The Walking Dead

There is a tradition or culture within oil and gas to treat ERP systems as necessary but costly. Therefore, the thinking goes, they need to be minimized in terms of their implementation within the producer firm. The money that is saved can then be used to drill a number of new wells and contribute to the bottom line of the business. And we see how that strategy is currently playing out within the industry. You reap what you sow and all the big ERP players moved out many decades ago. Writing off the oil and gas ERP marketplace as a dead zone. I have asserted that the current overproduction and oversupply can be attributed to a modern day ERP software bug. That is, the industries ERP system offerings are unchanging and unchangeable, essentially unable to accommodate the industry issues. At the same time the wells that were drilled, instead of being employed to eliminate the software bug, are losing money at record pace.

Until we stop dealing with the industry as just an engineering exercise and begin to start managing it as a profitable business we will continue with the status quo destruction. The number to remember is 17% of the shale based reservoirs are located in the United States. This can begin when the industry adopts the Preliminary Specification and as a result has the production discipline that is needed to correct the overproduction and oversupply. There will then be two types of producers in the industry. Both of which will be using the Preliminary Specification. The first group of producers will be the new startups that we will begin to see more of. And the second set will be the existing producers which we can now affectionately call the walking dead.

People, Ideas & Objects recommend that all future oil and gas development be done through startups. The strategic competitive advantages are phenomenal in comparison to the walking dead. Any investments into these startups provides 100% pure equity or debt exposure for the new investors. Whereas the investors face long lines of debtors and other equity interests in the walking dead that dilute their investment to negligible, if any, value. The other aspect is the cash commitments to these debt and equity holders in the walking dead will leave little or nothing left for any new investor. At best, any new investors cash will be used to pay down old debt of the walking dead producers. The walking dead’s competitive cost and payment structures are permanently uncompetitive.

Recently Blackstone announced the formation of two new startups in the industry, (here and here) using this startup strategy to their advantage and investing $1.5 billion. It's not that Blackstone are necessarily listening to People, Ideas & Objects it's just good business sense to do adopt this startup strategy. It is however true too that we have been in discussions with Blackstone since November 2015. This strategy also enables the startups to participate in the fire sale oil and gas property marketplace. Recall Chesapeake’s recent disposition of its Barnett shale assets for no cash consideration other than the opportunity to get out of their monthly cash drain.

This industry configuration provides the startups with the opportunity to leverage the existing operatorship capabilities of the walking dead. All at the minimum costs of the overhead allowances being charged. Giving the startups the time to build their own capabilities in the long run. The problem with this strategy is that People, Ideas & Objects assessment of our Revenue Model is based on the production profile of the producer. Meaning our revenue will need to come from the walking dead. Maybe I should find a better name for this class of producer and be more diplomatic. Never.

The walking dead have an obligation to their shareholders and to their debt holders. They have an obligation to their staff and the people that they conduct commercial operations with. I think their classification here is appropriate and they need to begin to operate their enterprise as a profitable business and not just an engineering exercise. The time for niceties passed a long time ago and it's time we all started to move forward. It would also be my opinion that those who would find this post offending wouldn't see the phenomenal business opportunity being spelled out here. So yes I do see the walking dead being the primary source of our revenues. It’s the only way they’re going to achieve profitable operations.

If industry was disappointed with my tone then maybe there is another way in which to deal with it. I have worked on the research, development and business regarding the Preliminary Specification since 1991. I have funded these developments myself personally since 2003 and have received nothing but a sound thrashing from industry since August 2003 when I developed the use of the Joint Operating Committee as the key organizational construct. I have been forced to make it a full time endeavor since that time as I am not welcome, or persona non grata in the industry. I believe I have built significant value for the industry and the industry is in the condition that it’s in due to the reasons that I have identified and solved in the Preliminary Specification. The person responsible for solving what can arguably be the most significant issue in oil and gas, ever, is persona non grata! I can be as harmonious as the next guy. I just want to build the software and solve this problem. Throw a little cash this way, producers have nothing to lose.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Willful Destruction

I have repeatedly claimed that “market rebalancing” is the willful destruction of value in the industry. What industry would go about deliberately destroying the productive deliverability and capabilities of its industry as a strategy and “benefit?” The passivity of the current administration is beyond belief. They settle nothing and justify anything. Looking at the situation in natural gas it has been six years where production has been unable to generate any profits. Producers need to account for these losses that were reported in 2015 and are continuing in 2016. These losses increase the costs of their current production by adding the amount of the losses to the reserves costs. These costs are represented by the debt and equity that was issued to incur the development of those assets. And must now account for these historical investments and losses made by the producer by way of loan, bond and dividend payments. Putting the current producers cost and payment structures outside of any reasonable interpretation of a competitive cost structure.

