Bureaucrats Have Made Money

To understand what’s in store for oil prices we have the situation in natural gas to show us the way. For almost six years the bureaucrats flooded the marketplace with unprofitable natural gas production. Losing progressively more money each fiscal year as they went along. The response was to cut capital expenditures to balance the markets supply and demand. Each of those six years cuts to the annual budget were made. Natural gas is now at $2.50 and costs many times that to produce. In areas like the Marcellus shale they are lucky to get a $1.30 for their production. You have to remember that the bureaucrats are paid out of the money that comes in from general revenues. So they can’t cut off the hand that feeds. And who cares what natural gas prices are, there is nothing that the bureaucrats can do about them. So they state. Has anyone noticed the level of discussion in the industry about its current situation is a little frightening?

We discussed the decline in natural gas prices that will happen as a result of the continental storage filling to capacity in the next few weeks. We have some more news that should hit the natural gas prices here immediately. It would seem that all of the international LNG contracts are priced based on a factor of oil prices. With oil prices down, it doesn’t make economic sense to ship LNG from North America. The cost to purchase the gas, liquify it, ship it and return it to a gas is beyond the price in the destination countries. This is what I mean when I state that the bureaucrats are not taking care of business and as a result we risk losing the capacities and capabilities of the industry from a societal point of view. The investors who were committed to building the LNG facilities were told they would be making money. But just as in all things oil and gas, only bureaucrats make money.

This drop in demand from the LNG facilities, and inability to make any money will push natural gas prices lower yet. Making the industry more difficult to turn around. If it has been six years in natural gas, that means we have five more years in the oil side of the business before we see this kind of destruction. And with these bureaucrats, their sense of urgency, you know we’ll get there. In the future getting the investors to follow the industry is going to be next to impossible when all they did was lose their shirt. All I see is devastation. An infrastructure that doesn’t provide any value for anyone. A history of losing money for years on end in terms of the shale technologies impact. All of that natural gas has gone to waste in the form of a large subsidy to the consumers at the expense of the investment community. No plans, no ideas or worries from the people who manage the industry. Just carry on losing.

When the bureaucrats ran me out of the industry for my ideas. They knew what the implications where if we implemented them. The elimination of the bureaucracy. They laughed and enjoyed themselves in their turning the screws and making my life miserable. Sure is funny now isn’t it. They’ll have to live with the fact that they had made the decision not to go with my ideas more than eleven years ago. If they would have, the industry would have had the price maker strategy implemented and oil and gas prices would be profitable for all of the oil and gas production. However, now they do have their cabins and boats to keep them company. So there is that.

No doubt all the silence is attributable to the plans that are being made for the mass layoffs that will be announced around Christmas. The investors are not going to want to invest in a business that never pays. People are never going to want to come back into an industry that when it finds itself in difficulty it lays people off like it was 1920. They’ll move on to bigger and better things. Something more reliable. And so the seeds of the destruction of the industry are being sewn by these selfish, corrupt bureaucrats who had the chance to do the right thing. It only conflicted with their personal best interests.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

No Money Being Made Here

Any idiot can spend, just give them the money. And that is what we have in oil and gas. A bureaucracy that can spend. Commodity prices are up, increase spending by 200%. Commodity prices are down, reduce spending by 10%. Commodity prices are up once again, double spending again. If you're an engineer or geologist with oil flowing where their should be blood. Forget it. You're nobody in a world of bureaucrats with checkbooks and contacts in New York. How can you compete in a world where there is no differentiation between the things that are done? Everyone just spends, drills and reports profits. Miss your projected deliverability targets however, and you’ll find yourself in the ash heap of history. Those are the rules.

The problem is that none of the production, at any point in time, has been profitable if you consider the actual costs. Production needs to include the capital that was used in the drilling, equipping, and production facilities. And would also need to consider the costs of all of the overhead of those people and offices. These costs are never counted because they are capitalized and only the smallest sliver of them is ever recognized in any one year. When bureaucrats verbally state if they are profitable or not they are not subject to any regulatory requirement of what a profit is. So they state the “netback” which is the revenue less royalty less operating costs number that never ceases to amaze and confuse.

