Recalculating Our Value Proposition

Members of the user community need to update their value proposition in terms of the changes that are occurring in the oil side of the business. If oil is being affected by the Saudi’s in the manner that we spoke of in yesterday’s post. Then the value proposition that is provided by People, Ideas & Objects, the user community and service providers is enhanced substantially. We haven't discussed how the calculations of our value proposition is prepared for a while so I thought now might be a good time to prepare an update.

Simply we should calculate the incremental value of the People, Ideas & Objects software that the user community develops, and the service providers implements and operates for the oil and gas industry. That calculation begins by determining what incremental value is generated above the current base case. What we can deem the base case consists of is the current bureaucracies “price taker” strategy in both the oil and the gas sides of the business. We also need to calculate the incremental value that is earned by the producer through the specialization and division of labor that are attained through the continuous development of the administrative and accounting capabilities within the domain of the industry.

Lets deal with this last point first, specialization and the division of labor. These are two of the many tools that the user community can apply as the resource that determines “what” and “how” the People, Ideas & Objects software will do. Using automation, process management, computers, and other tools to continuously refine the specialization and division of labor of the administration and accounting processes and capabilities of the oil and gas industry. These will eliminate the bureaucracy and achieve higher levels of output in terms of the oil and gas production from the same resource base.

The second element of our value proposition is our decentralized production model which enables the oil and gas producer to become a “price maker.” This is in direct contrast to the “price taker” strategy that the bureaucracy has accepted throughout its administration of the industry. With shale based reserves moving the oil and gas industry into an era of abundance it is necessary to move the industry mindset from its current belief that demand is insatiable. To one where production is easily obtained and that can overwhelm demand. And therefore the need to allocate production on the only reasonable and fair methodology, that being profitability of the producing property, is necessary.

Therefore to price this aspect of our value proposition it is assumed that we have the capacity to double the current natural gas prices and bring the natural gas reserves into a profitable situation for the producers. If we doubled the value of all the natural gas reserves, including the shale based reserves, we would easily obtain our claim that our value proposition is in the trillions of dollars. Based on yesterday’s post we are now able to make the similar claim in the oil side of the business and could add incremental value from that business. As a result, our claim that we provide trillions of dollars in value to the dynamic, innovative and profitable oil and gas producer is what every member of the user community could and will be saying to differentiate their services from those otherwise unprofitable bureaucrats.

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. 

Raging Against the Bureaucracy

To be able to join the user community and participate in the development of the software of People, Ideas & Objects you really need to have a deep felt rage toward the bureaucracy. I know I have it and many other people do too. Especially the investors that we will be appealing too to provide us with the financial resources to support the user community and build the software. Now I know its inappropropriate to rage against anyone in this politically correct world. However if we look at the oil and gas industry today we see a very disturbing trend. I think it started when the oil and gas prices took off in the early part of this century. The budgets of the various departments of the firms became a little soft and no one has been able to remember the type of size or configuration of what a profitable oil and gas producer looks like.

What has happened since the early part of this century is that the empire builders have begun to understand the game as it is played. And instead of building a company, the domain of budgets and the number of people are all that bureaucrats are concerned about. Simply the stuff that makes their blood flow. What we have now in my estimation, at least in Canada, is at least half of our organizations are bureaucratic waste. That’s correct I think if we lost half the people in the industry we would be far better off than we are today. Now if you're still reading this you belong in the user community as the people that have stopped reading have found it too painful to listen to, those being the bureaucrats.

One needs to ask themselves for what purpose does a bureaucrat exist today? Well there are the friends that keep the bureaucrats self confidence high. And there are the wife and kids, and the private school that they no doubt attend. These are the things that provide for the reasons for the existence of a bureaucrat. But my question was more oriented to the use and productivity within the organization and specifically from the point of view of a dynamic, innovative and profitable oil and gas producer. They are but a cost, and a healthy cost at that. And they incur costs, many of them in the manner of time and energy of others. But in terms of productivity within the producer firm it would be a tall tale for one to believe that bureaucrats provide any value to the producer firm.