The point in market rebalancing is to reduce the supply in the long term to better match demand. And based on the EIA’s recent Natural Gas Weekly Update we see that the shale gas volumes are behaving in the “desired” manner. In early 2016 shale gas formations peaked at approximately 44 bcf / day and have declined to the current 41 bcf / day. Conventional gas volumes and Canadian imports seem to have made up the difference. Total supply is 79.9 bcf / day which is consistent with last years. The graph below shows the decline clearly. What can also be seen is that the declines appear to be mostly from the Marcellus, Haynesville, Eagle Ford and Barnett shale formations.

If I were a producer I would not be jumping up and down at this time. This does not deal with the issues that the industry must address in any sense of the matter. The first issue is the existing producers uncompetitive cost structures. Prices could skyrocket and they will not defer the losses and cash costs that have been incurred in the past. You carry your legacy with you. At some point you will need to address the past. Producers cost structures and cash demands will force the producers to demand much higher commodity prices in order to be profitable. Or even to be cash flow positive, which is the terminology they use in the industry. You have debts and equity positions that need to be addressed. Those will demand cash to be distributed from an ever smaller pool of “rebalanced” market production. Investors are aware of who they line up behind. If they see a long line of debtors and other investors feeding at the trough, what’s in it for them if they dump their money in?

The second issue of course is that 17% of shale formations exist in the United States. Those 17% have created the global collapse of both the oil and gas prices over the past decade. What happens when the countries that have the other 83% of the shale formations begin to use their resources. Already the LNG market prices are in line with North American natural gas prices. A big change from when everyone began developing the multi-billion dollar LNG facilities to access those export markets. Another look at that graph and we can see that in as little as six years, from 2010 to 2016, production of natural gas from shale increased from approximately 10 bcf / day to 44 bcf / day. A period of time when the natural gas business was on its knees. If prices do come back, how long will this natural gas production decline curve go on? Will it be measured in years or minutes?

It is the same situation for oil. Producers need to think of 17%, and only 17%. The way in which they operated their firms in the past won’t work anymore, your losses are telling you that. We have shifted from a world of scarcity to one of abundance. Without production discipline being exercised at each and every producer the industry will continue to be a no man zone. Production discipline based on profitability is the only reasonable, fair, equitable and manageable way in which it can be implemented. Alternatively you could have the government come in and tell you which areas produce and which areas won’t. How would that fit? The Preliminary Specification enables the industry to implement production discipline based on profitability. It is the only way forward in the industry, everything else is a an exercise in further destruction and delusion.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Ready To Go

There is always an easy reason why the Preliminary Specification can’t succeed. Whether that reason is collusion, or some other simple excuse that fits today’s headlines. The question needs to change to ask “what if the producers can’t survive.” Leadership and action are needed to be taken in the industry. Time has been taken to explore the remedies inherent in the current organizational structures. “Market rebalancing,” hoping and waiting have not achieved anything other than the complete atrophy of all financial value from the industry, and its destruction. The issue we need to address is that the United States holds 17% of all the probable shale reservoirs. We live in an era of energy abundance. To achieve the change we desire we need to change the direction that we take in the industry. That direction is the Preliminary Specification.

Producers don’t believe the Preliminary Specification scope and scale can be approached as it is currently configured. Yet it is that same scope they attempt to undertake within their own operations. The difference is that People, Ideas & Objects will have the resources from our budget to deal with both the scope and the scale of our application. And is it reasonable that producers solve the scope and scale within each producer firm independently and repeatedly? The current producers don’t have the resources to deal with either the scope or scale appropriately which has led to what I have termed a modern day software bug. That being the inability of the oil and gas producers to deal with the issues of the industry due to the fact that their ERP software is unchanging and unchangeable.