So commodity prices have fallen as a result of the mismanagement and inherent unprofitable overproduction by the bureaucrats. This shell game is going to be exposed here for what it is in the financial reports of the producers in the next few months. What we need to focus on is the state of affairs of the industry today. The trajectory it's on. Where the investors are in terms of their thinking about the industry. What needs to happen to ensure that society maintains its standard of living in an uninterrupted manner. And mostly importantly, what trajectory is the industry needing to be on? There are many things to be done.

I know that today’s and yesterday’s discussion may have left some people behind in terms of the value that the industry has generated. They point to the fact that properties sell for far greater amounts than the costs. And that their cousin Vinny made a killing in the stock market. Both are true statements. But stock markets should not be confused with earnings in an industry. And we are talking about accounting, not market values of properties. The difference is that the accounting is the basis of valuation and profits of the management of the firm. If the basis is skewed, which I am suggesting that oil and gas is skewed by capitalizing everything and recognizing very little of the capitalized costs. You then skew the basis of the company's earnings. An oil and gas company only needs a few drops of oil in order to report an annual profit. This is not the reality of the situation that is occurring in the industry.

Offsetting these bloated balance sheets is the other side of the issue. Yes they are balanced by the overstated earnings of the producers. But here’s the catch, the producers have not been reporting very good earnings! In light of the fact of the distortions on the balance sheets they should have been reporting windfall profits. This goes to show you how much more valuable the commodities are than what they are being sold for. The other offsetting element to the bloated balance sheets is the amount of equity they have been able to generate from the markets. Which has been substantial. However the largest offsetting element is the debt these firms are carrying. In most cases, large debts based on the reserves, those same reserves used to value the company in the accounting. These bank loans and debt instruments make the producers highly levered.

Back in the 1980’s I did a stint in Touche Ross’ bankruptcy practice. This was during the last time oil and gas producers were going bankrupt. I was surprised by all of the trustees and judges were of the opinion that if the firm had good cash flow then it would be restructured as a viable going concern. Since the SEC and accounting firms implemented full cost accounting practices in the late 1970’s, that’s all I’ve heard about in the oil and gas industry. It has good cash flow. I don’t think this similarity is all that coincidental.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Who's Making Money?

Clearly no one is. And that has been our assertion here at People, Ideas & Objects for many years. Capitalizing everything that moves in an oil and gas company leads to high asset balances, low cost operations and overhead, and high profits. Doing this over the life of the organization leaves assets on the balance sheet from the beginning of time, an overstatement of the value of the producer and overstatement of the producers earnings. When you add in low commodity prices from natural gas for the past 5 - 6 years these losses on those properties could be hidden by the higher priced commodity operations in oil. Now with oil being in decline as well, there is no hiding the losses that will be stated in this third quarter of 2015. Producers have bloated their balance sheets to the full value of all of their future revenues. Which is ridiculous. But when they were recorded at the previous commodity price highs and now need to be “impaired” to reflect current commodity pricing realities. The write downs in oil and gas that will begin this quarter, and must be reported this fiscal year, are going to be spectacular. The full scope of how much of a scam oil and gas has been will be on display.

Oil and gas always lived on OPM, or other people’s money. Have a capital budget? Better have a stock offering to go with it. Those were the good days. Just dilute your existing shareholders on an annual basis and eliminate any hope of them earning their share of the company's earnings. Now as the tide has begun to go out, as they say, we’ll see who has been swimming naked. Look at any producer today and you’ll see a firm with property, plant and equipment that is so much higher than their revenues. So much higher than the market capitalization of the producer. So much higher than anything that could ever be justified. Remember it is potentially as high as the highest prices ever attained in the marketplace times the reserves that are able to be produced. Or, all of the future revenues of the producer. And this is what has kept the stocks so high. It hasn’t been based on earnings. The value of the producers has been based on the balance sheet which justified the stock's performance and the annual stock offering. This has been a modified Ponzi scheme. Modified in the sense that in a Ponzi scheme there is money that goes out.