Take the situation that we find ourselves in today. Technology provides a means in which to deal with the administration and accounting of an oil and gas producer. And the Preliminary Specification aligns the compliance and governance frameworks of the hierarchy with the seven frameworks of the Joint Operating Committee. Enabling greater speed, innovativeness, accountability and profitability. Why with the technology that can be developed today are we still constrained by bureaucracies? Are bureaucracies and technology not mutually exclusive? Doesn't one eliminate the other? Yes they do. And that is why I write to you from outside the industry. There is no bureaucrat operating in the oil and gas industry today with a vested interest in developing the technology to eliminate themselves. They have the game fixed in their favour and as far as they are concerned it will stay that way.

So it comes down to the question of... “do you hire the bureaucrats to run the oil and gas industry, or do you spend the time, energy and money to build the systems, user community and service providers to offer an alternative to that archaic, lethargic, unchanging, and losing proposition the bureaucrats? Guess which side I'm on. Your suspicions were correct that not everyone could be part of the user community or the service providers. We don't need any bureaucrats to run the industry. We can do it much better with fewer people. And some may say that’s a bad thing because we will be putting a lot of people out of work. And I say, in this case we should look at it as significant progress.

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.

Some Thoughts on Our Future

Reading the content of this blog we can see that we all have much to do. How it will be done is through the individual actions of those that will make up the user community. They are the key to the success of the oil and gas industries future. If we want a dynamic, innovative and profitable oil and gas industry, we need the individuals within the user community to form and provide the knowledge and understanding of “what” and “how” they want their People, Ideas & Objects software applications to look like and operate. Software is the ingredient that defines and constrains what an industry can and can't do. Our user community will be able to define what the industry can do in the software that they build, and make the necessary changes through their actions.

People, Ideas & Objects appeal resonates with a broad audience in the oil and gas community. Frustration with the bureaucracy is an age old complaint that doesn't require too much argument for people to agree with. Our appeal is much broader than that. People, Ideas & Objects Preliminary Specification, user community, and service providers project a vision of the ways and means of the oil and gas industry that is compelling and complete. A vision that deals with the issues of today such as low natural gas prices and the high demand for earth science and engineers. But also provides the framework in which to deal with the issues and opportunities of tomorrow. This is where the user community and service providers come in. Their ability to institute change within the frameworks to deal with the current and prospective situations in the industry will provide the industry with much needed capabilities.

The oil and gas industry has changed. The shale based reserves have endowed the industry with the reserve base for the next few generations. However they are not profitable. And within today’s business model they are of no commercial value. The oil and gas industry, or the bureaucracy refuses to even discuss this issue. Choosing to muddle along hoping for a cold winter or something that will fix it. At the same time ignoring People, Ideas & Objects. Ignoring us because we preclude them from the future of the industry. Theirs is a self interested or selfish point of view that is inconsistent with the scope of the problem that is facing them.

From our lofty perch up here in Canada we can see the devastation of the great “hope and change” experiment that the United States has been involved in since 2008. We had a similar one in the 1960’s, 70’s and 80’s under our Prime Minister Pierre Trudeau. We are still paying for the cost of that experiment. From what we see up here we can’t believe that the U.S. has fallen so far, so fast. And in a related way the great experiment with alternative fuels and renewable energy is proving to be what it is. Therefore I hope that the U.S. can get back on track and remember that the progressives are really that dangerous. And that the damage from them isn't too costly. And that the natural gas business can become the fuel that powers the next great leap.

I’d like to think that that is the case. And with a new organizational configuration the shale gas reserves could become the engine that drives the U.S. and Canada forward. If so it will have to do so profitably. There is no way that the industry can continue to lose money on natural gas at the rate that it is for the past few years. What the industry is involved in now is not rational. And what is tragic is that the industry carries on without a single thought about the rationale about doing so.

I think we have come to a point in our organizational evolution where the big organizational behemoths have finally proven incapable of dealing with the speed and scope of the changes that we face. What is needed is a new method in which to organize ourselves to solve our issues and profit from our opportunities. I propose the Preliminary Specification, the user community and the service providers.

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. 

As a User Community Participant, Where Will You Be?