It doesn’t take much effort to see the devastation that has occurred in the industry. In the cities where oil and gas operate there are severe economic hardships being realized due to the difficulties in oil and gas. The amount of revenue that has been irretrievably lost over the past number of years due to the decline in oil and natural gas prices has been substantial. These losses have been an element of our value proposition for the producer to consider in terms of dealing with the costs of implementing the Preliminary Specification. Oil and gas price increases would be realized on a go forward basis once the Preliminary Specifications price maker strategy was implemented across the industry. Enabling the commodities to seek their marginal costs and provide the industry with profitable operations on a consistent basis. Leaving these extensive periods of economic malaise behind as just really bad memories, permanently.

After all the efforts of everyone in the industry we find that it is more than just an engineering exercise, it's a business. It needs to be run as a business and those business ideas need to become the way in which the industry is managed. “Price maker” is not collusion, as I repeat once again. It is an economic principle to define the characteristics of certain products such as oil and gas commodities. If we adopted strategies that were consistent with the characteristics of the commodities then we would leave these miserable times behind. There are trillions of dollars that are being lost due to the current inactions of the producers. All as a result of the superficial analysis that the Preliminary Specification is collusion, or I said something that upset someone at sometime, that this is that or that is this. This industry is a disaster and we need to fix it. Producers have run out the clock and exhausted their resources in terms of time and money. There are no ERP system alternatives for which the producers can have the research completed within the next decade. The Preliminary Specification is available to be developed today.

We enter a window of time in early September where people’s attention can be focused on the development of the Preliminary Specification. If we had the financial resources to do so. This is the most natural time to begin a project such as this, and the most effective in terms of delivering our software to the producers in a timely manner. We have been focused on developing our user community for more than two and one half years. This has been our priority and will continue to be once we’ve secured our budget. We will only deliver a quality product. Which demands that these be user community based software developments. We are waiting on industry and are otherwise ready to go.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Taking a Weeks Vacation

No posting this week. 

Well That Was Unexpected

Some interesting thinking is being done over at Vox.EU.org for once. Not that they don’t always do good work. It’s just rare to find any thinking in oil and gas that doesn’t just parrot the “market rebalancing” theme. They state that “A very incomplete global mapping suggests a US shale oil share of no more than 17% of a huge geological wealth.” And that “The advancements in horizontal drilling and fracking can also be applied to conventional oil extraction.” Kind of puts the argument about “market rebalancing” into perspective doesn’t it? It also makes the entire discussion of current inventories of oil and gas on hand in the U.S., those numbers that are eagerly awaited each Wednesday and Thursday moot. If the world has these types of resources on hand I can state unequivocally the oil and gas industry will never be profitable. The cash drainage will continue unabated for the remainder of the century.

We are on a dead end street travelling at 300 mph with no brakes and the brick wall is well within sight. Does anyone have a different scenario that they can paint? Is there something behind the vision of “market rebalancing” that is not permeating my thick skull? What’s the plan? How do people participate in the oil and gas industry without having to destroy their life savings, their careers and everything else. Is there a pool of unintelligent investor's that is as deep and as wide as the Pacific and the Atlantic oceans that I am not aware of? Just exactly, in light of these facts that the world now has horizontal drilling and fracking, will the industry proceed?

Muddle along! Nothing to see here. That’ll be the response to these facts that speak to the futility of proceeding without the Preliminary Specification in place. Creative destruction is the only answer to how the industry is rebuilt, brick by brick and stick by stick. What exists today is too vested in the status quo and is unable to deal with the situation on the ground. They started losing money six years ago when the natural gas prices were affected by shale. Their losses began to significantly increase when oil too was affected by the abundance of oil from shale formations. These losses demanded cash to continue which caused the investors and bankers to pause. We are now in a phase where the market value of oil and gas properties are being diminished by the sheer volume of properties being made available for sale. Chesapeake dumping their prized Barnett shale assets for nothing. Just to get away from the cash drain. But let’s be honest, next week's inventories may be down from their record volumes.

Our plan enables the industry to refocus on energy independence on the North American continent. Something everyone, even investors and bankers, can dedicate themselves too. In an era where the resources are as abundant as they are, this sounds contrary to the reality that has been painted here. Natural gas is a continental price. And the volume of oil produced by the U.S. is material to the world demand and supply. We do control our own destiny in the oil and gas industry. This however, is only the case if the industry is profitable. And real profits, not those SEC induced accounting profits of the past four decades. What the industry needs to do is to adopt the production discipline that only profitable production is produced. Which is attainable through the Preliminary Specifications decentralized production model. Then and only then will the markets response attain its marginal prices. Until then we have these facts and these outcomes.