So here we are with a situation where the powers that be have hoodwinked the investors on an industry wide basis for decades. Who’s responsible? I’ve pointed to the SEC and the public accounting firms and will continue to suggest that they are the ones that implemented these ridiculous rules and audited to them. Most of the producers are run by engineers and geologists. They don’t understand what it is that I am talking about here. They think they pass their annual audit and therefore everything is fine. They don’t understand the nuance of valuations or accounting. Spending is not the development of value. The industry has been on a spending spree for decades and the chickens are coming home to roost.

We are starting to see the effect of this situation becoming the norm. PennWest is trading at about $0.50, formerly at about $9.00 in 2014 and $20.00 earlier. Encana is at $6.98 formerly at about $90.00. Everyone is down about 50% in the past year. The cracks have been showing for a while. There are a few high profile bankruptcies in the states. This third quarter will show a few who have been frolicking in the nude. And the annual report will show that all of the producers have been. How did this happen? How could this have happened?

A better question is what are we going to do about it. I think investments in oil and gas will be all but lost based on a lack of confidence in the numbers. If the bureaucrats have their way that’s not a bad thing. They will still manage the carcasses. What we need to do is to start building the industry on the basis that is focused on providing the oil and gas producer with the most profitable means of oil and gas operations. And in that way we can forget about this nightmare and move on.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Third Friday Off

Leadership From the User Community, Part IV

Independence is one of the attributes of the user community members that gives them the ability to maintain their leadership position. They are not dependent upon anyone in terms of what and how they do their jobs in this new oil and gas industry. They have the oil and gas producers as their clients. And they are committed to providing them with the most profitable means of oil and gas operations. How they are able to provide these services is upto the innovations and creative capabilities of the individuals that will be members of the user community. Ownership of the service provider that provides the software and service for that specific process will be theirs. This will generate the revenues from the producer firms that enable them to maintain that independence. They will also have a much smaller source of revenue directly from People, Ideas & Objects for any of the work that is done with our software developers.

This independence is necessary to enable them to fully explore the capabilities of their team. How to organize their offering in terms of automation, innovation, specialization and the division of labor to ensure the producers are given the appropriate service necessary to meet our profitability focus. And this will be a competitive environment with the other service providers and members of the user community. However not a competitive environment in the traditional manner that is used by the producers today. There will be no “me too” types of service providers enabled in the marketplace. Once the user community member is granted a license for the service to be offered to the industry, that will be an exclusive license and there will be no direct competition created for that specific process. Some exceptions in the production accounting areas will apply for geographic purposes, etc. The competitiveness comes about between the service providers and user community members by way of the manner in which specialization and the division of labor are used and implemented. How automation and innovations are accelerated and iterated upon throughout the community. These will be the competitive foundations that focus the user community and service providers.

The perspective of what a service provider involves themselves in terms of the oil and gas producers administrative and accounting domain will be rather limited in comparison to the work that is done today. The “jack of all trades, and master of none” demands of the current positions in all of the producers administrative and accounting fields will be gone. People will become very specialized in the types of work that they do. Understanding every aspect of the process and its implications. Applying this specialization across the entire industries data set, which would be your client base. This will bring about new and interesting perspectives on the work that is done. Thinking about the process and how to improve it constantly will be in the mind of the user community representatives. Their team will be comprised of various people who have different skill sets and are specialized in their own ways. It will be more about the science and art of process management than administrative and accounting in oil and gas.

