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. 

Where's the Outrage

We have focused on the situation in oil and gas and most particularly its difficulties. As I pointed out the responsibility for this downturn in the industry is fully attributable to the bureaucrats that run the industry. Shale formations have brought about a new dynamic of abundance of the resources. There has been no response to this change in the underlying business. With these bureaucrats being unresponsive to market signals. When prices do go up, what's to say they just don’t sit on the production they have and just pocket the booty? The attributes of one’s character can help to determine what their future actions will be. Therefore, since this is the past character of the bureaucrats, you can take it to the bank that they will use any increase in the price of the commodities to line their own pockets. Leaving the industry to perish and decay as we’ve discussed earlier.

The question I guess we have to ask ourselves then is there anything that these bureaucrats are going to be able to say and do that will convince the investors, any investor, to invest in the oil and gas industry in the next, 5, 10, 15 years? Investors have been on strike, more or less, since 2008. Alternative means to fund the industry have been used since the financial crisis to finance the shale boom. It could be argued that the junk bond market is no longer available. The attitude of the oil and gas investor is consistent with mine, I would think. A general disheartening of the bureaucrats in power. A lack of faith in their capabilities, trust and integrity.

Since the financial crisis governments have taken great steps to intervene in the monetary markets with their over the top stimulus measures. Instituting a zero bound interest rate policy has removed any integrity or discipline in the financial markets anywhere in the world. These oil and gas bureaucrats have had the luxury of being compared to the performance of other industries that are about as capable, trustworthy and of low integrity. Performance has not been the concern of anyone in any industry. It has been about survival, dividends and stock buybacks.

Global market volatility is rising as the world prepares to move away from the zero bound interest rates. That means the oil and gas industry will be expected to perform in order to obtain any investment from anywhere. Compete when interest rates on bonds are paying good returns. Compete when other industries can provide real returns on investment. It was easy for the bureaucrats to get away with the low performance and slack attitude during this zero bound interest rate period. Now it will be expected of them to compete.

I don’t think they care. If interest rates do go up it will affect the value of their stock and that might impair some of their compensation. But not materially. What can be counted on is when oil and gas prices do go down from an abundance of production, they will inevitably go up. That time could come quickly and they, the bureaucrats, would be able to enjoy the lifestyle they grew to enjoy as recent as one year ago. The trick will be not to fall into the same difficulty again by spending on drilling which would lead to overproduction and commodity price declines. If we don’t respond to market signals now, we certainly won’t begin to respond to market signals then, they will say.

All of these ingredients are in place. We are subjecting ourselves to an uncaring and unaccountable group of self interested people who feel they are entitled. Why would they change this situation? Put yourself in their shoes, it's not a bad situation to find yourself in, and who has the wherewithal to do anything about it?

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. 

History Repeats Itself

“The history of every civilization teaches us that those who do not find new means to respond to new challenges will perish or decay.” President Lyndon Johnson 

I’ve read Roberta A. Caro’s four books on Lyndon B. Johnson. These books represent a lifetime of research and detail in the man who became the President of the United States. You will know everything about Lyndon B. Johnson when you have read all four books. There is a fifth that is being written at this time, Caro is uncertain, at 79 years of age, if it will be finished. Knowing Lyndon Johnson through these books I’m not pleased that I find myself quoting him here. However it is such an appropriate quote to the time and situation that we find ourselves in.

Oil and gas has more to do with the quality of our lives than any other “thing” that I can think of. We put in jeopardy that way, that quality of life, when we ignore the challenges that the industry currently finds itself in. It is our history that we are doomed to repeat. The difficulty is that we are travelling at a much higher altitude with much higher velocity than at anytime in our history. I would suggest that the decay will be short lived. Perishing would come quickly.

Maybe I’m being too melodramatic. Industries have transitioned in ways that have appeared seamless to the average consumer. Which is true, no one remembers or even really cares when the record store manager lost his job. The technology was there to provide you with the music that you wanted and you were finally able to use it the way you always knew you should. Our problem with the oil and gas industry is the technology we need to use is right there in front of us. It just doesn’t fit on an iPhone and work within just one app. We need the software development capability and user community to ensure that the software meets our needs and the services to support the software. A big budgetary obstacle that stands in our way.

We used to be able to rely on what the economists called “spontaneous order.” The economy would act dynamically as people and companies would automatically fill in the gaps left between various companies offerings. These gaps, in the past, could be filled by entrepreneurs who were able to see and configure solutions out of their own financial resources and provide these products and services to their community. Now it's a global economy and software demands that it be the first item to be delivered into the marketplace. This is why Apple, a software company, is so successful. Now not only do we have to understand the global scope, the software nuances, but also undertake the battle of the vested interests who are entrenched in the old ways.

I hope I’m wrong about all of this. I think the speed of events, if left unaddressed, will accelerate exponentially. The momentum will move against us and we’ll never get the upper hand again. We stand on the shoulders of many brilliant people and pay no respect to the things that they have brought us. The fact of the matter is that there are 5,000 man hours of labor in every barrel of oil. If we allow the industry to proceed in the manner that it is, it will certainly decay. Who will volunteer to give up the first barrel of oil. The economy that consumes the most oil is also the most powerful economy. That has traditionally been the United States. Therefore it would seem reasonable that they were the first to give up that first barrel. I don’t think so either.