There is one material change as a result of the information from Vox.EU.org. And that is the market for People, Ideas & Objects Preliminary Specification is global and not just North America. We however are not contemplating that at this time. The issue in North America is the one we are focused on and are capable of dealing with. Maybe we will be able to deal with the others in the future. I am not going to do anything about that now, we have a job to do, let's get it done.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

It's a Software Bug

I remember in the late 1990’s fibre optic cable was being laid everywhere by companies you never heard of and haven’t seen since. This was part of the .com boom and everyone and every company had to be on the Internet. For the past decade, the iPhone will soon be ten years old, it’s been phones and Apps. These devices have occupied more time than can be calculated. But you can see the boom that was brought about by this trend in Information Technology is waning too. So what’s next? Clearly, in my opinion, its ERP systems. Businesses have avoided the thought of doing another ERP integration, at least in oil and gas, for more than a decade. The word on the street is that ERP is the area that will build significant, quantum levels of value for a business by defining and supporting new business models. ERP systems are digitally disrupting businesses and are the next big trend in Information Technology. Everyone is getting into the game, even Google apparently.

People, Ideas & Objects value proposition certainly qualifies in terms of delivering quantum levels of value to the industry. We are still able to claim that we provide at least $25.7 to $45.7 trillion in incremental value over the next 25 years. A time when the industry will undertake the objective of energy independence on the continent based on the profitability of the producers and the service industry providers. We do this by implementing the ERP system that we call the Preliminary Specification. An eleven module oil and gas system design specifically for the issues that exist today, and the frameworks that form the industry. Enabling the Preliminary Specification to also provide the industry with the ability to deal with the issues and opportunities that we will face in these next 25 years.

These are not your grandfather's ERP systems. My two concerns right now are how do we get the user community to think. And once they begin to think, how do we get them to think faster. The speed of the industry's evolution and capabilities in terms of its throughput and innovativeness will be dependent on the quality of the organizations that makeup the industry. It’s not so much the case at the moment, but it will be in the very near future. The capabilities and throughput of the producer organizations will be dependent on the quality of the ERP software that these organization use. Today’s oil and gas ERP systems are the beginning of this trend. They are wholly incapable of dealing, or providing any solution to the issues and opportunities that the producer and industry are facing. They have locked, frozen and cemented the organization into an unchanging and unchangeable structure that has fundamentally failed their producer organizations. This is the new definition of a software bug.

One thing about Information Technology trends is that everyone wants to be part of one when the time comes. It’s early still, but we are looking for the leadership component that will be necessary to drive the changes needed in the oil and gas and service industries. Our user community participants are the only ones who can change the software. People, Ideas & Objects software developers are deaf, dumb and blind to all others. We only listen to our user community. It is the user community member who will form the service provider organizations that provide the process management to the industry when our software is operational. This is a significant business opportunity for the user community participant. These people will have the constant stream of part time revenues that they will earn as a result of their work in the user community. And they will also earn their business income from the service provider that they own and operate. This is the new ERP Information Technology trend and the digital disruption of oil and gas.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Production Discipline

If the market for oil and gas properties has collapsed, which is inevitable, then the last source of cash to the producer has been withdrawn. The next step will be that we need to begin the difficult process of rebuilding the industry stick by stick, and brick by brick. Muddling through, hoping and waiting for the market to rebalance have destroyed everything. There is nothing of value left in which the industry can use to buy time and continue to do nothing. The need for action to remedy the oversupply and overproduction is the only concern that can be on the minds of anyone in the industry. The continued, sustained focus on rebuilding the industry over the short, mid and long term is the only thing that is going to get us through these next few years.

Back in the 1980’s and 1990’s we saw the producers continue with poor financial performance as a result of low oil prices. Gripping constantly about how bad the times were and the effect it had on their financial performance. It’s the only thing you heard. Quarter after quarter, year after year. Nothing was done, ever, to mitigate the overproduction issue then, and nothing has been done so far today. The one big difference between then and now is that it was only oil that suffered from oversupply and overproduction. Natural gas you could live off of. Today natural gas has been depressed for six years with no sign of any break in the difficulties. And oil is moving to its third year of overproduction with only gripping coming out of the producers.

