No Vision of our Future

It’s certainly beneficial that the bureaucrats were able to foresee the difficulties in the industry and ensure that the crude oil export ban was lifted in a timely manner. It is these kinds of actions that make the difference in the industry. I wonder where they will focus their energy now? They seem to be caught in the dilemma of the dog catching the car, what does it do with it. Just as they prayed for a cold winter a few years ago, and we did have a rather cold winter that year. The removal of the export ban can be removed from the list of useless, irrelevant distractions for bureaucrats. Strong leadership in times of crisis always gives the people in industry a sense of comfort.

As I stated, my time during the Christmas break was spent preparing for the next four months. It was a time in which I thought that we would be able to convince the investment community to move to fund the Preliminary Specification in the face of such difficult times for the oil and gas industry. A time in which to adopt the plan to build these systems to offset the difficulties in the industry. The times certainly haven’t improved, and I suspect that April and May will be difficult for the producers to get through. But I don’t have any positive feelings regarding the work that I have done with the investment community. Whether it is denial on a wholesale basis throughout the oil and gas industry and the investment groups. Or a fundamental capitulation of any responsibility by everyone involved in this business, it's difficult for me to tell.

It certainly isn’t the investor's problem. If anything they’ve been duped and fundamentally betrayed by the bureaucrats. I just don’t see anyone standing up for the future of the industry. The truth of the matter is that there is overproduction in the industry. Claims that rebalancing would resolve the problem have proven to be false as the deliverability in North America continues to grow. The point that I am making is that all the lies that have been told about what was going on in the industry are now beginning to be seen as lies. The validity of what the bureaucrats say is taken as much into consideration as what people who have no understanding of the business. Maybe that’s the point or the objective of the bureaucrats, for what purpose I couldn’t tell.

Much of what I have said in the past few years about this situation is what has happened. Most specifically the bureaucrats can’t, won’t and will not ever change. And overproduction will continue. Even now with the price of oil in the $29.00 range don’t expect any change in the behavior of the bureaucrats or the production profile of the producers. The news of the day is that overproduction is going to continue for as long as the bureaucrats are in power. Even with the Preliminary Specification staring them in the face they have chosen to do nothing. The fact of the matter is the Preliminary Specification eliminates the bureaucrats from the oil and gas industry. We’ve seen similar actions be taken in other industries as a result of new technologies coming in and offering new methods and ways of doing business. The term is disintermediation.

In terms of where we go from here I have always had a plan and a direction as to what I needed to do to get there, and a clear idea as to where I am heading. I’m sorry to say that I do not have any vision at this time as to what is going to happen next in the industry. Overproduction is going to continue for ever with these bureaucrats. Someone has to take the industry away from them. I also don’t think the bureaucrats care enough to keep the place tidy for the next tenants who come in. The investors have lost so much that they are either out of the business, or are seriously contemplating the exits. I didn’t see the extent of this damage coming so quickly. And I seriously don’t know what’s next.

What we can do is continue to push our solution in the marketplace. Our value proposition increases substantially each and every day. There are many people who are committed to seeing this solution in the marketplace. We have much work to do. And maybe instead of knowing where we're headed we can at least be satisfied that we know that we’re doing the right thing.

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. 

We Need the Big Guys

Late last year I mentioned that the integrated producers were actively looking at doing something in the marketspace of which the Preliminary Specification resides. Noting that they are masters of their own domain and will deal with the issues in the industry as they see them. Today I want to address this directly and note that we need them to be a part of the development of the Preliminary Specification. When we allocate our costs based on the deliverability of the North American production. To exclude Exxon, Shell, BP and Chevron from the mix leaves us with an unfillable hole. They would account for approximately half of the funds needed for us to develop our software.

Whatever it is that they are doing. If I should be so bold as to suggest, it won’t work. That is to say it’s not specifically their problem. The overproduction that is causing the price declines are everyone in the industries fault collectively, and no one specifically. If the integrated producers did resolve the problem internally that would not resolve the 2% overproduction that is occurring in the industry. Overproduction would continue to cause the oil and gas prices to remain depressed. One individual company, no matter how well it is managed, will not be able to resolve this problem. Everyone in the industry needs to adopt the discipline of only producing what is profitable. Only then when the industry has production discipline will this problem be solved. Having the integrated producers go it alone in what they may be doing is not going to resolve the commodity price issues on their own.

The ability to produce only what is profitable is going to need a new definition and standardization. Determining what is profitable is a necessary and critical aspect of what and how that production discipline is attained. Our service providers will be working for all of the producers in an objective manner. They will be implementing standardized accounting and administrative policies across the industry. So when it comes to account for the price of oil or gas. And we should note that the administrative and accounting costs for natural gas will be significantly higher than it is for oil. Which is not the case currently with the use of overhead allowances. The capital used in the development of the Joint Operating Committee will be amortized on a reasonable basis to ensure that the industries investors are provided with a good return on their investment, and a return of their investment. This accounting and administration will be consistent and standardized across the industry through our service producers. A necessity in terms of establishing a fair and reasonable means of production allocation, the precursor to production discipline.

Production discipline can only be attained by reorganizing the industry and the individual producers in the manner specified in the Preliminary Specification. Stripping the prototypical oil and gas producer down to the C class executives, their earth science and engineering resources, some land and legal, and some support staff. The remainder of the administrative and accounting people are then allocated to service providers who are focused on an individual process and use the industry as their client base. This configuration enables the producer to shut-in any unprofitable production with the effect of having all of the costs associated with that Joint Operating Committee, including administration and accounting costs, not being incurred while the property is shut-in. The Preliminary Specification does two fundamental things. It makes all of the producers costs variable. And converts the producers administrative and accounting capabilities into the industries administrative and accounting capabilities. Obtaining significant benefits for the individual producer and the industry as a whole. The producer themselves will no longer be involved in the need to develop their administrative and accounting capabilities. Tasks that are consuming the profits of most firms. Having the unprofitable properties shut-in will increase their overall profits by not diluting their profitable properties. Shutting-in unprofitable properties will also remove the marginal production from the commodity marketplace which will increase commodity prices. And the reserves of the producer will be saved for a time when they can be produced profitably.

To make these structural changes to the producer and industry, and to make them stick requires that we build the software that defines and supports these organizations. Software plays an enhanced role in society today. To undertake these change in the software first is necessary before the actual changes are undertaken. We have to deliberately move in the direction that we want to as an industry from now on. We are not just aimlessly developing as individual organizations as we have in the past. Spontaneous order, the economic concept that has served us well for over 100 years has ceased to be effective. It has been replaced by the concrete that software turns our organizations into. You can not change an organization today unless you change the software first and foremost. That is one of the critical reasons that the industry needs to adopt the Preliminary Specification and acquire the long term software development capabilities of People, Ideas & Objects. To ensure that the producers can continually meet the dynamic environment of the industry.

It is for these reasons that the integrated producers need People, Ideas & Objects Preliminary Specification, our user community and service providers as much as we need them. They can’t do it alone, just as none of the other producers are able to do it alone.

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. 