The question is asked where the members of the user community will be physically located. I guess the best answer I can give at this time is they will be located virtually in the main centres of Houston, Dallas, Oklahoma City and Calgary. And there may be others such as Denver and Los Angeles or San Francisco. Or, wherever you are now. Members of the user community may have their own office space dedicated for the sole purpose of being a member of the user community. However, they will most likely be operating out of the office of the service provider that they have established as a result of being a member of the user community. There they are hands on with the issues and opportunities of the producer and can deal with the day to day of the producers, and also see the bigger picture issues of the overall industry.

Accommodations will be made in People, Ideas & Objects development environment for the members of the user community to participate in the developments. These however will not be the primary means in which to communicate between the developers and the user community. This is where the virtual elements of the relationship come into being. The user community is first of all designing what they want in their systems. The only constraints on their design is the budget and the Preliminary Specification. Users may virtually come together from all corners of the continent in order to make this design dynamic, innovative and profitable for the oil and gas producers. Secondly they will document what it is that is necessary for the development of those systems and interpret that for the developers and insure that it is implemented correctly in the software.

This doesn’t need to be conducted side by side with the developers. Developers will work from the documentation that is prepared by the user community. Developers and user community participants will both have access to the information prepared by the user community and the developers. That means that at times when you are discussing issues with a developer, or another user, on line, you may be reviewing some of the software code. It’s not necessary that you're able to write code, but at least be able to follow along in a reasonable manner. As a user, having read-only access to the software code will provide you with a better understanding that the system that you want is the system that you have.

So if you're based in San Francisco and are working mostly for Chevron, and our development environment is located in Houston. You will not be subject to any difficulties as a result of the virtual nature of the relationship with the development team. The development team is housed together in one location which I think is a necessity. However, in most open source development projects the developers are scattered across the globe and they develop excellent software. Having the users and developers separate in this day and age is a non issue with the technologies for web based meetings being readily available.

What is a critical issue is the interaction between the user community and the producers themselves. And we have that in the user community participants being members of the service providers. They are therefore the people on the ground that are dealing with the producers issues and opportunities and are the producers proxy in terms of what they need their systems to do. Here we are getting at the critical nature of the user community participant and the importance of them in the People, Ideas & Objects development. They are for all intents and purposes, the producer.

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. 

Some Rambling Thoughts

Liz Ann Sonders was on Bloomberg the other day and was asked to give her investment advice. Ms. Sonders is the Senior Vice President and Chief Investment Strategist at Charles Schwab & Co. Inc. I can remember her advice form the 1980’s when she was a guest on Louis Rukeyser's PBS show. She must have been 8 then based on how old she looks now. Anyway her advice was as good then as it seems to be appropriate today. She said that she sees the trend of returning money to shareholders through dividends and buybacks ending. And that this money would be invested instead. Her primary recommendation was for the technology sector which she stated was in the position to capture some of the capital investment from other industries. And secondly, energy was so cheap that it appeared to be a good buy. I just thought that it was good news for anyone who was contemplating being part of the People, Ideas & Objects user community to hear that technology and energy were good places to be in terms of career choice.

I've had an iPhone 6 Plus now for a little more than a month and have to say that I in the hands of the user community, backed by a software development capability like that of People, Ideas & Objects, is a lethal weapon. I was never a fan of phones before, they were good to make phone calls but for anything else I deferred to a computer or an iPad. The iPhone 5 that I had was too small to do anything on. And the battery didn't last if you tried to do anything on it. And there is just no way that I can manage my life through a four inch screen. Well it appears 5.5 inches is all that I need. Anything that I can do on my iPad I can now do on my phone and without concern for the battery drainage. This is an effective tool for the enterprise, as is the iPad as you might have guessed. What I see these being capable of doing in the Preliminary Specification are significant, and the user community really needs to consider these as effective and useful tools for the dynamic, innovative and profitable oil and gas producers.