Clearly the market forces are not working. Oil and gas producers have not responded to natural gas prices in over five years. And oil is following down that same path. What we have are self interested bureaucracies. Just as the former Soviet Union was unable to respond to any market, we currently are not much better. If we are not responding to market signals when there is an abundance of oil, should we now assume there would be a response by these bureaucrats to any market signal denoting a shortage? I don’t think so. After all it would only provide them with more cash which they can then divert to the various forms of compensation that they have so richly provided themselves. These are the facts of an uncaring and unaccountable oil and gas 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. 

Swing Producer, Embrace It

Earlier this week Russia and Opec were unable to come to an understanding regarding production cutbacks and broke off talks. It would almost seem like the Saudi’s were serious about maintaining their market share! Recall this is their stated position regarding their continued overproduction. Once they lose the customer, by cutting their production, they’ll never get them back. They feel that the U.S. shale producers, which are the high cost producers in the oil and gas industry. Are the ones who need to assume the role of swing producer. Opec feels they will produce at full production at all times. And the high cost production, or North American production, will fill in to meet the market demand as required. This will enable the swing producer, us, to maintain the prices that will ensure we earn a profit. The high cost shale producers can ensure that the commodities prices are high enough to earn them the profits they need, and Opec who is the low cost producer despite what you might hear otherwise in the North American press, will be profitable as well.

There is a lot of resistance to this logic in the North American oil and gas, and financial communities. Whether it is that they are being dictated to from Opec, or its perceived as a secondary role to be a swing producer, I couldn’t tell. With the devastation that is happening in the North American oil and gas industry, is it wise to continue to argue the point? Why not just accept that the position the industry needs to take is the one of swing producer. After all it's not just oil that is in need of a production allocation methodology. Natural gas is far further along the business decline created by the abundance of shale reservoirs. The current high throughput production model that the industry operates on is bankrupting the entire industry.

For society to rely on an abundant energy supply to make it through this century we are going to need a healthy and profitable oil and gas industry. We haven’t had that for many years, or even decades. What we have is a very sick industry that can’t and won’t change to accommodate the realities on the ground. The industry has appeared healthy for the past decade due to the accounting methodology used to capitalize everything under the sun. This has bloated the balance sheet of all of the producers and recognized almost none of the real costs of exploration and production on the income statements. Inflating the earnings of those producers at the same time. As a result you have what people thought were healthy balance sheets with abundant assets. But that’s all you had. No cash, no working capital or anything else. The industry was never profitable and always relied on other people’s money.

In order for the industry to become healthy, dynamic, innovative, accountable and profitable they need to adopt the Preliminary Specification, our user community and the service providers. By doing so they will be able to employ the decentralized production model as a replacement to the high throughput production model and begin to allocate production within the industry based on profitability. If the property is profitable, it will be produced. And by profitable we will take into consideration the actual costs of capital for that property. If it isn’t profitable then it will sit in the producers shut-in inventory and be subject to their innovative earth science and engineering capabilities that are designed to expand the properties reserve base, increase its production or reduce its costs and return the property to profitable production.

People, Ideas & Objects value proposition is in the region of $45.7 trillion over the next 25 years. It is comprised of the capital that will be invested in the business and returned to the investors over the next 25 years. It is also comprised of the capital that has been invested in the business, that is sitting on all of those balance sheets and will therefore be returned to the investors in the form of dividends. And lastly it reflects the increase in revenues and profits due to the fact that the marginal production will be removed from the commodity marketplace. Increasing the commodity prices. Saving the reserves of the producer for a day when they can be produced profitably. And increasing the producers profitability by ensuring that only profitable operations are produced. Therefore even if the producer has to shut-in half their production, they will still be more profitable using the Preliminary Specifications decentralized production model.

Adopting the swing producer role in the global oil and gas industry should at least be a survival instinct. However, these bureaucrats, it would seem, are hell bent on destruction. As long as they don’t have to work too hard, as is the case today, everything is fine. We are at the beginning stages of this decline. A decline that can not be sustained for very long by these producers based on their poor financial health. This quarter will identify those who the downturn are affecting the most with the trifecta of difficulties being faced by the producers. Those being the bank reviews, the natural gas storage and the third quarter report conspiring to break the story that “all is well.”

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. 

An Olive Branch, Part III

The last two blog posts have painted a rather dire situation transpiring in the oil and gas industry this quarter. The assumption could be made that we make it through this period without too much disruption. Let's assume that for just a minute. We’ve heard nothing from the bureaucrats regarding these difficulties. And we have that trifecta of issues which we identified that include the bank reviews, the natural gas storage and third quarter report. Which do play out as they are scheduled to do. We would then face the year end process and the reporting of the past year. Maybe the markets will turn around and be positive for a change. Maybe all that has happened will be solved through the muddling along of the producers. And maybe things will get better in 2016.