So when we discuss change within the industry. We can see this involves change in everything and everyone. The business of oil and gas has been operated in the manner that it has since the 1950’s. Computers have been used to accelerate manual processes. Not the most efficient uses of computers, or of people. We need to focus on the things that people do well, the leadership, problem solving, decision making, creative, collaboration, research, generation of ideas, design, planning, thinking, innovating and negotiating. What we need the computers to do is what they are designed for. And that is the storing of data and process management. This is how we need to restructure the oil and gas industry and the leadership of the user community will be how we get there.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Leadership From the User Community, Part III

The capacity to deal with change at any level is what the user community provides over the status quo bureaucracy. This is the key differentiation between the two systems of organizations and the reason why we must move to the Preliminary Specification. The capacity to deal with the changes in the underlying oil and gas business has to be matched by the organizations that define and support the producers. What we have currently is a fundamental change in the business. Where shale has brought about a level of abundance in the commodities. And the business organizations are incapable of dealing with the situation. The old will die off, or we can be proactive and make the changes necessary and not have to experience the negative general effects of an energy shortage in society.

The President of Shell was interviewed by the BBC last week and commented that the oil prices have declined over 50% with as little as 1 or 2% over production. Welcome to the new oil and gas industry. This is basic economics which is usually learned in your first business economics course. The elasticity of supply and demand are unique to each product. An oversupply of Ford F150 trucks will not have any effect on their price. Supply and demand are considered inelastic. Whereas oil and gas are elastic and are subject to wide swings in prices as a result of small changes in supply or demand. What we need to do is to find the right prices necessary to fuel a profitable industry, which the Preliminary Specification decentralized production model provides. What is going to happen due to the bureaucracies inaction is that the industry is going to atrophy and supply will drop 2% below demand and the commodities prices will reach the moon. Not good for anyone, but the bureaucrats will be happy.

Is it appropriate that we have an industry as fundamentally important as energy is to the world economy. Being unnecessarily subject to the principles of economics that we learned hundreds of years ago? Are we incapable of accepting ideas that challenge the vested interests and bureaucrats who chose to do nothing and just accept our situation as the way things are? I believe there is a better way and that is the method that we have been discussing with the user community in the leadership position in terms of providing the necessary changes in the industry. Then when the business does change, in whatever permutation or combination that it does, the leaders within the user community will be able to make the changes necessary in the organization to accommodate the needed changes in the underlying business.

It is the toolkit that is provided through People, Ideas & Objects that makes the user community capable of implementing the changes that are needed. With the full power of the Intellectual Property under their control they can make whatever changes are necessary to their process or functions through their work in the community and with the People, Ideas & Objects software development team. How do the bureaucrats make changes in the organization to accommodate changes in the business? Who has the authority to make the changes in the software today? This power and control over the Intellectual Property is the dynamic solution to the current muddle along strategy.

The third tool that is unique to the People, Ideas & Objects user community is the fact that the service providers are owned and operated by the user community members. They are therefore the ones on the front line in the industry providing the software and services to the oil and gas producers. They are the ones who see and can understand the need for the changes in the IP and software first. What needs to be changed and how that change needs to be implemented most efficiently in the software and the service they provide. They will be the most effective and efficient in terms of ensuring that the oil and gas producers are provided with the most profitable means of oil and gas operations on every day the Preliminary Specification is operational. That is the difference between the old and new ways of doing things and why we need to change.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Leadership From the User Community, Part II

Last Friday’s post documented the background of how the leadership within the industry, in terms of how it approaches its opportunities and difficulties, will be handled by the user community of People, Ideas & Objects. Today we are going to expand on this by introducing an article that is written by Don Tapscott and addresses the point of where leadership comes from in the, dare I say it, new economy, or as he now calls it “democratic capitalism.” The article is entitled “Great Leaders Don’t Have Followers: They Collaborate.” He has been around for many decades discussing the impact of Information Technology on business. I find this article of his to be particularly on point in terms of where I see the user community providing the leadership in the oil and gas industry.

Leadership vs. management, what’s the difference?  And why do we need to change?