Some people might be confused as to when to join the user community. The simple answer to that is January 2017 when we are funded. However, that is when the work will begin on a full time basis to begin the developments on the Preliminary Specification. There is much that can be done in the next few years in terms of your personal investment and planning in terms of your participation in the user community. Reading this blog will be the first priority. Reviewing the Preliminary Specification in its entirety and getting an understanding of how the industry will operate in the new revised organizational structure is critical for everyone to understand. Then review your area of expertise in the Preliminary Specification. Lastly picking up those three or four university level courses on Java, relational theory and databases so that you will be able to communicate effectively with our developers when the time comes. These are the things that you could be “investing” your time and energy in the next few years. Trust me, it will make you able to smile during those meetings when the bureaucrats are droning on. Knowing that you're secretly putting them out of business.

If however you want to join the leadership team then you should start the process of joining the user community now. We need to have the leadership team in place in order to secure the funding from the investors in January 2017. We need to have the ability to show the oil and gas investors that there is a group of like minded people available and committed to providing them with the most dynamic, innovative and profitable means of oil and gas operations as an alternative to the current static, bureaucratic and financially poorly performing organizations that exist today.

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. 

Our Marketing Strategy

Within People, Ideas & Objects we have a unique Revenue Model that sources our funds where the money and the need for our services exist, at the producers. We will raise the necessary funds to fuel the developers, the user community and the cloud computer infrastructure to run our application from assessments on the subscribing producers. This is a fundamentally different Revenue Model than what has been used in the software development business, and one that has been developed to deal with the issues we have with our business model. Each of our revenue issues is a deal killer on their own and collectively make the project a non-starter. However, with our Revenue Model as it stands today we are able to overcome these issues and proceed with the project with the anticipation that the project will be funded based on the value proposition that we offer to the dynamic, innovative and profitable oil and gas producer. Had I ever mentioned that the value proposition that People, Ideas & Objects, the user community and the service providers provide the producers is valued in the trillions of dollars?

The first thing any software developer wants to do is to go out and raise some venture capital to fund their ambitions and bring the next great iPhone app to the world. When we knock on the VC’s door this is the world that they operate in. They are looking for innovative products that fit on an iPhone and require substantially less than $2 million in funding and will be sold at $2 to 4 billion people. When we say that our costs are $4 billion and our audience is a few hundred producers they naturally back away quickly and completely. We in no way fit within the scope of a VC’s business model. They are designed for the mass market and are designed to bring innovative products to that market quickly. Neither of which apply to us.

So if the producers are the ones to fund both the developments and the user community how come we haven’t received any funding? Good question. One of the reasons that we are going to the producers for funding is as a result of the games that were played by the producers in the 1990’s when there were an abundance of ERP software providers on the street. There were significant numbers of vendors and it was difficult not to bump into all of them. And all were big players backed by big companies looking to earn market share in the new “ERP” market space. So the producers played the “show me what you got” and “so and so will give me his stuff for free with just a maintenance contract” type of games. Needless to say I don't think any producer ever paid for an ERP system in the 1990’s. Those days are over. The costs are too high and the oil and gas industry isn't that large of a prize that anyone is looking to sell ERP systems, other than us that is. What’s that saying you reap what you sow. Having an operational ERP system running ready to be sold into the oil and gas marketplace would be a non starter today or any day in the near future. The producers will know that the market is small and they will collude with each other to ensure that you earn single digit percentages of lifetime revenues on your capital investment. They will put you in the poor house and make sure that you eat slop for the rest of your life. So now they will have to deal with the likes of the Preliminary Specification as literally their only choice, and pay for it. No one else is so foolish as to even think to be in this business.

Now technology is clearly able to bring value to the oil and gas producers. Did I mention our value proposition? In my discussions with industry they still want to play games like “call me when you have something.” Clearly understanding that when we have something it will be specifically designed not to fit in their organization. These are user community based software developments. If you don't participate directly in the development of the software, then the software will not fit within your organization when the time comes to operate it. If you want to make money in the 21st century you have to think differently as to how you will make that money. The first thing you have to do is understand that your organization is run on software and you had better be able to operate the software from the development team and user community on up in order to operate your company. That will be how the dynamic, innovative and profitable oil and gas producer will make money in the 21st century.

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.