As far as the bureaucrats were concerned they were going to phone-it-in from the cabin over the summer months and return to business as usual in September. But as we have detailed here, things are not as they had planned. The other aspect of this past summer is the fact that they did blow past their personal budget for what they thought they would be spending on the cabin renovation and that new boat. The fact is that the whole state of affairs of their personal budget needs a bit of tightening and it is not in the condition where it's able to sustain the chosen life of retirement, yet. They need to be working for a few more years in order to crystallize those retirement plans. What these bureaucrats will soon realize is that if, and we can debate the probabilities, but if the confidence in the industries management is lost then these bureaucrats will be out of a job. And it will be difficult for them to find their type of work in other industries as long as they carry that albatross of oil and gas experience on their resumes. No one will be interested in picking up these, fill in the blanks here.

Continuing on with our assumption that all is fine. That the banks didn’t seize any of the company’s properties during their review. That the global market changes, based on the need to accommodate higher interest rates. That natural gas prices will be enough to still pay the overhead. And after all Opec is scheduled to meet in December and maybe just maybe it’ll be a cold winter. Hope springs eternal. The ability to sustain a few more years of employment in oil and gas will be easy. Just the same as before.

You can debate who is the crazier one in the various scenarios that have played out in the last three days. Is it me with the dire consequences of the last five years coming to fruition and demanding attention in the third quarter? Or is it the do nothing bureaucrats expecting to cruise through another quarter or two, or even a few more years, phoning it in as it were with no expectation that change will be forced upon them.

I think this is a crisis. A crisis in confidence in the bureaucrats that run the industry. Similar in scope to the financial crisis in 2008. The difference of course is that the government has to step in when people become concerned that there is no integrity or value contained in the “paper” financial systems. Without it the whole shebang falls apart. A crisis in confidence in the oil and gas industry will be a really bad thing for the bureaucrats, but not much else. They will be out, permanently. The lot of them. Maybe not today, or even this next year. But it will be a wholesale change in the people who are running the show.

So maybe I’m being dramatic and over the top. Or I’ve got myself too far ahead of the game. I however have a record on this blog over the past ten years that is actively critical of the bureaucrats and their self serving and unprofitable manner in which they have operated the industry. My prospects, and those of the user community and service providers look good. If the bureaucrats do survive and thrive for another year that’s fine. Then we’ll be here pointing out the differences in how we’ll do things. This olive branch is provided as a means to secure our budget and accelerate our time to market. It has a high probability of not working, but we’ll keep trying. And one day we will replace these bureaucrats, just as every other industry is being disintermediated, and that day is much sooner than we can predict.

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. 

An Olive Branch, Part II

We continue on with details of our “option” program to provide producers with a solution to the issues that they face in the short term. The mid to long term solutions that we provide are the development of the Preliminary Specification, our user community and the service providers. Our current option program for the short term enables the producers to attain the $700 billion stock market capitalization gains that were lost in the last year as a result of the decline in commodity prices. Their stock prices are languishing due to the inability for them to provide a solution to the issues that they face to the marketplace. If the producers were able to provide a viable, credible solution, then they would be able to reclaim their prior losses on behalf of their shareholders.

This can be done by entering into a subscription to the Preliminary Specification. This subscription denotes that the producer is engaging in the necessary steps that are required for them to participate in funding our budget and the activities involved in developing the Preliminary Specification of People, Ideas & Objects. Subscriptions are calculated monthly and paid annually on each producer entering the program. Once the producer subscribes, their name will be published in the wiki with the other producers who have subscribed. Subscriptions for 2015 are open until December 31, 2015. Warning, any producer that subscribes, however does not participate in the funding of the budget in the long term, may be deemed to be manipulating their stocks value.

The situation as we detailed yesterday is that these producers have no solution to the issues that are seriously affecting their survivability. In the next month they will be faced with three detrimental actions that will put producers in further jeopardy. The first is the natural gas volumes being produced are about to exceed the continents storage volumes capacity. This will have long term and negative impacts on the natural gas prices. These prices are barely able to cover the cash costs of a producer as it is. Any further declines in natural gas prices will further cannibalize the producer organization. Secondly bank reviews of their loans to the producers will be undertaken to see if they are performing, or in breach of any of their covenants. The past review in April was of minimal disruption, however, that was primarily due to the hedging of the commodities that were still in place. Third, the third quarter report will have to be published. The third quarter will be particularly difficult as we mentioned in the second quarter. The hedging has now for all intents and purposes expired. The producers are fully exposed to the depths of the commodity price declines. We should expect to see some significant and serious destruction.

The bureaucrats have managed the industry well. There is no good news to go along with this trifecta of difficulties. If only they could quickly and easily find a solution to the deep seeded issues to these problems. One that would inspire confidence in the producer that all will be well, in time, and that there is a plan of action. (I feel like I’m selling moonshine out the back of an old Ford truck.) This is possible if the producer does subscribe to our option. The means to do so is to call me at the number that can be found on this blogpost. Then we can calculate your rate and arrange payment. It will be at that time that the producers name will be posted on the wiki, and we will promote the company as a participant in the development of the Preliminary Specification.

Without this olive branch I don’t know what the producers are going to do. Confidence is a difficult thing to lose. It’s an even more difficult thing to earn. I think though that that is what we will be talking about. The confidence in the bureaucrats who are running the oil and gas industry. There has been a lot of support that things would be o.k., that things were under control, to only see things continually get worse and much worse isn’t confidence inspiring. This quarter may be the point where the confidence in the industry is lost. It may not. I don’t have any horses in that race so it makes no difference to me. This is an olive branch, pure and simple. If the bureaucrats want to ignore this opportunity then that is their choice and their risk. I only know that in time, the confidence will be lost in them and the solutions that we are working on here at People, Ideas & Objects will provide for the answers one day. The question is where will the bureaucrats be. In this “option” scenario they get to stick around until we build our software. This would make things easier for us by taking some of the pressure off in terms of our delivery date. And that is my motivation in extending this olive branch.