Dispelling Myth's

There are many myths about the oil and gas industry being discussed in the marketplace these days. The understanding of what is going on and how the oil and gas producers will respond in certain circumstances is being supported by these myths. I think there will be a day of accountability for those that have been pushing these myths out as answers to the current situation. The myths that I want to respond to are 1) the producers are rebalancing the market. 2) that producers are innovative and therefore dropped the costs of production down to be profitable at the current price. And 3) production will be removed from the marketplace when it becomes unprofitable. These three myths are part of the bureaucratic malaise that has overtaken the industry. The press believes the story as it is consistently told by the bureaucrats. And like all myths, incorrect.

This rebalancing of the marketplace has been going on in natural gas for six years. And if you look at the deliverability of the U.S. natural gas production it is beginning to turn downwards. (This is mostly attributable to deliverability declines in the Marcellus shale region. An area that receives at best $1.20 for its gas.) However, that is after six years and a price decline from $15.00 to $1.75 just before Christmas. As I have always stated “rebalancing is a very blunt tool. However, in the age of shale based reserves we won’t see the return of any profitable natural gas prices based on the behavior of the current producers. There are now over 18 bcf / day of deliverability in what are called DUC’s (drilled but uncompleted wells). This was an attempt by the bureaucrats to drill wells at lower costs, taking advantage of the misery in the service industry during these difficult times. What they didn’t realize is that these wells would be considered as part of the inventory volumes of natural gas that are ready to join the other 74 bcf of daily production. Rebalancing the marketplace is what was attempted in the 1980’s and 1990’s. That took roughly 15 years to be effective. In the era of shale reservoirs it will never be an effective means of dealing with overproduction. As soon as the prices rise those 18 bcf / day will race to the market faster than you can blink. Only the Preliminary Specification provides the industry with the capability to allocate production based on profitability at the Joint Operating Committee. Profitability based on an actual accounting.

The second myth that I mentioned is really two myths in one. The first is that the oil and gas producers are innovative. This is not so much a myth as an absolute farce. Ask anyone who has tried to bring anything of value into this industry and they will tell you of the decades that they’ve spent trying to convince a producer to try and build value for themselves. As exhibit a, I would use myself and my 25 years in this endeavor. Providing a value proposition of $45.7 trillion in exchange for our budget is too much math for the bureaucrats to deal with. Too many zero’s to carry I guess. I can remember the stories in the late 1990’s from the coil tubing people begging producers to try their product. Or just look into the history of Packers Plus to see how frustrating it is to deal with these bureaucrats. All the innovation that occurs in the industry comes from the service industry and is as a result of decades of screaming at bureaucrats. Bureaucrats are not innovative. Bureaucrats sit and do nothing but watch the commodity prices fall. What else could they be doing?

The second aspect of that myth that the bureaucrats innovations are responsible for bringing the costs of oil and gas down from the $75 - $80 / barrel before the price collapse to the $25 / barrel today. Is something these people are going to pay dearly for in May 2016. This is a myth and they will be held responsible for stating that these costs behaved this way. Think of the situation. You drilled, completed and equipped a well in 2013. That is a historical, factual capital cost that has been incurred. Based on the production in 2013 these capital costs including the operating costs, royalties and overhead totalled the $75 - $80. In today’s environment, recall that oil and gas is a capital intensive industry, the only change to the costs would be some operating cost efficiencies and a severe drop in the royalties. Maybe $20 in total.

So how does a bureaucrat move from $75 - $80 costs to $25. There are a variety of names for it but I will use the term that I feel is the most common “recycle costs.” Recycle costs are calculated when you take the current price of oil is $33 and to produce a profit at that price your cost would need to be $25. Therefore the producers costs on a go forward basis are $25. Subject of course to some innovations in terms of the capabilities of the producer. That is recycle costs, the myth.

The last myth we listed was that as soon as production is deemed unprofitable it will be shut-in and removed from the marketplace. First, with the phenomenon of recycle costs there will never be any loses as those costs are always lower than the prices. Second the deliverability continues to increase. And more bankruptcies will be announced in 2016 then at any other time in the history of the industry.

This mindset is the one that is operating in the industry today. If you don’t believe me, take a look at the price of oil and natural gas. There is no adult supervision going on. It is bureaucratic, self interested, thoughtlessness at the highest level. These people will need to be preparing their stories and their financial statements for the 2015 annual report and general meetings. These myths are present in the marketplace today. How will they deal with the reality of their actions in 2015, their lack of plans to deal with it and the dispelling of these myths. It’s going to be a good year for People, Ideas & Objects, our user community and service providers. If you think I’m being too harsh, that I might get funded faster by being nice. The truth has to come out about what’s been going on here. How to fix it. And who is going to fix it. Being nice to the people who created this much destruction, after the treatment that they provided to me over the past decades, particularly when they could've saved themselves by building the Preliminary Specification. Is beyond my level of compassion. They need to account for their behaviors, actions and decisions.

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 Nile is a River in Egypt

In terms of the five stages of grief; there are denial, anger, bargaining, depression and acceptance. People who have paid the costs of the bureaucrats inaction, those that have been laid off, are no doubt forced to be in the acceptance phase. The bureaucrats themselves, and most particularly the investors who have funded the bureaucrats nonsense for the past decade, are all in deep stages of denial. Talking to them is almost useless. They will fixate on an element of the discussion that is irrelevant and use that to wander away aimlessly from the conversation. Anything to get away from the facts on the ground. As I stated yesterday, there is a general consensus now that the overproduction by the producers is the source of the difficulties in the oil and gas industry. There are no boogie men. The point here is the Preliminary Specification with its price maker strategy is the solution to this problem. And that needs to be accepted, which happens to be the fifth and final phase of grief.

The good news in this discussion, from the point of view of People, Ideas & Objects, our user community and the service providers, is that we will soon move onto the anger phase. A lot of anger and grief will be expressed over the fact that trillions of dollars have been flushed unnecessarily by these bureaucrats inaction. This is why I hypothesis that bureaucrats will be hightailing it out of the industry faster than you can say, “but wait a minute!” The damage that’s been done affects everyone in the industry, except the bureaucrats, and everyone is going to be as mad as hell. It’s not an environment that I think any bureaucrat is going to want to be sitting around listening to, with the eventual outcome being they’re shown the door anyways. Why not just skip the whole process and leave now. The good part of this hypothesis is that there won’t be any mass layoffs because that would be redundant. If you're a bureaucrat, just get out of town before the sheriff finds you.

Denial is what humans use to soften the pain of the loss. In theory then we could be in denial for decades as there is no way out of the overproduction issues other than the Preliminary Specifications price maker strategy. This is a commercial environment, however and it is here that the resources of the industry have been taxed the heaviest. The cupboards are bare. The industry never had any working capital to speak of, even in its best days. It chose to deceive everyone with bloated balance sheets. The net effect of these bloated balance sheets is that the investors were subsidizing the energy consumers and the industry never really made any money. It was a money pit. A drain on the investment capital of the banks, junk bond markets and investors. Now, instead of having any resources to deal with the storm they’ve created, producers stand naked, frozen, directly in the tornado’s path. Nowhere to run and nowhere to hide.