Let's be Unreasonable

The last few days we have discussed the completely unreasonable and irrational idea that we could reorganize the oil and gas industry. That the prototypical producer would also be reorganized in a radical fashion. Ideas that were put forward here on this website. The methods put forward in the Preliminary Specification require significant change be implemented within the industry and not one thing, that is person, place or producer would be untouched by the changes put forward in that specification. This certainly makes the Preliminary Specification unique in its scope and scale of change. Its a bold statement to make and one that requires frequent checks on ones sanity. I am however, reminded by the saying from George Bernard Shaw

The reasonable man adapts himself to the conditions that surround him... The unreasonable man adapts surrounding conditions to himself... All progress depends on the unreasonable man.

I am certainly an unreasonable man, and I have many people that are willing to attest to that fact. I have also always focused on the value that we are able to provide within our organizations. I have been able to consistently differentiate my work on the basis of the value that is generated through my activities. It is why I went into business for myself back in 1986 so that I could begin to capture some of that value for myself. You have to understand too that you can not build anything of substantial value within a quarter or two. You need to begin with a plan, remain focused and dedicated to stomach the difficulties that will inevitably come your way.

Keeping focused on the plan during the positive and negative distractions that occur are what will keep you on the right track. For example if for some reason we were able to raise our budget tomorrow, a positive distraction, it would not deter us from our focus of developing the user community and then the service providers. The user community is critical to the quality of the software that we will develop. Without them we would only provide another version of what has already been produced. The clear and distinct difference between what we are doing and what has been done in the past is that we are user community ERP based software developments.

Some may think why in the world is that important. What concern does the user have in the world of ERP software. Consider the understanding and knowledge that is contained within what will be the user community. In terms of the work that they do and how they do their job. If it takes on average six months to fully comprehend an individual's role within an organization. And the number of different roles within the industry. Capturing that knowledge and understanding by the developers is a necessity in order to support the user. I think a user community based ERP system should support and provide the tools to the user for the work that is done in the industry. What SAP and other “ERP” systems do is handle the compliance and accounting requirements. And that’s it. Particularly from an oil and gas point of view they do a very poor job. Review the Preliminary Specification to see what I think the users will do and how they need to be supported in an ERP environment. We believe in a strong division of labor between computers and people. Computers should be used to store and process things. People should focus on the leadership, problem solving, decisions, creativity, collaboration, research, idea generation, design and planning amongst other things.

In terms of value we can be responsible for providing trillions of dollars in incremental value from the current base case. Is that justification for making these changes? I think it is. As we will be positioned to be able to provide for additional value as issues and opportunities occur within the industry. People interested in joining People, Ideas & Objects user community should look to build value for themselves and the industry for the long term. We don't plan to begin work until January 2017 and there are many things you can do to prepare before then. If the oil and gas industry is for you, and are disheartened by the bureaucracy what are you going to do about it. I have an idea and it needs you to make it work. Its a little unreasonable but then that is how progress is made.

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. 

The Age of Abundance Part II

People, Ideas & Objects, our user community and the associated service providers who provide the dynamic, innovative and profitable oil and gas producers with the decentralized production model. Have a value proposition that is valued in the trillions of dollars. If you take the manner in which the industry is being operated today, with its price taker strategy. And compare that over the long term with the decentralized production models price maker strategy. You will generate trillions of dollars in incremental value for the North American oil and gas producers. If you were a member of the user community or service providers you too could tell people that you provide oil and gas producers with the most profitable means of oil and gas operations. And as you can see you would really mean it.

With the decentralized production model the producer firm could potentially be sitting with a large inventory of properties that are shut-in due to their inability to be produced profitably. That’s where the Preliminary Specification comes in handy once again. It has been designed to instill within the producer firm the innovativeness necessary to compete in the 21st century. Innovation is a replicable process and those have been included within the Preliminary Specification. So when a property is shut-in due to financial losses. The ability to begin the processes of innovating to increase the properties reserves base, bring its costs down or production up can begin. This will bring the property back into a profitable situation and therefore can be returned to production. Any properties that do fall into an unprofitable situation can be addressed through the various processes of innovation that the producer firm will be structured to approach as a result of using the Preliminary Specification.