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. 

An Olive Branch, Part I

I can only assume the range of emotions that the commodity prices put our friends the bureaucrats through last week. One minute they're at their lowest, the next moving into bull market territory, only to fade into a more peaceful range. These are the kind of emotions they put everyone through as a result of their inaction and overproduction. It's good to see them sweat a bit. Other than watch the commodity price ticker, because they know they can’t look out the window until the afternoon. For if they did, they would have nothing to do that afternoon. Old British joke. They seem to be frozen in time and in place and absolutely petrified. We saw a few layoffs, but those will soon be as common as the weather forecast. The question remains, what exactly are these bureaucrats doing?

It is the bureaucrats that the world will be looking to for a solution to the losses and disastrous consequences of their actions and inactions. They will be asked “what is the plan.” “What do you need to do to get out of this mess and do it as soon as you can.” There isn’t much in the way of a scenario where an industry is on fire, such as the oil and gas industry currently is. How will the powers that be put that fire out, and how soon will it resume normal operations. Standing at attention on the bridge of the ship, blinking in response to the question, with your pants on fire, isn’t going to inspire anyone.

Best to think quickly what your options are. The classic management excuse in the development of all scenarios is a) to do nothing. And they have been relying on this one for six or seven decades now. Clearly this won’t work, so we need new ideas. It’s at this point in time that I would point out that I had a vision in 1991 of how the industry could operate. One in which Information Technology would be the key enabler. It's now 24 years since that “idea” permeated my head and it has taken me this long to develop the Preliminary Specification. So coming up with a new idea on the bridge of the ship while your pants are on fire is the appropriate time and the appropriate place. Still the question has to be asked, what are our options?

Have I ever mentioned that we provide a $45.7 trillion (with a T) value proposition. Or that by funding our budget the producers could state that they have a solution to this issue and would be able to reclaim some of the past years $700 billion damage done to their stock market capitalizations. I’d be surprised if I hadn’t mentioned our value proposition. Anyway these are the values that should motivate the bureaucrats to act. Sure it would be the end of their reign of power. But what is it that they think they have?

We have our budget here at People, Ideas & Objects which will take some mental preparation for those that need to fund it. Think value proposition! One thing that can be done in the short term is that we can offer the producers an option. Our olive branch. The Preliminary Specification as a solution to the difficulties they face. This however will cost the producers a monthly fee, paid annually, in order to be part of the group of producers that are participating in this solution. It will be in this way that People, Ideas & Objects can begin the process of generating revenues, something we know absolutely nothing of. In exchange for this fee, producers will be able to state they have this option, and they are moving forward with this option as a solution to the problem. It’ll make the bureaucrats look like geniuses, and maybe even stop a round or two of layoffs.

Bureaucrats have a record, over the 24 years that I have been doing this, that stinks. The performance of the stocks of oil and gas producers has mapped closely to the commodity prices. Commodity prices go up, producers stocks go up. What is it that the bureaucrats are doing. How have they provided value to their shareholders, society and most importantly to the people who work in the industry. It is clear they’re only trading on the commodities. Why not just set up shop in Chicago and trade commodities then. This is a terrible record, however, it gets much worse. The times when commodity prices were high, bureaucrats were the ones found to be in the trough crowding out everyone else before anyone got their share. If they want to mitigate the sting of this record, rectify the problem in the industry, and keep their options open. This can be done by subscribing to this “option” of People, Ideas & Objects. We will publish the names of the producers that subscribe and you too may enjoy some stock price increases based on the potential value producers can earn in the future. Their incentive is to show the world they have a solution to the problem. Then with the efficient market hypothesis, their stocks will reclaim some of their lost stock market values.

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.

Labor Day

No posting today.

A New Policy

Implementing a new corporate wide policy of every third Friday off. Since I'm the only one here, I'll see you Tuesday. 

Your Motivation to Join

The probability that our budget is raised in this next quarter is slim, but possible. What we can expect however is that the people who are concerned about the industry. Will continue to stand up and identify themselves as those who are able to represent the producers and investors. And wish to proceed with these software developments, the user community and our service providers. We can certainly engage with these people and proceed with the appropriate discussions. There has to be a fee levied in order for these groups to join the conversation. Otherwise we will never stop talking, and never have the appropriate people in the room.

That should clear the room in the short term. What we also need to be doing in the next three months is focus on our priority regardless of the outcome of our budgets development. Our priority of course is the development of the user community. It seems that we don't discuss the user community specifically in our day to day posts. However, I can assure you that it is our priority and we are working as hard as we can on its development. The reason for this focus is that this is a difficult and time consuming process. One that currently takes very few resources and can therefore be done before we secure our budget. It is also the critical first step in our development of user based ERP software developments. Without the user involved in defining and developing the software that they want and need. Then the software will become just more of what already exists in the marketplace. And what would the purpose of that be. When we secure our budget, our speed and capabilities in terms of our development will be constrained by the size and capabilities of our user community. Therefore it is prudent to eliminate some of these constraints while we can.