This “muddling through” strategy as it is known in the industry is a strategy of leaving things alone to work themselves out. And we see its not working. As I stated yesterday it only provides value 25% of the time in the industry, the rest of the time it’s devastating to those who chose to participate in any form. I think we need a new approach. One that assumes that the energy that we produce in the 21st century, and the value that oil and gas provide the energy consumer. With its irreplaceability, and the fact that it can not be substituted for anything else. Should we therefore not ensure that we at least produce it profitably? And profitably from the point of view of considering all the costs. Not just the cash costs it takes to produce. The industry has been such a financial disaster for so long that it is managed on the basis of its cash costs. The actual, full costs are never considered because it’s in a state of crisis at all times.

Shale introduces the dichotomy that will permanently keep the industry on its knees. Producers will always pursue the greatest prize that they can. Shale delivers the reserves that make any producer want to earn that untapped fortune that lies in wait. Shale is very expensive which demands production. Shale production is prolific, like the reserves. Without production discipline across the industry, based on profitability, there will be no profitability for anyone. The only means to obtain production discipline is through adoption of People, Ideas & Objects Preliminary Specifications price maker strategy.

Along with our user community and the service providers we have a plan to deal with the oversupply and overproduction issues and begin the steps toward energy independence on the North American continent. Producers need to participate in that plan in order to survive. I am known for my bold statements. Participation in our plan, it is believed, would enable investors to see that the plan in place provides for the long term profitability of the producer and future expanded deliverability. Something that they are more than interested in participating in.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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. 

Take It, It's Free

People should hurry! Chesapeake is giving away their crown jewels! Their Barnett Shale assets were offloaded just to relieve them of the costs of carrying them. I think we will begin to see more of this type of activity as we proceed down this rabbit hole. If it takes cash to produce, and the financial losses are as significant as they are today. Then the value of the assets are really nothing. Those who cherish their bloated balance sheets may be surprised by the fact that the market values their properties at much different valuations than what they’ve recorded them at. Markets and accounting are two different worlds. You need deep reservoirs of cash, strong investors and willing bankers to be in the oil and gas business. That way you can destroy all of them by producing the product.

World Oil reports that private banking is adopting our recommended strategy for their reentry into the oil and gas industry. And no, it's not that I think they’re listening. Purchasing properties on the marketplace at fire sale prices is the preferable strategy as it avoids the accumulated debt and previous equity issues of existing producers. Private equity can then own 100% of the property that they’ve purchased. They will however also have 100% of the cash drainage and losses. They therefore need to acquire the appropriate mechanism to manage those assets and that is the Preliminary Specifications decentralized production model with its price maker strategy.

This may be the beginning of the creative destruction that is needed to fix the oversupply and overproduction issues in the industry. Wipe out the old, non-functioning organizations and put in the new dynamic, innovative, accountable and profitable oil and gas producer. Enabling them to operate with the Preliminary Specification, our user community and the service providers. That way there would never be these periods of destruction that are so common in oil and gas. When did it become acceptable that this level of destruction could occur? This would never be accepted in any other industry. Money is destroyed, people’s careers are destroyed and that is just accepted as part of the normal course of business. That attitude should never exist.

We saw a big bump in the price of oil last week as the Saudi’s made rumblings about a meeting, and as I heard it on Bloomberg, “issued a very official looking press release.” That a meeting will take place in September regarding the price of oil and a possible production freeze. Immediately, like the bright shiny object that it is, it drew everyone in the industry's attention away from the problems. The key point that I think the Saudi’s want the North American producer to learn from these episodes. Which seem to occur with a regularity that I find comical. Is that oil prices do respond to the belief that there will be a change in the market supply of oil. North American producers all sit up at attention when the Saudi’s make some noise about production cuts, why don’t the North American producers learn that if they cut production too, prices would likewise respond.

I have been looking for a signalling event that reflects the time in which the industry entered the point of no return. The time when the industry began its transformation to the new dynamic, innovative, accountable and profitable industry. I think Chesapeake dumping their Barnett Shale assets for nothing is that signalling event. That is the point that will stand out in people’s minds that things began to change. Just as Chesapeake was such a critical part of the development of shale.