Creative destruction is the term for this phenomenon. The destruction will be complete. From the industries ashes will be the Preliminary Specification, our user community and the service providers that you and I develop here in the next few years. It shouldn’t have to be this way, but that is the way that our capitalist system changes. Out with the old and in with the new. And you can be a critical part of that new industry. If for whatever reason you accept the changes that I have detailed here. Then consider yourself in a leadership position with respect to where the industry will be in the years to come. The opportunity to take that leadership position and strategically position yourself with a role in the development of the Preliminary Specification and formation of a service provider is the opportunity that is open to you today. Placing yourself in the structure of the industry for the next generation.

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. 

A Fundamental Betrayal...

...is what the bureaucrats have orchestrated upon the oil and gas industry and all of those that are involved within it. And they did so for the sole purpose of ensuring that their personal financial benefits were kept intact. After all of the lies, the screaming and pointing of fingers that it’s someone else’s fault. It is now clear to everyone that the North American producer, fueled by shale based reserves, have been overproducing oil and gas in the commodity markets. Do we now trust these bureaucrats to be the ones who will figure out what the real issue is? Do we therefore expect them to resolve the problem? No, our expectation is that the integrity and honesty that they have displayed in this process has been destroyed. It is obvious that they will destroy the industry before they face the reality that they are unwilling to deal with the problems that they are creating for themselves. They are personally conflicted. No one is going to give them the second chance.

There was an alternative in the marketplace that dealt specifically with the overproduction issue that is ever present today. Am I the only one who saw it. No of course not. But I am the only one that has spent the last 25 years working to resolve it. The bureaucrats giggled amongst themselves when I said that the value proposition of the Preliminary Specification was well into the trillions of dollars. Now as a result of their inaction they are responsible for the destruction of trillions of dollars of value. Real destruction of real money. Who’s giggling now. This has been a fundamental betrayal of all of the interests in the oil and gas industry. And a fundamental capitulation of the future of the industry. And the bureaucrats are solely responsible. I have consistently let it be known that I believe the bureaucrats were the problem in overcoming the adoption of the Preliminary Specification. It has been their history since I first published the use of the Joint Operating Committee as the key organizational construct of the innovative producer in August of 2003. They saw the writing on the wall then and they ran me out of town and shut me down. I have been unable to find work in oil and gas since then. Interesting isn’t it. All the work that I was doing just stopped and nothing new was ever offered. That is the price I have paid for trying to solve this problem. Please note as well that we enter our eleventh year of writing on this blog!

It’s down to us. The realization over the Christmas holidays that the overproduction of the North American producers is the problem is now widespread. Soon it will be generally understood that the only solution that exists is People, Ideas & Objects, the user community and our service providers. The bureaucrats, who have no integrity and we can’t trust, have always known what the problem was, as evidenced by their treatment of me. They had every opportunity to resolve it within their own organizations. Why is it that they didn’t resolve it on their own? Its because they can’t, won’t and will not ever change to the type of structure necessary to enable them to resolve it. It eliminates the bureaucrats from the industry.

It’s not only down to us but we have a lot of work to do. In the perfect world industry would have joined me in August of 2003 and began working towards the solution at that time. Then we could have avoided the decline in natural gas prices in 2010 and the decline in oil in 2014. A sum total of several trillion dollars in value. They also could have avoided the more than one trillion dollars in lost value in terms of the oil and gas producers lost market capitalization. But I’m afraid there will be much more. We have many years of work ahead of us. And this is why the bureaucrats were paid the big bucks, they were supposed to be aware of these things and avoid them. Now we’ll just avoid the bureaucrats.

So it is with regret that I stand here in 2016 and have to look at the destruction that is the oil and gas industry. It is something that I know I did everything I could to stop it. And we can resolve it in the mid to long term with the Preliminary Specification, the user community and our service providers. I suggest if you have similar feelings you join me in the user community and we rebuild the industry back to what it should have been before we were so fundamentally betrayed.

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. 

Year End Closing

Where we currently stand to in the oil and gas industry is far from where we need to be. The deterioration of the capacities and capabilities can be felt draining from the industry in the past six months. Things that should be getting done are not even on the list of things to do. This of course is the old business model working as it does. Let the industry deteriorate until such time as shortages are created and then we’ll move to rebuild what was lost with other people’s money, again. The only thing the producers have today are spectacularly large balance sheets. These represent the money from the last time they fleeced the investors. The actions of the investors in the past few years shows that they’ve caught on to the game, and they don’t like it. They might sit this round of financing out. And therefore the producers will decay even further as shale’s flush production continues to overwhelm the commodity markets price mechanisms. The only way out is for producers to select the Preliminary Specifications decentralized production models price maker strategy. That way an industry wide method of production allocation, based on the equitable and fair basis of profitability of each and every Joint Operating Committee, can be used to determine which property produces and which property remains shut-in.

Until this scenario plays out People, Ideas & Objects and our user community have work to do. The forces of creative destruction in the industry are well in play. We need to commence work now in order to offset the difficulties in the industry. As they depreciate we’ll rise to recover from their failures. Eventually taking over from the ashes of what will be left of the producer firms that exist today. That is how creative destruction has worked in the past and how I expect it to function here. There will be many producers that might make the transition, however picking the winners and losers is a sport that Las Vegas would be more interested in. Our job is to get moving and to make sure that society does not have any difficulty in sourcing their needs of oil and gas.

It will be a cold, literally, hard slap in the face to those alternative energy and climate change people. They will think that the decline in oil and gas is an opportunity to build more wind and solar. I am always amazed at the extent that people can convince themselves of such foolishness. Those who think that they can just switch to wind and solar are fresh out of the looney bin. The oil and gas industry produces so much energy, and so much of it is used in industrial purposes that it would take centuries for wind and solar to catch up, let alone take over. Ever see a chemical plant next to a hydro dam? And you won’t. Society is not hooked on oil and gas. Oil and gas is the blood that makes society run. Let's not kid ourselves into believing in myths and fairytales before it's too late. Your participation in our user community is the mitigating factor and the destruction of this myth.

I will be taking the rest of the year off. I need to prepare for the early part of 2016. Producers will be once again preparing their annual reports for what has been a bad year in a dismal industry. They have no profitable operations anywhere. They have no financial resources and they are desperately short of cash. They need to show their investors and bankers, and most importantly their prospective investors and bankers, a plan on how they’ll turn this situation around. As we know they don’t have one and they’ll be unable to come up with anything in the next few months. What I suspect will happen is we will see the rats jump ship, so to speak. The bureaucrats will seek greener pastures knowing that the difficulties in oil and gas are beyond what they can resolve. After all that is their history and pedigree. Expect the announcements of retirements and resignations to begin once the bonuses have been distributed. That’s right bonuses. I am looking to return on January 11, 2016 and expect that posting may be light for the first four months of next year. This is crunch time for us. We must make this real. A decision has to be made to proceed with the development of the Preliminary Specification. I am looking to the investors and bankers that support the oil and gas producers to make that decision. So for now have a Merry Christmas and Happy New Year and will see you in 2016.