As Peter Drucker said years ago, stable times require excellence and good management. As we transition to a new age, our organizations need more; they need leadership. So managers shouldn’t just manage. Today they need to lead and think of themselves primarily as leaders rather than just managers. 

And how is that leadership configured? Who fulfills the leadership role in this new business environment?

My approach to leadership is collaborative. This approach is the antithesis of the old-style, brilliant visionary, take-charge, rally-the-troops type. In the past, Winston Churchill, Thomas Watson, and Lee Iacocca embodied the single dominant leader. Today, the leader is a collective, networked, virtual force and no longer necessarily embodied in a single individual.

1. Collaborative Leadership Means Leading for Learning

What we need in oil and gas is to have the capabilities of the user community employ new tools to deal with the changes that inevitably occur in oil and gas. These new tools include the power of the Intellectual Property that make up the Preliminary Specification and its derivative works. And the software development capabilities of the People, Ideas & Objects dedicated developers. The user community will also have in their toolkit control over the service providers who operate the administrative and accounting functions on behalf of the oil and gas producers. It is in this way the user community can achieve this collaborative leadership.

Increasingly, the only sustainable competitive advantage has become an organization’s ability to overcome what management author Peter Senge calls its “organizational learning disabilities,” and to grow and change with the times.

The days when a great leader at the top could learn for the entire organization are gone. As Senge points out, “in an increasingly dynamic, interdependent and unpredictable world, it is simply no longer possible for anyone to 'figure it all out at the top.'” For Senge, “leaders are designers, stewards, and teachers. They are responsible for building organizations where people continually expand their capacities to understand complexity, clarify vision, and improve shared mental models — that is, they are responsible for learning.”

2. Collaborative Leadership is Collective Leadership

There is too much for any one individual to take on in terms of the scope and scale of the difficulties and opportunities. Each member of the user community needs to be specialized in their domain of understanding. Responsible for one process and all that is associated with it. Providing leadership for that process throughout the industry with state of the art capabilities, understanding and knowledge.

The intellectual power generated through networking minds for collective vision will far surpass the intellectual prowess of even the smartest, loudest boss. Equally important, strategies developed collectively have an infinitely higher probability of actually being implemented. Collective thinking leads to collective action.

3. Collaborative Leadership Is Your Personal Opportunity

This is the basis of the user community offering at People, Ideas & Objects. The personal opportunity to participate directly in the new oil and gas industry as a member of the user community which includes your ownership in a related service provider. The G&A costs of the oil and gas producers are being shifted away from the internal resources of the producer to the service providers. A substantial revenue opportunity awaits these service providers. The user community also has the budgeted revenues that are paid by People, Ideas & Objects for their contributions towards their software development efforts.

One conclusion that can be drawn from this trend is that leadership for transformation is your opportunity, not just an opportunity for your CEO, or your boss, but your opportunity. Each of us has a choice to participate actively in transformation, to observe passively, or to resist. If you act, you can shape your future, even if you’re not a member of the senior management group.

At root, it’s a question of taking control of your destiny for a new age. No less a philosopher than rock singer Meatloaf has advice on why we need to take charge of our lives: “There is only one thing that will take away everything you’ve ever wanted — fear.” Mahatma Gandhi was even more specific when he said, “We must be the change we wish to see in the world.”

To generate powerful collective action, embrace collaborative leadership by understanding that it involves growing and learning along with others, your opinion will never be the only one that matters, and it’s your personal opportunity.

We need to set the industry on the basis on a new paradigm. One which provides the oil and gas producer with the most profitable means of oil and gas operations. It will be in this way the oil and gas industry will be able to fuel society for the remainder of this century. It's a great time to be in oil and gas.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Leadership From the User Community, Part I

Oil and gas prices are clearly responding to all of the initiatives that the bureaucrats put forward this past week, month, year. Is it just me or does this eerie quiet just about deafen you? What we do know is change is hard. And what we have learned since I published the Preliminary Research Report in May 2004 is that change can only be made by instituting the needed changes in the software that the organization uses, first. We are dependent as organizations on the software that defines and supports the organizational structure. Any attempts to change the way things are done, without first changing the software is going to fail. This is in that research report that I published in May 2004 that the bureaucrats have twisted the logic of, and used for their own benefit. What they concluded is that if they never changed the software then they would never be challenged for their positions in oil and gas. It would seem therefore that both of us are correct.

