There is a Precedent
Royalty Trusts were enabled in Canada through tax legislation in a number of administrations. It was felt that it provided a means for smaller oil and gas companies to provide their investors with a means to recapture their investments from the oil and gas producer in a safer and quicker fashion. This involved the Royalty Trust declaring monthly dividends to the investors that represented a taxable income to the investor. Essentially the producer firm was not having to pay income tax or what is commonly believed to be the double taxation normally associated with the traditional corporate model. In the early part of this century the pressure to convert your organization into a royalty trust was quite strong. And if the firm did convert, the results were that you would receive a higher stock market valuation and greater access to capital. Those that resisted were treated poorly by the investment community by way of receiving little attention in terms of new capital investment.
The trend therefore became quite strong to convert to a Royalty Trust in Canada. The pressure then grew to the intermediate producers with the majority of them converting. Then it became fashionable to employ the business model outside of the oil and gas arena and other industries began actively pursuing this corporate model. It wasn't too long afterward that even large producers were contemplating the conversion to a trust model, and even large corporations outside of the oil and gas industry began converting. It was at that time the Canadian government stepped in and announced an end to the tax legislation defining and supporting the Canadian Royalty Trust model. Effective as of 2011 all active Royalty Trusts have had to convert back to regular tax paying corporations. This was done by the Federal government to mitigate the large and growing loss in their corporate tax base.
Here we have an example of the ability of the investment community directly pressuring the organization to make the necessary changes to affect their business model. If they didn’t make the changes then the producer was somewhat ostracised in their ability to raise capital in the investment community, and their valuations were encumbered by the premium that was attached to the Royalty Trust model. In the financial investment community you have to compete. By opting out of the Royalty Trust model you essentially stated that you would not compete for capital.
We can, and we are implementing this same strategy. The investor can state that they want their producer firm to implement the Preliminary Specification in order to provide for the most dynamic, innovative, and profitable means of oil and gas operations. The material affect of our value proposition is significantly more pronounced than it is in the Royalty Trust business model. We provide real value increases, not just a minor reduction in the taxes that would otherwise be paid. As each individual producer converts to the Preliminary Specification. A conversion that is done by simply paying their share of our development costs and issuing a press release stating that they have done so. It will be at that point that the investor will begin to see the benefits of the pressure that they put on the producer through the fact that the valuation of the producer firm will have been adjusted to reflect the new realities. Then the pressure will build on the other producers to convert to the Preliminary Specification as well.
The decision to support People, Ideas & Objects in January 2017 doesn't seem to far away, nor as impossible now. Investors do have power to make the changes that we are asking of them. And we will continue to appeal to them to make these changes at their producer firms.
The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.