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. 

Users Wanted

Yesterday we went through some of the difficulties people may be faced with regarding the decision to participate in this user community. We understand that it’s not for everyone and we are looking for specific people who are able to make the difference in the new oil and gas industry. If you’ve made the decision to join the user community of People, Ideas & Objects, what’s next. Review of the application process can be found here. We know it’s extensive and will take some time and effort to complete. It is important for us to be able to make our decisions based on the best possible information available to us. Once you’re approved, this information will be available to all users across the community, and as a result, users will be able to find like minded people with similar experience to work with.

The second point we should concern ourselves with is that we are a technology oriented solution. From a specialization and division of labor point of view we are providing a new, sub-industry between the oil and gas and the Information Technology industries. Our user community is being drawn from the oil and gas industry and we have all had dealings with those who are in the Information Technology world. Sometimes it seems that they are speaking a different language and are on a different planet. The sub-industry we are creating needs to be able to understand oil and gas but also needs to understand the Information Technology industry at the level where they can effectively communicate with them on that planet. You won’t be writing or editing software code, but I can assure you that you will be reading it. You will also be leveraging your ideas and needs through the software developers of People, Ideas & Objects and members of the Information Technology community. They will be the tools that you use to provide the oil and gas producers with the most profitable means of oil and gas operations.

There is time, and I would suggest that everyone, whether through formal education or self study, be capable of achieving the above requirement in the Java and database environments. We are Oracle Fusion Middleware and Oracle Fusion Application users as the base of the People, Ideas & Objects application. These are the technologies that will form much of the work that you will do. If you have avoided the technologies up until now, or have a strong aptitude in the Information Technology area, it doesn’t matter. Your key value to the oil and gas producer is the understanding of their business. Your creativity and capabilities in determining what and how you can do what you can do in the future, when you have a software development capability available at all times, will be so much more effective if you fully understand the technologies capabilities and limitations. There is much that we can deliver to the oil and gas producer in terms of value from an oil and gas point of view. And there is much that we can deliver to the oil and gas producer from a technology point of view. This can only be attained by having a “hybrid” user community that can bridge the two industries that we sit between.

I think that I am on record as stating that these technological requirements would be attained with six or seven university level courses in Java and database technologies. This would give you the level of understanding that would make you proficient in that world from the point of view of understanding the tools that will be at your disposal. Having the software development capabilities of People, Ideas & Objects and Oracle technologies at hand, with the user community vision, empowers you to achieve our success over each of the next 25 years. It is that time frame that we should consider that these systems will be under constant iterative development and will continue to evolve to provide the oil and gas industry with the ability to meet society's needs for energy.

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. 

Courage

A defining characteristic of People, Ideas & Objects user community is going to have to be its courage. This is not something that is usually expected in the domains of oil and gas administration and accounting. However what we are doing demands that we have the courage to overcome the difficulties that we face in the process of changing the industry to one that is dynamic, innovative, accountable and profitable. No one can think that this will be easy, it will be the most difficult work that most have undertaken in their careers. And it will not necessarily stop once we have developed and released our software into the marketplace. The user community is a long term solution to the bureaucracy and will be the replacement to that means of administrative and accounting capability. We can expect more than a few fights from the bureaucrats and a general lack of support from them as well.

When I speak of courage in this instance I would define it in its purest form as the “conscious self-sacrifice on behalf of something greater than one’s own self-interest.” Let's be clear, I am looking for leadership to be an element of the user community. Leaders who lack the courage to lead are not leaders. And there are other common virtues of courage other than leadership. These include honesty, integrity, confidence, compassion and humility. I am setting a high standard in terms of the individuals who are members of the user community due to the role that they will undertake that is so critical to our success and the success of the oil and gas industry. Our demand for courage from our user community and service providers may be unique in the environment that the bureaucracy has created for itself. What I see in the bureaucracy is a group that is committed to being unaccountable and as self serving, who will do nothing other than for themselves. I have stood up to them and paid the price, we need to create a climate where accountability and virtue replace this unaccountable and self serving bureaucracy.

General William Tecumseh Sherman defined courage as “a perfect sensibility of the measure of danger and a mental willingness to endure it.” Many have expressed their concern about participation in the user community. Identifying the risks associated to them in joining our user community. Fear is what I am sure everyone is feeling regarding participation. It is an exciting project with significant downside risk to their medium to long term prospects of their careers. But that is the point, without fear there would be no need for courage. There will be many people in the user community who are committed to the success of this project, purely out of fear. If that fear is greater than your courage to approach the difficulties that we share in the future you should stop reading this blog and forget about participation. If however, your desire to resolve these difficulties in industry are greater than your fears than you should move to act on those feelings by joining our user community. It is said that “you can live with pain. You can live with embarrassment. Remorse is an awful companion.” Coulda, shoulda, woulda might be too much remorse to live with in the future. “Don’t let the sensation of fear convince you that you’re too weak to have courage. Fear is the opportunity for courage, not proof of cowardice.” John McCain

What I have done to mitigate your risk is to ensure that we have our budget funded in its entirety before we commence any software developments. This might be unreasonable, however. With a value proposition of $45.7 trillion over the next 25 years, and over $700 billion in the producer's market capitalization losses. If the producers can’t be compelled to save themselves by funding our developments in full, then there is no hope for them. Therefore there will be no financial risk for the members of the user community during our developments. We do not expect any of the user community participants will be engaged on a full time basis during any of our developments. Though we have costed the user community participants time at an average of $190 / hour.

There is much to do before we get to that time and the application process that we have established is rather onerous. We will detail these in tomorrow’s post and give you a better understanding of what might be opportune at this point in time.

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. 

Your Involvement

As members of People, Ideas & Objects user community you will be applying the understanding that you have gained from your years of experience in oil and gas to the development of the Preliminary Specification. What we have now is the overall vision of how the system will provide value for the dynamic, innovative, accountable and profitable oil and gas producer and industry. What we need to do is to fill in the details of what are required for the areas that you're familiar within the industry. What functionality and process management is necessary for you to undertake the types of work that are necessary and desired in your area. Understanding that we are not replicating the status quo but building a new industry and new producer for the 21st century based on the vision of the Preliminary Specification.

You will do this work with the People, Ideas & Objects software developers who will take your input and develop the software that you specify. This will be comprehensive, collaborative and iterative work that is done with the input of many users representing a diverse range of experience. It will be in this way that we can capture the exceptions that occur throughout the industry and deal with those through the software. Key to this development process is the work that will be undertaken by the service provider organizations that you establish. They are the organizations that you the users will be building in order to deliver the People, Ideas & Objects ERP software and your services to the producer firms. Each service provider will be dealing with a small subset of the overall Preliminary Specification and apply it across the industries data set. It is in this way that you will be able to apply the principles of specialization and the division of labor to the work that you are doing with the other users and our developers.