So much for the thought that maybe the bureaucrats will come around and conduct themselves constructively. I’ve seen too much of their behaviour in the past ten years to know that they have a comfortable life and are not interested in discussing it any further. Who it is that will ultimately step forward and fund our budget is unknown to me at this time. Passive investment is also the name of the game. If you're unhappy with the performance of the oil and gas stocks then you sell out of them. Still there are the institutional oil and gas investors who have built the industry. I’m sure they're as impressed as I am with the bureaucrats.

We have a situation where change is necessary in the oil and gas industry. If we had the Preliminary Specification operational in the industry, I think we would have a framework where the issues and opportunities of the day could be addressed. Key to those issues and opportunities being addressed are the software development capabilities of People, Ideas & Objects and, most importantly the user community. These tools can be used to define the changes that need to be made to the industry when and if the time comes. By having these tools, the oil and gas producers will not find themselves “muddling along” for decades while things eventually turn around.

Then we will have an industry with the appropriate posture no matter what the situation that comes about. Today we could provide the producers with the price maker strategy. Tomorrow who knows what situation will be created as a result of the innovations and creations that the earth science and engineering people come up with. It’s clear that the sciences have become more advanced than the business can handle. Shale as a technology is not commercially viable at this time, that is until a price maker strategy is put in place, therefore why is the business pursuing it in the manner that it is? Clearly things are not working the way they should.

The user community will be the key to the ability of the industry to address the issues and opportunities that are presented to it. They will be able to provide the leadership to address the requirements of the business. Tuesday we’ll have the second installment of this series and it will detail how the user community will fill that critical leadership role in the industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Its Our Users

We resume our discussion about those things that we can change. People, Ideas & Objects focus is on our user community. Users are the source of our software quality. It would be futile to approach the problems that we face without the user in full control of the developments of their software. And that is what we are doing with People, Ideas & Objects. Review of our user community vision shows that it is in fact the user community who have the power to build the software that they need to operate the industry. As user community members, you will be the quality of the software and have the power to do what is necessary to make it a fact.

What is it that you as a user member will be doing within the community? Let's assume for a moment that you have been involved in the industry in various aspects around the Material Balance Report for the past ten years. This is one of the key areas of the Preliminary Specification and the foundation of most of the automation that is derived from the production process. Your understanding of these processes and requirements is what has to be captured in the software to ultimately support your work in this area. You know what is important and what is noise. What the critical areas of concern are. Working with other members of the user community you will document what the industries requirements are. Determine ways in which these can be done better with the tools that you have at your disposal. Tools such as the software development capabilities of People, Ideas & Objects. And then design the various processes and interfaces that are necessary to undertake all of the tasks and requirements.

The environment or specification that you will be working in will be within the service providers that you will either own yourself or jointly with other members of the user community. These service providers will replace the administrative and accounting resources of the producers and therefore will be the way in which you design the new processes for this new organizational structure. Your service provider organization might be managing a very small part of the actual Material Balance Report. However, you will be doing it on behalf of the entire industry. Therefore new ways of looking at the data and information contained within that mountain of data will be provided to you. These insights could lead to further process developments of the software as time passes. Specialization, the division of labor and automation are the tools that you will use as the key competitive advantages of your service provider. They will also be what you consider in terms of the overall design of the software as a member of the user community.