Our appeal to our user community is the business opportunity for the user to be affiliated with People, Ideas & Objects. As a user their time and efforts in being involved with our developers and during their research into “what” and “how” the software will do is compensated. This compensation is budgeted at $190 / hour. Secondly, the user community participant is the individual we are looking to, to establish the service providers who will provide the People, Ideas & Objects software, administration and accounting services to the producers. The service providers are established as a result of the changes in the industry configuration to enable the price maker strategy of the decentralized production model. And as a result they are the replacement to the current administrative and accounting personnel of the producers. In terms of a business opportunity, we see many thousands of users and service providers, and they will have the current G&A costs of the producers, estimated to be in the region of $40 to $60 billion, in annual revenue.

Disintermediation is a phenomenon that is occurring in every industry. For oil and gas People, Ideas & Objects are providing these Information Technologies to leverage the old ways out, and to bring in the new. Included in all industries disintermediation is the reduction of bureaucratic methodologies. And hence the industries are able to operate in a smoother manner. This disintermediation also applies to the administrative and accounting areas of an industry. And it is reasonable to assume that the numbers of people currently employed in administration and accounting would be smaller in the People, Ideas & Objects environment we are working on. However, there will also be greater capacities in the oil and gas industry, there will be redundancies that will be eliminated through the process of our development. Not everyone will be able to function in the Information Technology environment that we are creating, in my opinion. I also believe there will be a natural selection by those that have the ability to take these more advanced Information Technologies, individual's comfort level with change, the opportunities that are presented through People, Ideas & Objects and continue to remain employed in the administrative and accounting areas of oil and gas. This will provide for greater efficiency in the administration and accounting of oil and gas, leading to higher profits for oil and gas producers, but also higher profit margins for the service providers.

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. 

September 1, 2015

These next few months will be interesting for People, Ideas & Objects, our user community and service providers. The ideas and solutions put forward in the Preliminary Specification are consistent with the needs in today’s oil and gas marketplace. That is they are evident to everyone in the industry and financial community. Our time is now. Both from the point of view of having our budget funded and this community proceeding with our developments, and our ability to address the capacity and capabilities of society's energy needs for the mid to long term.

The issue of overproduction might be something that people are willing to give the bureaucrats more time to work through. I suggest their behaviour in the past year regarding oil prices is evidence enough that bureaucrats can't, won't and will not ever do anything to rectify these difficulties. As further evidence we can use the natural gas business and the approach the bureaucrats have taken to correct the overproduction in that side of the business. Nothing. And it has been over five years since prices slipped below the marginal costs. As even further evidence we can look to the situation from 1986 onward. Low prices continued for what seemed like decades due to the inability to shut-in unprofitable production. Bureaucrats just whined about how bad the business was in their annual and quarterly reports for year after year. And muddled through. Impotent, incompetent and unacceptable for the 21st century and the importance that oil and gas provides society.

Another year of this; do nothing, say nothing, it’s not my fault, will only lose that much more money. And that many more producers will declare bankruptcy. We don't have that time and these bureaucrats have done nothing to earn the respect and privilege to continue on in this manner. Action is required to change the industry from the passive “muddle along” strategy to the Preliminary Specifications decentralized production models “price maker” strategy. We have work to do and it needs to get done. The only way that that is going to happen is that our budget gets funded. It’s not what the bureaucrats want, they have fought me for ten years, and now they don't have a say. They've lost the right to be involved and to participate.

One valid criticism of People, Ideas & Objects that we will hear from the bureaucrats is that it’s just a product. And it’s just vaporware at that. Which are both valid points. For the larger part of the past 24 years I have been working on this myself, financed by my own resources, at great personal cost. What do you expect from one individual. The Preliminary Specification is budgeted on the basis of 5,000 man years of development effort in its first commercial release. The oil and gas industry has contributed less than $0.01 towards these developments. Bureaucrats know they are out of power in the world where the Preliminary Specification operates. Seeing the devastation that the industry went through in 1986 I knew that they would not survive another downturn due to low oil and gas prices like the one experienced then. When the technologies became available in 1991 to begin to solve the problems, that’s when I began working to make this solution real.

1986 was only on the oil side. The natural gas side of the business wasn't that big and it wasn't in that difficult of a situation. The U.S. was dealing with what was called a gas bubble, but gas prices were keeping producers above water. The natural gas prices today are so far underwater that they alone are all that is needed to drown the producer. The oil prices are now in the same territory. If producers do not begin to learn to listen to market signals and begin producing based on profitability, which they can only do with the Preliminary Specification, we will be in for a limited future.

I used to watch in awe at the phenomenon of no producer willing to cut production due to low prices. The conclusion I came to is that they can't, won't and will not ever do it. It is a bureaucratic nightmare to do so. And we see this playing out again. The time to fix it is now and these next three months will be critical to our success in delivering a product on a timely basis, or being late in terms of avoiding societal difficulties.

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. 