The decentralized production model has also reorganized the producer firm to a much smaller footprint to enable a greater focus on the earth science and engineering capabilities, and land and asset base of the firm. These are the competitive advantages of the producer firm and should be their primary focus. How quickly the producer responds to a Sarbane’s Oxley situation is mostly irrelevant to the performance of the producer. Therefore as we mentioned yesterday the industry has been structured to provide the administrative and accounting capabilities through service providers who are focused on the process and use the industry as their client base. It is in fact the service providers competitive advantage of how they respond to Sarbane’s Oxley. This therefore sees the producer firm stripped down to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The service providers bill for their administrative and accounting services directly to the Joint Operating Committee on a monthly basis and only if there is production.

This methodology would currently remove all of the production from the market as none of today’s natural gas production is making any money. The gas prices would certainly respond quickly, violently, and without hesitation to this change. Gas could then return to the market as it surely would qualify as profitable, and an equilibrium would then be achieved. What the producers have to understand is that it is profitability at the property level that is the factor for determining if the property will produce. Not at the producer level. By taking each property and assessing its profitability the prices will be much higher and there won't be the averaging that will occur if the assessment is made to determine if the producer is profitable. If it is assessed at the producer level, producers will attempt to average their properties profits and losses to show a net average profit. This would be an advanced form of cheating to achieve a higher production profile. Not the production discipline the market requires or is desired. Cheater’s however have always existed in the marketplace. The industry will have to establish the means to control those that do cheat. Maybe they will be able to do that through the Joint Operating Committee which is the operational decision making framework of the industry. And since the Preliminary Specification uses the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer it will have the means in which to deal with these cheaters. Another problem solved.

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. 

The Age of Abundance

To review the natural gas reserves of the producers these days is quite a change from the past. In the past you would see how the producer would struggle to increase their oil and natural gas reserves year over year. Doing everything within their power to expand the reserves base of the firm was a challenge that took many of the best minds in the business. Now producers have so much gas that they have difficulty comprehending the implications of the change. And the business has changed from one of difficulty and scarcity to one of abundance. Where not only do you have several tcf of gas, but all your neighbours do as well. Rushing to get that gas to market is the current strategy for each of these producers. And thankfully for People, Ideas & Objects we have a solution for this situation and the investors who are very disheartened by the producers financial performance.

Producers are jumping ahead of each other offering their gas at lower prices in order to be able to make the sale. This has caused the price to collapse from 6 to 1 when priced to oil to 20 to 1. And some producers seem determined to drop the price even further. This has caused the price of natural gas to fall below the margin for the past number of years. The only remedial action that has been taken by the producers is to reduce their overhead costs. As it is deemed that the costs of carrying the overhead for their production profile is the issue that the investors are concerned about. Not that there is significant overproduction of natural gas in the marketplace. The investors real concern is that the shale gas reserves are unproven as a commercially viable venture.

What is needed is a new business model in which to operate the business based on the changes that are reflected in the business. If there is an abundance of natural gas, and potentially oil as well, then the industry needs to have a business model that deals with that situation. A business model that would allocate production based on profitability would be the most reasonable approach. It would also be the most fair basis in which a producer could approach their business. An easy to enforce business model from the perspective of the investors. With unprofitable producers not being funded, or participated in, by the investment community.

People, Ideas & Objects Preliminary Specification business model is called the decentralized production model and addresses specifically the issues that are raised as a result of the abundance from shale based reserves. It enables a producer to shut-in any production that is not profitable without any financial penalty. It sets out a revised organizational structure of the producer and the industry in which the overhead costs of the producer become variable with their production profile. Therefore as the natural gas price declines in the marketplace, producers can shut-in their unprofitable production, reducing their losses on individual operations and actually increasing their firms profits. This will also save those shut-in reserves for a time when they can be produced profitably. And reduce the amount of production in the commodity markets placing a floor in the pricing structure.

