opportunity that sits in front of the dynamic, innovative, accountable and profitable, startup oil and gas producer for the next 25 years. Then you should get out of the business.


Maybe all this technology is just a fad and the boom will return soon. If you're in an oil and gas company fighting to keep the doors open, you may not be far from this belief. These opportunities will pass you by when the technological fad’s become the ways and means of the industry and you were too busy stuck trying to restructure a buggy whip manufacturer. We all have choices. And that is what makes living in North America so dynamic. The old stale ways never survive. They’re always swept away by the better way. We’ve always embraced creative destruction. Sometimes it's just difficult to see it when it's here.


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 XVI

There seems to be a disconnect between the third quarter financial statements and the tone on the street. We came out of the second quarter reporting period with this giddiness that the low point in the industry had been reached. Then with higher prices being realized in both commodities during the third quarter, further fueling the confidence of the producers. And with the announcement of a potential Opec production agreement, there was the declaration that the war against Opec had been won by the shale producers. This has set these producers up for a serious hit if Opec declares that no agreement can be made.

Producers are missing their Wall Street targets. Missing them by significant, serious amounts. If this trend continues heads will roll. Reading these financial statements reflects the scope of the devastation that has taken place. It appears to me that the producers would need almost three times as much revenue just to be considered solvent. They are absolutely gutted, capital destroying machines. Money goes in, mixes with other money, and it all gets lost. Sinking ships unwilling to admit the end is here.

What it’ll take to turn these around is beyond me. What is there? A recapitalization? There isn’t that much money, anywhere. No investor or banker is going to absolve these firms of their bad past behavior. Especially when nothing has been done to correct the issues in the industry. Pretending that all is well doesn’t sell well when the financial statements are this devastating. The only thing that I can see is an attempted rehabilitation over the long term. Funded by the sale of properties to pay off debts. As the assets are sold the debts are paid and when nothing is left the doors are closed. That may be an optimistic scenario.

We should look at these producers from the perspective of a rational accounting methodology. To adjust for that, take the net asset balance of property, plant and equipment and write it off. This leaves the producer with the massive losses that the firm has really incurred during its lifetime. The debts that it has incurred in creating those losses, and reflects that those assets, in reality are nothing but an albatross on the back of the producer. The cumulative producing assets of the industry earn nothing in terms of financial return. Therefore they are worthless. The producer would perform better financially if they didn’t have any properties. That is the best way in which to evaluate any producer today.

Producers have over the course of the past forty years “believed” in the accounting magic of the SEC that enabled them to capitalize everything to the balance sheet. They then have left those assets on the balance sheet for as long as there are reserves on that property. For accounting purposes, which is to evaluate the performance of the management, would you allow the management to capitalize a concrete building for the period of time the building would be standing, or approximately 100 years? No rational management would do so. Yet we have the equivalent accounting treatment in oil and gas for the past forty years. Creating the belief that the more that the producer spent, the more valuable they became and the more profitable they were. Creating a culture of spendaholics with no concept of value or consideration of the overinvestment they were causing in the commodity markets. The only time producers were subject to a write down of their assets was during the ceiling test. Taking all of the reserves at today’s prices, or the total gross future revenues of the producer, and ensuring that the net asset value wasn’t higher! Ludicrous. Investors and bankers used to participate in these spending binges by funding them. They’ve finally caught on to the game. Now the curtain has been pulled back to reveal the extent of the real damage and the producers think it’s time to carry on!

So what to do. It’s time to start over with a startup oil and gas producer. One that doesn't’ currently carry the albatross of yesterday’s property values and performance. The amount that you spent to build your house has no impact on the value of your house. The amount that a producer may have spent on a property has no impact on the value of that property. Today’s oil and gas property values are history. If the market needs more time to realize this then the startup can wait. The existing producers aren’t going anywhere but down. Leaving the best business opportunity, ever for those startups that can participate. And don’t forget that People, Ideas & Objects, our user community and service providers also provide the opportunity of a lifetime.

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 XV

Doing the same thing over and over, expecting different results is a sign of insanity. With that in mind People, Ideas & Objects look forward once again to the quarterly reports of the oil and gas producers. Expecting that these reports will trigger the conclusion that the existing producers do not have the ways or means in which to continue in any purposeful manner. Which it would appear is my general purpose in life. I don’t expect to see much in terms of performance from the oil and gas producers. Commodity prices are up since the second quarter, but the second quarter was as disastrous as 2015, the worst year on record. One thing we did see in the second quarter was that most of the hedges that were providing a safe haven for many producers, have expired. Leaving producers fully exposed to the discounted prices. There had also been the issue of generating enough cash from operations to meet the needs of field operations and the organization. Something they were not doing in the second quarter of 2016 or throughout 2015.