Parallels to the Former Soviet Union

With commodity prices as low as they are. The discussion in the marketplace has turned to the fact that producers will continue to produce as long as their cash costs are covered. This is the beginning of the destruction of the industry. Cannibalizing the business to pay for the overhead is a strategy of fools. It won't be too long under this scenario that we will find that oil and gas is unable to meet the demands of society, bureaucrats will then shrug their shoulders and say, oh well. This irresponsibility and capitulation by these bureaucrats shows that they are only interested in their own “take.” The laying off of engineers and earth scientists has also begun in earnest. What we saw in 1986 was the bureaucrats began competing with one another in terms of the depth of their cuts to their staff. A “watch this, I can cut even deeper than you” attitude. This trend will become evident in this upcoming quarter as they try to show who is the most prudent, and cash conserving, of the bunch.

Remember these engineers and earth scientists are highly educated. Probably average ten years of specific oil and gas experience. Are in their mid thirties and are facing a layoff! Not because of anything they did, only because the bureaucrats were too self interested and uncaring about the business to concern themselves with the long term. Remember too that I have been writing about these issues for almost ten years. Plenty of time for the powers that be to have done something. These engineers and earth scientists may be fully committed to the oil and gas industry. Have it flowing in their blood and are willing to cut the bureaucrats some slack. However, the poaching that technology and other industries may do of highly educated and dedicated people, as these other industries pick up, will be one of the key reasons that the capacity and capabilities of the oil and gas industry are permanently degraded.

Under the current scenario we will however have a fully staffed bureaucracy at the controls. And as the prices turn up, as the Saudi’s strategy has become successful and the shale era slides into the history books as the latest .dom, real estate, shale bust, we can sit back and think that with the endowment of those shale resources, with all that value that was unlocked by those brilliant technologies. We didn't have enough sense to make two nickels to rub together. It will be at that time the retirement of this brain trust, I’m talking about the bureaucrats and being sarcastic here, will occur and the complete collapse of the industry will have taken place. There are always imports from less reliable countries that aren't as advanced as we “enlightened” people are.

This doesn't have to happen. And by no means should it happen. But it is. In the Preliminary Research Report (2004) I noted that there were similarities between the former Soviet Union and the way in which the industry was operating. The Soviets collapsed due to the inability of letting markets decide what to do. The same thing is happening here. The bureaucrats don't do anything. They produce whether or not they should or shouldn’t. No one looks to the price as the determining factor as whether or not they should produce. Who cares what we get for the product, just produce it. It was foolish in 1986 and it is really foolish today. It will lead us to our demise in the same manner that the former Soviet Union faced. Complete collapse.

The Preliminary Specifications decentralized production model implements the price maker strategy on an industry wide basis. Using the profitability of the property as the determination of why a property should be produced or shut-in. A producer can maximize their profits at any level of its production profile due to the nature of all costs becoming variable in the industry under the Preliminary Specification. If the property doesn’t produce, then it incurs no costs, not even overheads. Therefore maximizing the profitability of the producers profitable properties, saving the reserves for the day in which they can be produced profitably and most importantly, removing the marginal production from the commodity marketplace.

Funding the Preliminary Specifications budget is how we will avert the nightmare scenario the bureaucrats are leading us down. The stock market is repricing itself on the expectation that interest rates will be rising over the next few years. This means that all asset classes will have to perform at higher levels, and that can be most easily achieved through lower asset values. This is killing the bureaucrats stock portfolios and their pension plans. They therefore are going to want to hang on for a little longer than they originally planned for. So the total destruction of the industry is pretty much assured if we keep them in control.

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. 

Money and Power, Part III

Members of our user community have the power to ensure that society is provided with the energy resources it needs. This power is obtained through the licensing and control of the Intellectual Property of the Preliminary Specification and its derivative works. With this in hand the user community is able to implement the policies and procedures within the industry to manage it on the basis of providing the producers with the most profitable means of oil and gas operations. They are also able to make the necessary changes to those policies and procedures, and the business model, to ensure that the industry maintains its competitive and profitable stature.  This is not your grandfathers user community. Participation doesn’t denote endless ceremonial attendance at useless mandatory meetings. It means that you are the one with the power to make the industry operate. This is why the bureaucrats love us so much. The manner in which we are structured here renders the bureaucrats power and influence in the industry to the ash heap of history.

The Intellectual Property is comprised of the Preliminary Specification, any of the other information contained on the wiki, and the ten years of research contained on this blog. These are what will be the base of the user communities work. It is the business model. Our budget will fund the user communities determination of what and how each process will need to be in order for it to be developed by our developers. This is the critical detailed work needed to fill in the gaps of how the industry actually operates. How people do their jobs and what they actually do. This work, however, will be unique in that it will be under the basis of the Preliminary Specifications new business model where service providers will be using the software and providing the services to the producers. A fundamentally different way of organizing the industry. Providing producers with unlimited flexibility in their operations.

I am the beneficial owner of the copyright of the Preliminary Specification and all that is contained within the blog and wiki. That provides me with the ability, through licensing, to control the development and ownership of the derivative works. The user community is paid by People, Ideas & Objects for the work that is done during our development, and the service providers will earn revenues that are a replacement of the producers current G&A costs. Two significant revenue streams, and since service providers will be owned by user community participants, a significant business opportunity for those that have contributed to this community.