In addition to your competitive advantages of specialization and the division of labor, you will have process automation capabilities developed with your work with our developers, and innovation based on your expertise in either the administrative or accounting domain that your service provider organization operates in. These are the comprehensive competitive advantages that have not been available in the administrative and accounting domains of the producer firms. In the current oil and gas industry the producer has to acquire the capability to meet the requirement, and has no scope or scale in which to apply any of these competitive advantages. As a result, the administrative and accounting burden is taxing the producer organization to the level where they’re incapable of earning profits. These current administrative and accounting capabilities are being replicated within each oil and gas producer yet are unshareable to offset the costs. It is the application of these competitive advantages through the long term relationship that our users will have with our developers that will increase the service provider's profitability and reduce the administrative and accounting costs of the producers.

The quality of this service offering that the producer receives will be far greater than what is achieved today. The producers will be able to profit from the reorganization of the industry in two specific ways. First there will be an effective cost structure that is more consistent with the producers revenues. The service providers focus is, as with all parties associated with People, Ideas & Objects, to provide the most profitable means of oil and gas operations. Their focus will be on reducing the cost to the producer or enabling greater revenues being earned through business model changes. Secondly the ability to expand the output of the service providers will enable the industry to conduct a greater level of administrative and accounting throughput with the same level of resources. Specialization and the division of labor are the two elements of all economic growth. These attributes would provide substantial value, however, the service providers are also the reason that the producers are able to implement the price maker strategy of the decentralized production model. Enabling a whole new manner in which to operate 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. 

I Got It

Clearly my point has been made. Recent discussions have shown to me that there is a strong concurrence in the marketplace regarding the future of the oil and gas industry. I am preaching to the converted. It's therefore time to get down to business. We need to spend some time on our user communities development which is our key focus. Our user community is one of People, Ideas & Objects primary competitive advantages. For too long users have been provided with substandard ERP systems that they have had to accommodate. These systems have been rigid and unchanging over the course of their lifetime and the users have had to work around these systems in order to get their work done. What is needed in the dynamic, innovative, accountable and profitable oil and gas industry is a user community that has the power and control over the development of the software that they use.

This power and control is provided to the user community through our user community vision. It is comprehensive in that it details the sources and means in which the power and control to affect change is provided to the users. Management of the industry is taken from the bureaucrats and is handed to the user community. It is the membership of the user community that will determine what is required, and what is desired in the industry in terms of their systems functionality and process management, and most importantly the business model that the users have effective control over. So that if there is need for a change in the price maker strategy of the decentralized production model, everyone will know that they need to turn to the user community to have these changes made.

And I would expect that in short order the user community will become the driving force behind the changes in industry. That the dynamic elements of the industry will be as a result of the capabilities of the user community to foresee the issues and opportunities of the industry and implement solutions within a timely manner that provide the most profitable means of oil and gas operations. Whether that is a minor change in one of the minor processes of the material balance report or wholesale changes to the business model. Change is going to be the dynamic that we will be faced with in this industry over the next 25 years. Our ability and capabilities to deal with those changes needs to be inherent in the organizations that we are establishing today and that is the why we are focusing today on the development of the user community.

What we expect to see is that there will be approximately 3,000 members of our user community. Each will be responsible for a specific process or sub-process within the oil and gas industry and be solely responsible for it across the North American producers. Each user community member will be the principal, or partner with other user community members in a service provider organization that provides the People, Ideas & Objects software solution and associated services to the producer firms. Whether that is an accounting or administrative process would depend on the background of the individual and their contribution to our development. We will not be handing out service provider licenses to those who have not contributed to the development of the Preliminary Specification. Over the next number of years the user community will be needed to determine the detail of the system's functionality and process management and this will be the time when users will be earning their goodwill toward a service provider license.

The service providers will be replacing the current administrative and accounting resources that are resident within the producer firms. Within the decentralized production model, the producer is stripped down to the C class executives, earth science and engineering resources, land, legal and some support staff. Therefore the estimated $45 to $60 billion in G&A costs that are currently incurred by the producers would be shifted to become the revenues of the service providers. Members of the user community are also compensated directly on an hourly basis for their contributions to the development of the Preliminary Specification by People, Ideas & Objects. This is a significant business opportunity for those interested in the user community of the new oil and gas industry.

Currently it is my opinion that we will be rebuilding the industry from the ashes of the destruction that is underway. Shale’s new dynamic on top of the bureaucracies muddling along strategy are toxic to the health of the industry. Continued inaction by the producers will eventually force the banks to take over. Providing an opportunity for the investors to purchase the oil and gas properties back from the banks. Then by using the Preliminary Specification, our users and the service providers will be able to manage the investors oil and gas properties profitably. Our appeal to the shareholders and investors of the oil and gas industry to rebuild the industry brick by brick, and stick by stick is the process that we need to keep our focus on. User community development is the first step in that process and one that we would be focused on if we had all our financial resources in hand. Therefore we are technically not wasting any development time by focusing on the development of the user community. So, what are you doing for the next 25 years? Take a look here to see if any of what we are doing interests you.

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

Thanksgiving!

A Leadership Crisis

People, Ideas & Objects continues to look for the future leaders of the oil and gas industry. Those leaders that the user community vision appeals to, and who would be interested in establishing a service provider organization in the new oil and gas industry. It is this new sub-industry of our users and service providers that we are establishing to provide our developers with the input to what systems they want and need in order to manage and lead their oil and gas clients. This new leadership will be the replacement to the current administrative and accounting resources of the producers. And particularly will be the leadership that is provided to deal with the issues and opportunities of the new oil and gas industry. Their leadership will be exercised through the business model that they have control over, through their involvement in the user community and the manner in which the user community has been established.

That is how we propose to deal with things in the future oil and gas industry. What we have today of course is a crisis of leadership. Muddling along has always been acceptable as the business model of the bureaucrats. Taking long stretches of time between profitable periods is what the industry has had to deal with, so they would say. That is certainly what you would need to say when their is no leadership involved. With the same production profile as last year. And the same production profile in natural gas as six years ago. What exactly are bureaucrats doing or going to do about the situation in the industry. Maybe a better question is what is going to happen to cause a leadership change?

Alternatives need to be proposed. Check. We have that in this community. A viable business model and community that only needs financial resources to proceed. What we do know as well is that bureaucrats never change. It is not within their DNA to be capable of the act. Our proposal will transform the industry into a dynamic, innovative, accountable and profitable industry. That is the basis of how we propose to lead the new oil and gas industry. With our value proposition being $45.7 trillion when fully valued over the next 25 years. You would think that bureaucrats who are in a financial crisis would act. It’s only in the oil and gas industry that you can propose to generate this much value and die of starvation.

Peggy Noonan was writing in the Wall Street Journal the other day about “Uncertain Leadership In Perilous Times.” And what caught my eye was the last part of this quotation.

Exactly what is needed now in terms of America’s defense, what is needed to deal with a possible parade of horribles? What might be needed down the road? There is a possible grim short term, and a possible grim long term. Who is thinking all this through? Are they getting the resources they need?