People, Ideas & Objects have a plan on how to deal with the oversupply and overproduction issues in oil and gas. It is the Preliminary Specification. Our price maker strategy ensures that any production from the continent will be profitable production. Eliminating these destructive periods that seem to occupy 75% of the time in the industry. I’ve been in the industry for 39 years and it's been “good times” for maybe a decade in total. Scattered about during that time for a year or two here and there. I’ve yet to see a producer firm succeed outside of the integrated producers over the long term. A producer has a shelf life of ten to fifteen years and then it's done. It shouldn’t be this way, it doesn’t have to be this way, if I have my way it won’t be this way.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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 Detailed Plan

Instead of letting my frustration get the better part of me. Today I’m going to detail People, Ideas & Objects plan and how it is the dynamic, innovative, accountable and profitable oil and gas producer will be able to benefit by subscribing to it in this the third quarter of 2016. My frustration comes about from wanting to solve the problem in the industry today. It is what I’ve been working on for a long time and I think that most people can understand that now is the time that it’s necessary. Forgive me for being human. We are very close to the beginning of the developments of this dynamic change in the industry. My impatience is getting the better of me.

I am of the opinion that producers are in need of some action to deal with the current industry wide situation. That this is a dire crisis that threatens the industry in ways we don’t understand or appreciate at this time. Capital is being withheld from the industry by the investors and bankers as a result of this crisis. In order to secure any capital in the short term, I believe that producers need a plan that deals with this crisis and sets the industry on the road to profitable energy independence on the North American continent. This requires a cultural shift in many of the ways the industry conducts its business. These changes are detailed below. If producers did subscribe to People, Ideas & Objects Preliminary Specification in the third quarter of 2016, by paying 10% of the subscription fee, then they would be able to state that they are part of an industry based plan in their third quarter report. Would this subscription then see investors and bankers return to those subscribing producers on the basis of their willingness to participate in achieving profitable energy independence? I know that doing nothing won’t bring them back.

How we provide the dynamic, innovative, accountable and profitable producer with this is through our price maker strategy which involves the decentralized production model of the Preliminary Specification. What we do first of all is reorganize the producer firm and the industry overall. The producer becomes a stripped down version of its current configuration. Where the C class executives, earth science and engineering resources, land and legal, and some support staff make up the configuration of the producer. This enables them to focus on their competitive advantages of their earth science and engineering capabilities, and land and asset base. The administrative and accounting resources are reallocated to service providers who focus on one process and have the entire industry as their client base for that process. This enables them to focus on their key competitive advantages of specialization, division of labor, automation, innovation and quality.

The Preliminary Specification uses the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework throughout the industry. The Preliminary Specification moves the compliance and governance frameworks of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee to provide the speed, innovativeness, accountability and profitability that we desire in our organizations.

The service provider will process the work that they do on behalf of the Joint Operating Committee, not the operator. Billing the specific property represented in that Joint Operating Committee. Therefore when the Production or Revenue accountant bills for their services they charge the specific property. The key here is that we have shifted the fixed administrative and accounting costs of each producer to the variable administrative and accounting costs of the industry. Therefore if the property was shut-in due to it being unprofitable. There would be no revenues, royalties, operating costs, or administrative costs. A “null” operation would occur. No profit, but also no loss. Increasing the producers overall profitability by not diluting it with unprofitable properties. Saving the reserves of the unprofitable properties for a time when they can be produced profitably. And removing the unprofitable production from the commodity markets enabling them to seek their overall marginal cost.

What the Preliminary Specification does is move the cost control of the administrative and accounting costs from the producers to the service providers. It is there that at any time they may see a drop of 10 - 15% of their revenues as a result of the industries shut-in inventory of properties. Something that they can budget for on an annual basis.

In a world with high cost and prolific shale. Oil and gas commodities markets will always be overwhelmed as a result of the lack of production discipline in the manner in which the industry is currently operated. People, Ideas & Objects method brings about a solution to the oversupply and overproduction that are plaguing the oil and gas commodity prices today. By simply removing the unprofitable production from the marketplace. A reasonable approach to business. It is however, not collusion as the decisions to shut-in a well is based on the actual, factual accounting of the properties profitability. It is what’s in the producer's best interest to maximize their profitability.

The Preliminary Specification also provides a solution to the resource constraints of the engineers and geologists in the mid to long term. It is a solution that is timely for today’s concerns and is ready for the producers to subscribe to its development. Enabling them to refocus on the task of profitable energy independence.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. 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

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