The licensing of the Intellectual Property works on the basis that I pay for your work which in turn earns me your copyright and I add this to the overall Intellectual Property. The licensing then grants the user community participant with access to all of the Intellectual Property in an unencumbered manner. It is in this way that I am able to use the Intellectual Property to raise the initial budget, and subsequent annual funds needed to support these communities. Without this licensing mechanism the producers would be subject to licensing from a large population of the user community. And members of the user community would be subject to significant cross licensing requirements within the community. An otherwise unworkable situation. In turn user community participants can look forward to building a business on the basis of participating in the user community and managing their own service provider where they provide the People, Ideas & Objects software and their services to their profitable oil and gas producer clients.

The larger point of this blog post regarding licensing is to ensure that the user community has the power to affect change. If change is needed only the user community needs to be addressed. People, Ideas & Objects will only ever send invoices for the costs of development and the user community to the producers. We do not, and never will have any Service Level Agreements. If producers require anything contained in the Preliminary Specification or its derivative works they have only one community in which to talk to. The user community. It is there they will find the people who are able, willing and empowered to make the software and the services work for the dynamic, innovative, accountable and profitable oil and gas producers. People, Ideas & Objects are a dedicated software development capability provided exclusively to the user community.

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. 

Money and Power, Part II

We are working to provide society with the energy it needs to ensure that it fully develops. We are concerned that the issues the oil and gas industry faces will lead to declines in its capacity and capabilities. Leaving people with poor choices in terms of their standard of living. With 5,000 man hours of physical labor contained within each barrel of oil, we do not want to see people being forced to reduce their consumption of energy. This is why we are developing the Preliminary Specification. People, Ideas & Objects, our user community and the service providers are committed to this and are focused on providing the oil and gas producer with the most profitable means of oil and gas operations.

Yesterday we noted the loss in market capitalization of the top 14 producers as a result of the decline in oil prices this past year. That was a little over $700 billion, and if we took into consideration the rest of the industry, and called it a rounding error, that number may well be $1 trillion. I really like the ring when anyone say’s trillion. This is the value that would be returned to the producers if they were to fund our budget and set in motion the means to provide the oil and gas producers with the most profitable means of oil and gas operations. That is a fact, the stock markets take all known information into consideration. This is how Uber has a $50 billion market capitalization. The future holds that promise. And with the Preliminary Specification under development, the oil and gas producers would be able to overcome their issues and provide for profitable operations to their investors. Recovering the previous loss in market capitalization.

Then if you take our value proposition. Which is valued in the area of $45.7 trillion. Note I could easily round this up as well to $50 trillion, but I'll stick with the $45.7 trillion. $50 trillion makes it sound less viable! These are calculated on the basis of the price increases of oil and gas as a result of the price maker strategy of the decentralized production model of the Preliminary Specification. Doubling, and in the case of natural gas at least tripling, the value of the commodity in the marketplace is what is needed on a go forward basis. Taking the present value of that over the next 25 years provides us with the incremental value of $5.7 trillion. The other $40 trillion comes from the fact that the pricing model that we employ includes the costs of capital in each volume produced. Producers are hoarding assets as if they are vintage relics of a bygone time. Hanging on to them until the next millennium. These capital costs need to flow to the income statement, and will do so within three years under People, Ideas & Objects. This will force the industry to recognize the costs of capital on a go forward basis. These costs have been projected to be $20 to $40 trillion in the next 20 years. And it will also remove the capital costs that are currently sitting on the balance sheets of the near bankrupt producers. Forcing the industry to finally account for those costs.

So there you have the deal of this century. We fix the industry and what currently ails it. Provide it with the means to deal with its problems in the future by destroying the bureaucrats “muddle along” strategy. Give the investors back the money they have lost in the reduction of their market capitalization in the past year. And provide a sound and profitable business that generates real earnings for the next 25 years. One that you can invest in profitably. And all that has to happen is that our budget of $4 billion, not trillion, although that would be a deal even if it was trillion, in investment is provided.

If I were an oil and gas investor I think I would jump on that. This past century of passive investment has led us to some dismal times in the economy these days. I wonder if business in the 21st century will continue to follow this model of passive investments? It would seem to me that we provide a good example of why the old model should be tossed. There is the potential of another alternative as well. That greed may have infected the bureaucrats who want a bigger cabin and faster boat. And therefore would consider funding our budget themselves on the basis that they could stick around for a little longer, just long enough to get those new toys.

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. 

Money and Power, Part I

In order for the industry to make the changes that are needed. So that we can provide the mid to long term supply of profitable oil and gas that society needs. We will need to have effective tools for People, Ideas & Objects, our user community and service providers. The two critical tools that are necessary are the budget and power necessary to implement the Preliminary Specification. It is these that are at issue with the bureaucracy. Particularly the power which is their current domain and requires that they lose control of it. We take their power through the implementation of our user community and the Intellectual Property that makes up the Preliminary Specification, and all that will be derived from it. Without the Intellectual Property under our control the user community would not have the power to make these changes and be successful.