We saw the difficulties that the industry went through in the 1980’s and 1990’s as a result of low oil and gas prices. Systemic overproduction was a phenomenon that was not identified or addressed. It exacerbated the difficulties of the industry and could have been so easily rectified. A long and difficult period that devastated the financial condition of the industry, destroyed the investors confidence and ruined people’s lives who had invested their careers in oil and gas. I was fortunate to have never been laid off during that time, however, the people who remained were permanently changed into risk averse, timid souls. Not what the industry needed but probably the genesis of why the industry hasn’t taken any action. These timid souls have evolved to become the bureaucrats.

What I want to know is where are the resources that Peggy Noonan is stating “Are they getting the resources they need?” People, Ideas & Objects is running short and the transition to a viable going concern needs this support now. We have a job to do, one that has been clear to most people for almost a year now. And I think we can establish the fact that the bureaucrats will never do anything to support us. I am frustrated by the pace of this transition and my present inability to make this transition real.

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 In, Who's Out

I think the big guys, Exxon, Shell, BP and Chevron have decided to sit this one out. They are going to pass on the development of the Preliminary Specification. Which is typical and what should be expected of them. They don’t let the outside world necessarily affect them. They are masters of their own domain. And that is ok from the point of view of our progress. We are focused on the higher level beings who are the ones with the money the producers will come begging for in short order. The investors and bankers that are as overjoyed with the performance of the industry as we are. It is they who we look too to fund the transition from the bureaucratic oil and gas industry to the dynamic, innovative, accountable and profitable one. We speak the same language as those investors and bankers, unlike Exxon, Shell, BP and Chevron.

Has anyone noticed that we’re still producing just as much oil and gas as we did at this time last year? Bureaucrats do not change, it is impossible for them to do so. The typical oil and gas company is configured just like the one that was established in 1932. They use computers today, however, they use computers to feed the people with the work. It should be the other way around. In November 2016 we will see the exact production profile that exists today and the same complaints from the bureaucrats. Another round of layoffs of people’s jobs will be cut for good measure, because we all know that people are the issue.

It is our community of users and their associated firms the service providers, and People, Ideas & Objects software development capability that generates significant monetary differences between our business model and the status quo. Our focus on the user remains our key priority at People, Ideas & Objects. It is the area that we are able to keep our development timelines on track and this project moving forward. If we had our budget secured we would be spending the same time and energy on user community development as we are today. Therefore we are in essence not losing any time in these, what can best be called ambiguous days. I would encourage everyone to read the user community vision and why the user holds such a critical role in the future of the oil and gas industry.

The producers will try to ride this downturn out just as they have done so many times before. Creating losses in this business is just part of the reality of being in the oil and gas industry, so they will say. Where do I invest? Sounds so exciting! Each day the local news has some disheartened individual who has been laid off from the industry and how they’ve had enough. They’re moving on, away from the industry. What these producers don’t seem to understand is that there are alternatives to investing in their firm and there are alternatives to working in oil and gas. Although you might say to the press that you’re making money at $50, your audited financial statements are calling you a liar. But they’ll argue those are sunk costs. And say so in front of the banker and investor that they want to volunteer their money to join that big pile of sunk costs on their balance sheet. This attitude in the face of such a dire financial situation is the delusion at full scale and we are close to that end. You can’t run a business like this in the 21st century. People will move on, jaded by the experience, never to return.

This will be the issue that the industry has to face in the next 10 years. Where to get the capital and who will work for the industry to meet the energy demands of society. People, Ideas & Objects can solve the first part of the difficulties, establishing a business model in which people will invest. The people will return when they see that the industry has the maturity to earn a profit on each producing property each and every year for a good decade, before they’ll even consider working for oil and gas.

And maybe that is the point. The maturity of the industry. You have self interested bureaucrats who lost sight of the purpose and reason for doing what they were doing. And even with the issues staring them in the face, and People, Ideas & Objects barking out a solution, they chose to do nothing. Feathered their nests as the destruction became evident and the problems became too big to solve by their means. And eventually we’ll see them just exit out the backdoor to a retirement where it’s sunny and warm.

People, Ideas & Objects our user community and service providers will provide these oil and gas investors and bankers with a profitable industry through the Preliminary Specification. Where the focus is on providing the producer with the most profitable means of oil and gas operations. It is through our price maker strategy of the decentralized production model that we are able to generate the profits that will enable the producers to fund their own capital investments. Something that a mature industry does. One that doesn’t dilute its shareholders with ever expanding annual share offerings to fund their capital budgets. That is how we will enable the producers to be profitable and earn the funds necessary to maintain their profitable production profile. A completely different attitude and understanding compared to the lunacy and corrupt bureaucracy of today’s 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.

Standing at a Crossroads

That is where we are today in oil and gas. At a crossroads between the past oil and gas industry and the new dynamic, innovative, accountable and profitable industry. I might be selling my book, as they would say, when I say the choice is one or the other. Chose the future and implement the People, Ideas & Objects Preliminary Specification, our user community and service providers. Or stay the course with the status quo bureaucracy. There are many reasons not to want to change to implement such radical surgery to the industry and to each producer. But then there are those commodity prices. I am not of the belief that we have time to debate the point. The industry needs to have a plan that they can show the financial community of how they will operate the industry in a profitable manner. Shale has introduced a new dynamic into the oil and gas industry and as it stands shale is not a commercial venture. And will never be under the current administration, the status quo bureaucracy.

Here we have the situation where the business model has been developed in People, Ideas & Objects. And because it challenges the established bureaucracy in terms of its existence. It remains unresolved in the marketplace. Despite the obliteration of over $700 billion in market capitalization of the top 14 producers, and the potential of trillions of dollars in future oil and gas revenues. The bureaucracy must have its way. I have identified the issue in the marketplace. I have created the solution to that issue in a timely fashion. And you can not imagine the difficulty that I have had in bringing this solution to this point.

There is no respect for the ideas put forward by People, Ideas & Objects in the mind of the bureaucrats. They just don’t care enough about the oil and gas business to give a damn. Remember what I continually say about them hightailing out of here when the heat gets too much to handle. Anyway they’re more than capable of doing everything on their own without the assistance of any outside help. And this is the trend that we see in all industries where the bureaucrats start copper mines in order to have the copper available for the computer chips they’ll manufacture for their employees computers that they also manufacture. The fact is the bureaucrats can’t run the oil and gas business as it stands in 2015. This is evident in the current financial status and future of the industry. It is time for someone to step aside, their ways and means expired in the last century. I think it was 1962. I remember seeing the flash just after sunset.

We need to focus on what we are able to do within the organizations that we establish. An oil and gas producer with the competitive advantages of their earth science and engineering capabilities, and land and asset base have a large domain to cover. Providing the oil and gas producer with the most profitable means of oil and gas operations is also a broad scope. However review of the Preliminary Specification shows that we are establishing a sub-industry to deal with the scope and scale of the competitive advantages that we are undertaking. No producer today would set out to differentiate their offering on the basis of a more effective administrative and accounting capability! It is therefore the wise thing for them to offload from their domain of capabilities and leave the administration and accounting to someone who can compete based on an enhanced competitive advantage. One such as specialization, the division of labor, automation, having the computers work for us and innovation based on administrative and accounting expertise. Add to this the software development capabilities of People, Ideas & Objects and you have a dynamic capability in the business model of the oil and gas industry. So that when things change, the industry will change. No more muddling along waiting for things to inevitably change to a positive situation.