In addition to the understanding that the user community members have of the oil and gas industry. People, Ideas & Objects have specified that a strong understanding of the Information Technologies be present. Noting that you should have a strong understanding of Java, relational databases through the relational model and other technologies. Access to the software code will be part of your day to day activities. The access is through a number of IDE’s (Integrated Development Environments). These will be read only. However, you will be making suggestions on code changes and submitting them to the software development team to be committed to the code base. These IDE’s will include NetBeans and JDeveloper. Both are Oracle products, NetBeans being an open source derivative of Sun Microsystems development environment. There are other IDE’s in the market however we will not be using those. Download one and have a look at these tools to get a feel for what the state of art is like in this area. I don’t want you to feel overwhelmed though, they are much simpler than they appear.

You know the oil and gas business. You have a strong aptitude in the IT areas. You're ready to fill the gap between the knowledge of the business of the oil and gas business, and the Information Technology world. This intersection has to be breached in order to fulfill the opportunity that we have in front of us. That comes down to our developers and to our users. If this seems like a thrilling challenge, and it is, then you should join us.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

In Summary

These next two months we’ll see the difficulties in oil and gas manifest themselves in three events that will set back even the healthiest producer. The first is the natural gas price will be affected by the filling to capacity of the continent's natural gas storage. The EIA was even subtly hinting at this possibility earlier in September. Once the storage hits capacity there will be no place for the surplus gas to go. Expect pricing to be affected adversely. Second the quarterly report will need to be prepared. There are no more hedges providing cover for the low commodity prices. They all expired toward the end of the last quarter. The full scope of the difficulties in the industry will be on display as a result. Expect to see some financial surprises from the majority of the producers. The question will be asked by most, if things were this bad, why didn’t you shut-in production? And lastly, the banks will be completing their review of their loans to the producers. Banks being risk adverse will be wanting to stop the hemorrhaging by ceasing all lending, recalling any outstanding lines of credit and secure any obvious risks through seizure of the property.

Producers need to change their underlying business model from the high throughput production model to the Preliminary Specifications decentralized production model, our user community and the service providers. In that way they can employ the price maker strategy to deal with the abundance brought about by the shale reservoirs. People, Ideas & Objects needs its budget funded in order for the commencement of this new business model to be implemented within the industry. Then the industry can anticipate that the value proposition that we provide will be delivered over the next 25 years.

There is a do nothing bureaucracy that is in place in the industry that refuses to do anything in the face of such devastation to the value, and capabilities of this industry. They therefore put our way of life in jeopardy by standing by and doing nothing. This muddle along strategy has worked for them in the past and they expect that it will continue to work for them. I think we are seeing that their strategy is failing and needs to be replaced by active management of the industry. We have had a year of poor oil prices. Five years of poor natural gas prices. Both commodities unable to provide the producer with positive margins. And with shale reservoirs not much of a chance of any relief. Yet they continue to produce unprofitably. And there is no discussion outside of this blog regarding any of the issues, the solutions or what should be done. There is a lot of commentary from the press and the analyst community but they don’t necessarily fully understand the industry and are only able to grab a headline or two in terms of being accurate. It is miraculous to me that these bureaucrats will pass through this time without saying or doing anything, or being held to account for anything.

It's a comfortable position to be in if all you do is the same thing day in and day out. Nothing ever expected of you, or you having to do anything. These bureaucrats have ceased to act based on market signals such as the price of the commodities that they produce. As time passes things age and deteriorate, are not built or replaced. Then the commodities become in short supply and the prices rise. We have no assurance that the investors have any confidence in the industry or the bureaucrats. We also have no assurance that the bureaucrats will begin to start responding to market signals such as high commodity prices. Instead, understanding their dilemma of a tenuous hold on their position within the company, they might just continue to do nothing and pocket the cash earned from higher prices.

Throw the bums out. Why give them the opportunity to screw it up any worse. Oil and gas is too important of an industry to fool around like this. Unlike the financial community we have no Fed that can flood the market with the commodities if something serious does happen. Let's get the budget for the Preliminary Specification funded and begin the replacement of this muddle along strategy with active management of the industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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.