I can scream until I’m blue in the face. It won’t matter and it won’t make a difference in the market. I’m here to provide an alternative to those that know that the industry is unable to continue in the way that it’s currently operating and structured. Convincing the world that this is the case can be highlighted here, but we have to wait for what Winston Churchill calls the “jarring gong” to occur. That being the time when people realize the situation is untenable. I think that’ll happen soon. When I can point out that the value of starting over with new startup oil and gas producers, which can acquire the existing producing infrastructure at fire sale prices from the current producers. Which will earn the $25.7 to $45.7 trillion value proposition by using People, Ideas & Objects Preliminary Specification over the next 25 years. Will also earn the further upside from the industry achieving energy independence in North America. All of this value is waiting to be earned by those that can see this opportunity. As a result I think the “jarring gong” will be heard soon. And as I’ve said before, maybe during this quarterly report season!

Today producers are fueled with optimism regarding a deal with Opec that may be put together by late November. I don’t see it. There is no interest in them putting together an agreement that I can see. Other than to fail at doing so and deflate the optimism that is rampant through the North American industry. This has been the game that's been played for the past number of years. It’s maybe difficult to see it this way when you're so vested in higher prices. Or maybe it’s just that I’m so vested in hearing the “jarring gong.” If the third quarter reports show that no progress has been made by the producers. And the Opec agreement falls apart. I think then this buoyant, optimistic oil and gas market will quickly disappear.

We’ve also come along way in terms of the natural gas market. Prices in the mid $1 to $2 range have been replaced by the low $3. About half of what is needed to be profitable. It was a warm summer and it looks likely to be a cold winter here in Canada. The shale gas production volumes have also come down significantly from their peak of 44 bcf / day and are now in the range of 42 bcf / day. One thing I learned from my years in oil and gas is to never listen to a non-engineer talk about the natural decline curve. So I won’t, there is still ample capacity in Canada and the United States. Storage is almost at capacity. If it takes eight years to destroy the natural gas business to achieve these results the producers should be happy that they’ve arrived, somewhat. Shale gas still exists however, and we’ll find that the producers unconstrained drilling response would overwhelm the market very quickly.

So the score card will show who’s making money and who’s losing money. I expect the tragedy to continue unabated. And these losses will be calculated based on the foolish accounting that has deceived everyone for over forty years. If you used a proper assessment, it would be far worse. The industry has a lot to earn to make up for these past losses. They’ll have to provide a real return on the investments they took, but then lost, but will need to have earned back. When that's done, in the far off future, maybe then they’ll be able to look at some of this upside. Or alternatively we could all just start over now with new organizations and a new way of operating oil and gas based on the Preliminary Specification and earn the value that awaits us.

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 XIV

Existing producers believe that given time the commodity markets will rebalance and prices will normalize. Until that happens, they will produce everything they possibly can, regardless of the economics of that production. Does anyone else see the foolishness of this strategy? Markets communicate information through prices. If prices are high and profitable, then producers should produce any property that meets the basic criteria of profitability. If prices are too low to produce a profit, then the producer should shut-in production and wait for prices to rise. That’s how markets work. They are not mythical, magical things that become all knowing and self determining beings. All they do is provide information in the form of prices that they’re willing to pay for the things of value. I have yet to see a market rebalance based on the passive involvement of it’s actors.

Chronically overwhelming the market with oil and gas is the characteristic that we are presented with as a result of the operating strategies of the existing producers and shale based reservoirs. With shale we move from scarcity to abundance in terms of the oil and gas commodities. There will now always be the capacity and capability to overwhelm the market with more supply than there is demand. This will be the case for the foreseeable future, which brings a new dynamic to the oil and gas industry. Managing on the basis of scarcity is no longer valid. Managing on the basis of a fundamental misunderstanding of what markets do, is no longer valid. The need for producers to listen to market signals to determine if a property produces or remains shut-in is what is necessary for the industry to move out of the current boom and bust cycles, and chronic malaise that it finds itself in.