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 Walking Dead

Time is wasting. Industry has little time in which to present a plan to its investors and bankers on how it will proceed with a viable business model. Everyone can see that this situation is not workable. Are we just going to muddle along for year after year in this malaise? No, we are not. We are going to continue until such time as the cash runs out. At the rate of cash burn today, and the limited resources of the industry, all but the integrateds will be out of business in six months. Action therefore is needed to be taken within the next six months to do one of two things. Come up with a plan. After all McKinsey doesn’t have one. The chance that you can develop a viable plan in six months, what took me 25 years, is next to impossible. Or you need to subscribe, quickly, to the Preliminary Specification, our user community and service providers. Then, one way or the other, you will be able to present a viable plan to the investors and bankers on how the industry will get itself out of this mess and rebuilt as a viable going concern. If the bureaucrats didn’t believe that the Preliminary Specification was a viable plan, then why did they hire McKinsey to copy it?

The full $6 billion for software development is required upfront. So much harmony and trust has been built up between the bureaucrats and People, Ideas & Objects over the past ten years. That I’m not going to undertake the development of this system without the funds upfront. I don’t need bureaucrats being distracted by some shiney object halfway through and cutting our funding. Or doing that just to show it’s unworkable. I’d be a fool to proceed on that basis. If I rely on the producer's goodwill that they will provide the money down the road, they also may not be there. Therefore the full budget is necessary to be provided before any software development work is done.

It used to be that I thought if a company took a hit to their stock from a single “event.” Where the impact of that “event” on the company's stock was in the range of greater than 50% of the market capitalization. Then that company was the walking dead. The ability to recover would require that the “event” be identified as being a significant occurrence to the history of the firm. And dramatic remedial steps taken to rehabilitate the company. I have only seen Apple return from this type of “event.” Oil and gas producers are in the situation where approximately 75% of them have achieved this milestone. What we therefore have is an industry that is the walking dead. I can’t recall this occurring in any industry outside of a financial crisis. This “event” is evidence that the industry is operationally incapable and there is no faith in the management of the industry.

We can sit around and debate the controversial aspects of my words but the industry doesn’t have that time. It needs to act by funding our budget. And slowly earn their credibility with the investment and banking community by purging those responsible for this crisis.

Or maybe I’m being too melodramatic. A distinct possibility. It takes a lot of effort to motivate a bureaucrat to act. Usually the self interest of their financial position is what works. However they know the writing's on the wall, and it has been on the wall for many years, and they are the odd man out in this 21st century way of working. They have put up the good fight against People, Ideas & Objects. Thrown the resources and value of the oil and gas industry into the garbage can for their own self interest over these past ten years. Expecting them to respond to this “event” is not going to happen. Their expectation was to exit when the heat became unbearable, that's what bureaucrats do. Cut and run. I hope I’m not the only one waiting for someone else to act.

I’m probably the worse person in the world to determine the timing of all these changes. Too invested in change. But at what point do we act? Just as the frog is sitting in the slowly heating skillet, it’s in industry's best interest to jump sooner rather than later.

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. 

Shale is Viable

One of the falsehoods that the bureaucrats have been hiding behind is their bloated balance sheets of the producer firms. People, Ideas & Objects have been hammering on the oversized balance sheets for a number of years and have taken significant flak from the bureaucrats, with the requisite number of giggles. If I lined up all the bureaucrats that laughed at me in the past ten years I could walk across the pacific. What they are finding here today, in this wonderful financial environment that they’ve created, is that their balance sheets, the things they thought were so magnificent and significant, are really quite useless. And in most cases, with the large asset write downs that some producers are getting out of the way before the big rush at year end, turning out to be the proof that the past decade has been a complete waste of time and money in terms of their administrations. Who would've thought something like this would have happened? Giggle.

The phenomenon of the bloated balance sheets has shown that the bureaucrats have obtained the same characteristics of each and every twelve year old girl. They can spend money. If you take the “profits” that they may have reported in the past ten years and look at the size of the write downs that are to be taken for fiscal 2015 they come to a handsome negative number. If you take the current working capital of the industry, outside of the integrated producers, you have a handsome negative number. This does not mean that the past ten years have been for nothing. There are the many handsome cabins and boats that the bureaucrats have. And an assortment of other luxuries. The fact of the matter is the losses that are being realized on the current production, I am talking about the gross margins of the business, another handsome number that is negative, there is nothing of value that is or has been generated in this business.

What good did bloated balance sheets ever provide any producer? Evidence of the ability to spend money. Check. The evaluation of the bureaucrats performance is what accounting is all about. In oil and gas it has become fashionable not to consider “your sunk costs.” It is this thinking that has lead to the overproduction problem. If everyone is evaluated only on the gross margin of the business then everyone is going to rush in to invest. Overinvestment and overspending lead to overproduction. In the past ten years no one has considered the costs of the capital that went into exploration and development because those were “sunk costs.” Making an evaluation on this basis is what a fool would do. What the producers did on top of this foolish behaviour is they capitalized everything that moved. Generally 80% of the overhead of the producers General & Administrative costs are also capitalized. PennWest even tried to capitalize its royalties. Which shows the systemic desire to capitalize as much as possible.

The appropriate position or attitude would be / is to remove these capital costs from the balance sheet and have them hit the income statement as quickly as possible. Evaluate the performance of the management on a reasonable, going concern basis. That way the performance can be evaluated appropriately and the future decisions made on the basis of actual performance. Oil and gas producers have been reporting bloated profits because they never accounted for the cost of capital by leaving all of these costs on the balance sheets. The limit to the amount that they could record as assets was, and is, the sum total of all of their reserves times the current oil and gas price. Which is the sum total of all future revenues! Ludicrous. As it stands today with the write downs that are being realized in the industry. The balance sheets will still be bloated because they will still represent the sum of all of the reserves times the current oil and gas prices. Ludicrous, or did I say that. The fact of the matter is the sum total of the value of the entire industry is south of zero. It loses money therefore you’d have to pay to get rid of it.

If producers realized the costs of the capital assets on a reasonable performance basis, these capital costs would be replaced on the balance sheet by other asset types. Asset types that include cash, accounts receivable, short term investments and other working capital items. That is because they would have had to sell their products for a profit, which generates cash. All that the industry has done in the past ten years is subsidize the consumer of oil and gas by fleecing the investor.

This hasn’t been a business since the 1970’s when the SEC approved Full Cost accounting. This is the net result of that decision, financial armageddon and systemic overproduction. In defence of the SEC they define the outer limits of what is acceptable. The auditors should have said that it is unnecessary for the entire industry to push the outer edge every year. Pick and choose your own culprit from these three groups.