With the current commodity prices the bureaucrats have a choice. Bankruptcy or fund the Preliminary Specification. I don't expect them to do anything but what we can see is the stock price of the producers continue to degrade. Two Canadian companies of interest are Encana and PennWest. Encana is trading at a little over $6 compared to $90 a few years ago. And PennWest is trading at $0.60 compared to as much as $35. A while ago I published the decline in the top 14 producers stock price from the initial decline in oil prices. Then it was $420 billion. Now it's $711.6 billion, an increase of 69%. In some cases these losses represent more than half of the firm's market cap. Therefore it might be reasonable to assume that we are halfway towards most of them declaring bankruptcy. However, that would be unreasonable because the bureaucrats have been relying on hedges for their oil for the past year. Those hedges have now expired so the bleeding will just now have begun in earnest. Bankruptcies could be imminent.

Seven hundred billion dollars isn't a lot when you just write it out in a sentence. These losses don’t affect the bureaucrats pay, bonus, pension or benefits. The value of their options are diminished of course. But when you're winning on four of the five forms of compensation you don't quibble. People ask me why I abuse the bureaucracy so purposely. First of all it's their fault. None of this has to happen. Second they have fought me at every turn and at every opportunity since I published that the Joint Operating Committee is the key organizational construct of the innovative producer. They can see the writing is on the wall and chose to fight me. It is important for people to understand why the Preliminary Specification hasn’t been adopted in the marketplace. If I wrote about it here, and if I did not clearly identify the bureaucrats as the / my issue, then people would wonder why it’s not working. Clearly it is not working due to the vested interests.

The amount of the losses in market cap that have been experienced by the investors in this industry. Are able to be recovered by funding the budget of People, Ideas & Objects, our user community and the service providers. This has to be the best investment that anyone could ever make. $4 billion down and you get back $711.6 in pure capital value. And that is just the losses that we can identify on the oil side since the price decline. There is the hidden value lost over the past five years on the natural gas side of the business. It might be just as significant. However, it's still August and there are many more weeks of vacation left for the bureaucrats to enjoy at the cabin. So don't bother them, their busy. We'll speak more about our power and the user community tomorrow.

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. 

The Three Horsemen

Members of our user community all share in People, Ideas & Objects concern for the capability of the oil and gas industry to meet society's needs in the mid to long term. The difficulties that the industry are entering into. Those that we detailed yesterday that include an investment community that has been abused by the bureaucrats, the bureaucrats themselves in all probability moving on to greener pastures when it becomes untenable for them and the commodity price declines. The industry's business model is flawed, incapable of addressing these three issues and these issues are more than what it can handle without losing much of its capacity and capabilities for the long term. This puts society and our way of life in jeopardy, and we are committed to ensuring that this does not happen.

We are doing this by providing an alternative business model for the industry to function. One whose focus is to provide the oil and gas producer with the most profitable means of oil and gas operations. By defining and supporting the producers with our software, based on the Preliminary Specification, our software development capability, the user community and our service providers. The Preliminary Specification is different. It avoids the corporate model that is in use in the industry today and uses the industry standard Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks of the oil and gas industry. By moving the compliance and governance frameworks from the hierarchy into alignment with the Joint Operating Committee we are able to achieve this new organizational performance.

By implementing the Preliminary Specification we address these three issues specifically. Looking at the prototypical producers in the People, Ideas & Objects et al business model. They will be stripped down versions of their current configuration. Consisting of the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder of the administrative and accounting resources are reallocated to service providers who will focus on one process or subprocess and use the entire industry as their client base. It will be in this way that the service providers can use their competitive advantages of specialization and the division of labor, automation and have the computers working for us. The producers will also be able to focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base.

Our service providers will charge the Joint Operating Committee directly for their service fees for any of their services. Therefore the specific service provider who calculates royalties will charge the specific Joint Operating Committee the costs of processing their royalty calculations. Then the producer will receive a detailed set of financial statements for each Joint Operating Committee that includes the revenues, royalties, operating costs, depletion and the actual costs of the overhead necessary to produce the property. If the property is reporting that it is unprofitable the producers can shut it in and reduce their losses on operations. If a producer was producing 100,000 barrels per day with 20,000 of those being unprofitable. They could shut-in those 20,000 barrels and the producers profitability would rise substantially. That is because they would not be incurring the financial losses on the 20,000 barrels, and their overhead would have been reduced from a producer producing 100,000 barrels to a producer producing 80,000 barrels just as their royalties and operating costs have. This is achieved due to the fact that none of the activities in the Joint Operating Committees of a shut-in property will trigger any of the service providers to conduct any of their services for the months that the property is shut-in. Rendering no billings to come from the service providers and a null operation, no profit but also no loss to be incurred and reported by the Joint Operating Committee.

The Preliminary Specifications decentralized production model makes all of the producers costs variable. It will also reduce the amount of commodities in the marketplace, enabling the price maker strategy that we provide. If all producers only produce profitable properties then a reasonable and fair production allocation process has been implemented within the industry. The producer will also have a stable of 20,000 barrels per day in which they can apply their innovative earth science and engineering capabilities to increase their reserves, deliverability or reduce their costs and bring the production back on to profitable production.

This solves the three major issues that the industry faces in the mid to long run. It returns the industry to a business model, based on profitability, that the investors need to see in order for them to return and invest in the industry. It removes and replaces the bureaucrats with their self interested business model and wishes them well in their retirement. And it returns the oil and natural gas commodity marketplaces to the marginal cost necessary to fund the needs of the industry in the mid to long term. This is what we, People, Ideas & Objects, our user community, and service providers are working on. Join us and solve this critical and difficult situation with 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.