The Preliminary Specifications decentralized production model uses our price maker strategy to enable the producer to make this change to the shale based era. Using a detailed, actual accounting of the property the producer can determine if it’s profitable and if so maintain production for another month. If it’s unprofitable the property is shut-in and the reserves are saved for a time when they can be produced profitably, the producer only produces profitable properties therefore their earnings are not diluted by unprofitable properties and the commodity markets find their marginal costs.

It is on this basis that the startup oil and gas producer will be able to assure their investors that they’re providing them with the most profitable means of oil and gas operations. How they’ve gained the production discipline to ensure that the disaster that is the oil and gas industry today isn’t repeated again and again. That their producer is being treated fairly and equitably in the marketplace through a production allocation methodology that is based purely on the properties profitability. This is how markets work and the startups investors will know that they have the ability to earn profits all the time that they are invested in the oil and gas startup. That they won’t be subject to the boom and bust cycles that have become the accepted norm and are more destructive than any productive activity. That their producer is wholly focused on profitably, delivering all of the upside that this transition to a new profitable oil and gas industry promises. Upside that includes the ability to affordably acquire the producing infrastructure from the existing producers. Realize the People, Ideas & Objects value proposition which is valued in the trillions of dollars. And then profitably provide energy independence to the North American continent.

When the industry is operated on the basis of the Preliminary Specification everything is fundamentally changed. We are relying on creative destruction in order to implement our technology due to the extent of changes within the producer and industry. Changes which are too significant for them to undertake in the normal course. There is too much cultural inertia to overcome within the current producers for us to be successful. The current producers have permanently destroyed the industry that existed just a few years ago. Most if not all of the producers have experienced financial difficulties of catastrophic proportions. If these carcasses appeal to the investor then we have nothing for them. If a fresh start is what appeals then we have 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 XIII

People, Ideas & Objects are focusing the oil and gas industry on profits. The Preliminary Specification is designed to optimize the producer and industry to ensure that they achieve the most profitable means of oil and gas operations. This seems counter to the status quo environmental and stakeholder focus that is the concern of the existing producers. Why is there such a stark difference in the focus of the industry between these two systems. Simply we’ve lost the ability to satisfy any stakeholders needs. The current organizations are confused as to their purpose and conflicted in their goals. These organizations are unable to determine what value is and how to increase it. Many have lost all of the money that they’ve ever raised in the equity markets and much of their debt. Those that haven’t achieved this stellar attribute are well on their way. Oil and gas isn’t a business or an industry, it’s performance doesn’t qualify it as such.

The investors, bankers, bondholders, service industry, the people who work in the industry. All of these stakeholders were invested in the oil and gas industry with their money, their time, their careers and their energy. As a result they have very little to show for it. What do they do now? Wait to see if this bunch gets their act together and figures out a way through the chronic overproduction and oversupply? That’ll take a long time and be a terrible waste. Since when did it become acceptable for an industry to be in such difficult times for the majority of its existence? Why don’t the producers take some kind of action?

People, Ideas & Objects can and have said goodbye to that way of life. There is no manner in which you can deal with a culture that is that convoluted, disorganized and unable to determine what it’s doing. The existing producers need to pass from the scene as a result of their poor performance. They’ve survived for forty years like this which has established their ways and means in stone. They can’t, won’t and will not ever change. Much of their past existence was supported by the annual share issuance and debt financing to cover for their continued poor performance. The investors now see that there is nothing there. They are wise to the game and are choosing alternatives.

An industry where everyone’s focus is on profits will support the investors, bankers, bondholders, service industry and the people who work in that industry. They will pay taxes to the governments and be good corporate citizens. Without profits you have what we have today. If everyone is focused on profits, and therefore can determine what they need to do to ensure that they provide the producer with the most profitable means of oil and gas operations. Then they can build value for the producer, the industry and these stakeholders. That’s how our capitalist system works. Or at least should work. It certainly isn’t in operation today.

Profitable producers would be able to better manage their operations and we would be less subject to the boom and bust disaster management that we have today. A profitable industry would be able to supply society with affordable and reliable energy on a consistent basis. That’s the promise that we provide when we’re focused on a profitable industry. There is money to be made here and that makes this the best business opportunity, ever. Show me a better time and place than this.

The Preliminary Specification provides the focus on profits throughout its eleven modules. Profits are its focus and everything else is secondary to that. Today, organizations are defined and supported by the software that they use. People, Ideas & Objects Preliminary Specification will enable the producers that use our system to remain focused on profits and have their entire organization building value. And that is how we will rebuild this industry brick by brick, and stick by stick.

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.