What the Preliminary Specification, our user community and the service providers provide the oil and gas industry today is a go forward basis in which to operate the industry. One that is reasonable and evaluates the performance of the producer in an effective manner. Without the People, Ideas & Objects and our associated communities the oil and gas industry will continue on in this spending exercise with the same discipline as any twelve year old girl. Shale can be profitable, but only with our system in place. The industry therefore has to choose, and quickly, because in six months they will otherwise be out of business. Do they have a sustainable plan to operate the industry on a go forward basis? With the Preliminary Specification, our user community and service providers that’s a definite yes. But they’ll need to decide, and soon. If they don’t have a plan in place in six months, fill in your own blank here...

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. 

Some More Cold Hard Facts

It is the user’s, our service providers and our developers who provide the oil and gas producers with the most profitable means of oil and gas operations. It may be altruistic to state this, however I see it as a clear division of labor. Producers will find and produce oil and gas. And we will make the producers profitable. Without us, there is this, this malaise and bankrupt style of operation that has been going on in natural gas for six years and in oil for the past year. Maybe bureaucrats will figure out what to do. I’m banking on the fact that bureaucrats have never been able to change their stripes, like a Tiger it fails every time. I expect them to hightail it out of their positions when the heat gets too much for them to handle. That is their history, look it up in the history books. Creative destruction is the process that is well under way in oil and gas. If producers don’t have a viable plan in place by the time they run out of money, about six months for most producers, then their toast.

So it's goodbye bureaucrats, hello users and service providers. We’ll be taking over soon, as soon as we build our organizations and applications. Before we can do that however we need to secure our budget. You would think with the state of affairs that we would be able to do that! No, bureaucrats are stubborn people. It's not their money their burning by incurring these losses and it's not their profits that are in jeopardy in the future.

I also expect that when we get to the point where we take over from the bureaucrats. They haven’t trashed the place like some adolescent punk rockers. I expect the place to be clean and neat, the floor swept and mopped, the garbage taken out and the place in as good of shape as is possible. The bureaucrats are failing in their responsibility to appropriately manage the business, that doesn’t mean that they can just trash the place and leave a mess behind for us to clean up.

I’ve heard a number of times now that what the industry needs is a vision of how to deal with the difficulties that it's in. And it has one in the Preliminary Specification. If that is inadequate then you can start the process and end up with a workable model in about 25 years. I wish you luck and hope you enjoy the ride. It truly is an adventure. I think that whoever invented copyright law was a genius of the highest order. But that’s besides the point. In addition to leaving the place in good condition once the bureaucrats leave I expect even more from the producers. Let's assume after all the noise and argument, the People, Ideas & Objects Preliminary Specification fails. I’m sitting on an island in the pacific drinking pina coladas having the time of my life. With the configuration of the budget I can guarantee that. The question that needs to be asked is what will the producers do then. It is this opportunity that they have today, the Preliminary Specification, user community and service providers that the producers need to be involved in. Don’t expect one individual to be the solution to all of the difficulties. I’ve done my hard work, the producers hard work is to come.

And that hard work will be working with our user community participants and detailing what it is you need in your producer organizations now and in the future. Don’t expect someone to walk up and provide you with a custom tailored suit without ever seeing you. The producers direct participation with our user community, the only manner that you have to deal with your needs, is the key to the success of your organization in the future and the success of People, Ideas & Objects Preliminary Specification.

This is the structure of how successful systems are developed, and how successful organizations are managed in the 21st century. The producers have trillions of dollars on the line here. If they expect someone else to deliver the solution to them. A solution that meets their unique organizational needs and delivers that value without their input. Then I have some property in Florida that I’d like to sell you.

The only thing worth owning here in the 21st century is Intellectual Property, or a license to Intellectual Property or working for someone who has Intellectual Property or a license. It’s not enough to own the oil and gas asset anymore. You have to own the oil and gas asset and have access to the software and user community that makes the oil and gas asset profitable. Now and in the future. This is the new reality and the source of the difficulties that I have had in delivering People, Ideas & Objects to the marketplace. The bureaucrats could ignore me before, but now they can’t because they messed it up so bad. Now the search for a vision usually takes what is available in the marketplace. Anybody see any other viable business models floating around?

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. 

How's the Weather?

I think I’m on record to state that all is well in the general economy and we’ll have smooth sailing from here on. That 2008’s financial crisis shook out the demons that were present and we have a clean slate once the Fed and its cohorts begin to remove their quantitative easing initiatives. Here’s some bad news for the oil and gas bureaucrats in the industry. I’ve changed my mind in terms of the overall general economy. I think that the interventions by the Fed and others have to cease as soon as possible in order to put some reality back into the financial markets, and health into the overall economy. Zero interest rate policies are for crisis, not for the day to day economy. We have gone on too long waiting for the Fed to act to raise interest rates that no one believes they will. And when they do act it will be so small that the effect will be minimal, or they will only do one rate increase and be done. I think I see the effect of all of this quantitative easing starting to create the difficulties that we would expect to see in such a false economy.

What Ben Bernanke did in 2008 and subsequently was needed and brilliant in my opinion. The continuation of that however beyond 2011 has been unnecessary and damaging. I would go on to say that it might be that the Fed has been politically motivated in continuing without raising interest rates for so long. Whichever, the time has passed and we need to get to a normal economic environment as quickly as possible.

The thing that changed my mind is this short video from Bloomberg. We’ve all known about the events that are being discussed in the video however, I didn’t realize the extent, frequency and significance of each of these. Obviously the transition from the current false economy to the one that we need to get to is not going to be as smooth and as natural as we would think. If there is this much turmoil in commodity, equity, bond and currency markets, and it has been building for the past five years, there will be a day of reckoning. I think the day of reckoning will be triggered by the inaction of the Fed to make the necessary changes to increase interest rates. They say that they will be making the change in December, but they have been saying they were making the change for years. And when the time does come they make up an excuse not to act.

The great depression was, in most of the history books, a result of a failure of government. We have had a lot of change in the past seven years. None of it positive in my opinion. The New York Attorney General is said to have launched an investigation into Exxon's climate change practices. Essentially looking to prosecute it for what it knew and what it believed. Students at Yale are protesting free speech and dedicated people are thrown out of their jobs for not acting decisively enough in Missouri. Hope and Change successfully implemented. The failure of the Fed to have acted in the objective manner that is required has been questioned by many people. I can’t be the only one looking at the United States with a curious look on their face. If a failure of government were to occur, in my opinion, the federal government of the United States would be my choice as the prime candidate.

We need to focus on the elements that are important to our future. Ensuring that society is provided with the energy that they demand. The only way to do that is to have a healthy and profitable oil and gas industry. What we have today is at least ten years away from being in the position of contemplating that. Thank your bureaucrat for that. If we have a downturn as a result of the disruptions in the commodity, equity, bond and currency markets. What else is there? It won’t be just the oil and gas industry in need of a fix. We’ll be starting over from an economic base that is at a pretty low level of economic operations. Energy will be how we continue on. There is a lot of pain being experienced in the oil and gas industry today. People are paying the cost for the inaction of the bureaucrats regarding the overproduction of the commodities. As bad as this storm is, and it is the worst storm we have experienced in oil and gas. I think the forecast is for even worse weather.

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.