When a producer shuts in production the overhead for that property is not incurred in the decentralized production model. What the Preliminary Specifications decentralized production model does is reconfigure the industry to change from a producer based administrative and accounting capability to an industry based administrative and accounting capability. The fact that each and every producer has to develop the capabilities to be compliant with all of the administrative and accounting regulations are what are causing the producer to lose money. These capabilities are not shareable at the producer level. By establishing industry wide capabilities through the People, Ideas & Objects software, user community and service providers we can specialize on each of the individual processes and bill the individual Joint Operating Committees the overhead costs for each process. If the property is shut-in there will be no charges incurred by the service providers and no billing to the Joint Operating Committee during periods when a property is non-producing.

This is the manner in which the industry needs to operate in the era of abundance from the shale based reserves. Production allocation based on profitability is the only equitable manner in which to proceed in the industry. A method to deal with the fact that everyone has trillions of cubic feet of natural gas in reserves means that some of it will have to be kept off of the market some of the time. The current methodology isn’t working and there is no solution to the situation other than the decentralized production model of the Preliminary Specification.

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. 

Attributes of People, Ideas & Objects System Integration

We need to address the integration of the People, Ideas & Objects applications, and the services of the service providers into the producer firms when the user community has completed the development of the People, Ideas & Objects applications. First I would like to address the issue of funding for the integration, and the larger issue of where the funds for the service providers are derived from. And that is to say not me. Whereas the user communities funds are derived 100% from People, Ideas & Objects we provide no funds to the service providers, ever. They are licensed by People, Ideas & Objects to manage an exclusive domain or process of the application. And therefore access the applications. They are also owned and operated by members of the People, Ideas & Objects user community. It is therefore on that basis that the service providers are deemed to be self funding in terms of their needs. And that would include any investments that were required to initiate the establishment of their services. We feel that with the license and their expertise, the ability to leverage these assets and skills in the financial community would be possible to help establish the service provider in terms of any initial investment requirements. Recall that we see the service providers are undertaking the responsibilities for the administration and accounting capabilities of the oil and gas industry. And as such would earn as their revenue stream the $40 to $60 billion in annual G&A expenses currently incurred by the producers.

Integration, or implementation of the software therefore clearly falls under the jurisdiction of the service providers. They will charge the producers for the costs of the integration of the process that they manage. These will be the first costs that the producer face outside of their initial development costs which they paid for when the project was commenced. The relationship with the service provider will be under a service level agreement and be based on the activity, or non activity of the producer. If there is no activity, shut-in production, there will be no service fees billed by the service provider. This will be a mandatory requirement and is included in all of the People, Ideas & Objects licenses. The Preliminary Specifications decentralized production model requires this feature to be present throughout the service providers.

With regard to integrations I have never been a fan of the big bang ERP integration. There are too many elements that are being managed poorly and too much information being lost in the process to make them practical. However, what we do have is an interesting and unique situation. A cloud computing based offering that is fully funded. Our hardware and software, development and user community is fully paid for as a result of the way we are being funded. Read our Revenue Model for further information. With so many disparate components of the Preliminary Specification being integrated into one unified system, the dependencies are very large and not initially well known by the producers. Therefore the tendency, and probably the necessity, due to these dependencies, is to move to the big bang style of integration.

Each service provider is responsible for their own exclusive domain. They will need their source data and will be able to find what they need to prepare that. They will also be the ones that are managing the process on a going concern basis. It is a domain therefore that is more manageable than what a traditional big bang integration is due to the ability of the service provider to parse their domain down to their scope of process operation. The main difference is the domain of data is much larger than what would have been the case in the past. What also may be the case is the state of affairs in the industry. PennWests recent reduction of 50% of their administrative and accounting people led to the capitalization of royalties. The quality of the accounting by the time we get to the industry integration may be tragic, and the number of people left in the industry may be minimal. That’s also considering the transition in terms of the number of resources that have moved from the producers to the user community and service providers before the integrations begin.

What I therefore see is a massive game of musical chairs where the producers layoff their administrative and accounting people and the service providers rehire them. These people then reengineer the data into the new processes within the service providers that they are re-employed by. In a world where companies are currently cutting half their staff and capitalizing royalties. I don't think this game of musical chairs sound as off the wall as it might have a few years ago.

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.