Best Business Opportunity, Ever, Part XXXIX

We have an Opec agreement, for now, that is for the next six months. We’ll see if it lasts that long and if it has any effect on the global oversupply and overproduction of oil. Opec have agreed to “targeted” production cuts of 1.2 million boe / day and expect to see 600,000 boe / day in cuts to come from non-Opec producers. Six month agreements, after seven months of negotiating are one thing, implementation is another. Nonetheless, from the producers point of view this is a resounding win. They feel they’ve been fighting Opec for the past two years and have succeeded in surviving and asserting that they’ll not take the price maker role in the oil markets. What I do know now is that there will be no dealing with them whatsoever. Not that they were listening anyways. For the producers winning at all costs was the game plan and that has certainly been the case.

Producers will feel vindicated and have established themselves as the force to be reckoned with in the oil markets. That is until the next payroll is due. The reality on the ground may be that this is a hollow victory. What I saw in the third quarter financial statements would be nothing to be proud of. Will Opec agreements change the investors and bankers opinion on the viability of an oil and gas producer? The cash that is needed to keep the operation going is not being generated and these organizations have internal problems that have not been addressed or recognized for decades. Movement of the oil producers, and particularly the shale producers stock prices was dramatic yesterday. Reflecting that the business is more about the stock price as opposed to the underlying performance of the firm.

The issues of oversupply and overproduction are just symptoms of the larger cultural issues that are systemic throughout North America. Premised on the SEC’s determination that reserves are the value of an oil and gas producer and financial performance is irrelevant. You can’t run an industry for very long on that basis, and oil and gas has been operated on that for over forty years. The value that has been destroyed has been epic, and this has to be addressed before anything positive will be coming out of this industry. Producers stock prices aside.

The prolific nature of shale is already being promised to fill the volumes that Opec is “targeting.” Restoring the imbalance in the marketplace. And this will continue for the history of the industry until there is no oil or gas left. It’s a science experiment, not a business. There is no discipline, and no basis of business understanding supporting any discipline in terms of what produces and what’s shut-in. Commodities markets are not mythic creatures that exist on their own. They send information in the form of price. If your profitable at the prices offered, you produce.

Does anyone question that Opec did everything that could be done? What will it take to try again when the six months are up? Oil prices were up almost 10% as a result of the agreement. I have always asserted that Opec, in this drawn out agreement process, were trying to show North American producers that oil was subject to price maker characteristics. If I was right, then I would expect to have this agreement fall apart in the next 10 days. Then we will see the price fall 10% or more. These price changes show that the removal of marginal production from the marketplace would be the appropriate thing to do. It doesn’t make a lot of sense for Opec, the lowest cost producer, to be taking production off the market. Does it. Particularly when North American producers are all recording epic levels of losses. This issue isn’t over.

To me a decision needs to be made. Whether we travel along to hear that jarring gong or not is a pretty risky proposition. But that is certainly where we’re headed. The adults in the room need to stand up and take control of the situation. That would be my recommendation. I’m taking some time off. Screaming at the wall these past few months has become deafening. I also need some time to think about the next phase of what and where we’re going as an industry. Therefore we’ll see you back here on January 23, 2017. Have a happy holidays and if you need to contact me I’ll be around.

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. 

Best Business Opportunity, Ever, Part XXXVIII

The cost and competitive structures of the existing oil and gas producers have been destroyed through the process of ignoring the industries issues. Muddling along has eroded the value in the industry and the individual producers are carrying legacies of past spending and unprofitable operations with them. From a cash position they’re unable to generate any value that would be considered a normal environment. If any value is produced from operations it will be consumed in servicing the debts and satisfying the legions of shareholders that participated in the annual ritual of issuing more stock. This being the kind of place that future investors willingly leap into in order for their money to be voluntarily incinerated. These organizational tragedies will limp along selling assets, in a market filled with producers who are operating in likewise fashion, where the buyer of the property can pick and choose like at no other time in the industries history.

Leveraging a business is the appropriate manner in which to manage any enterprise. It provides the means in which to increase the return to the shareholders. However, in oil and gas leverage on the assets that represent the past spending orgies are not appropriate. The assets on the balance sheet have ballooned to unreasonable levels due to the SEC’s accounting methodologies. What may be an appropriate percentage of debt to take on in a business would be excessive levels of debt in an oil and gas producer due to the assets representing every cost being capitalized. Capital and operating costs in the field, overhead and interest costs leave very few costs left to pass through to the income statement. Reflecting high balances of assets and high profits. Yet never any cash. That always had to be provided from the investors each and every year.

This has gone on for four decades and many in the industry don’t understand why or how it’s wrong. They were brought into the industry on this basis and know nothing else. It’s just the way the business was run. Since President Elect Donald Trump was elected it is clear that people have stopped sitting on their hands in the United States and are looking to do some business. The fear of being penalized for existing under the Obama administration is about to stop. As a result market rates of interest are beginning to move substantially, anticipating the demand for capital in a growing economy. This is very good news except for those that may have been excessively leveraged due to bad accounting policies, and are suffering in a low commodity price environment. We have a high probability of normalized interest rates within one year.

Even if Opec will, or has, put together an agreement, these higher interest rates will cause the oil and gas producers difficulties to linger. They are in no position whatsoever to be taking on an increase in a major cost such as interest rates. I recall in the last downturn the oil and gas producers created large volumes of unsubordinated debt. That being the amount of interest that wasn’t able to be paid and as such the debtor turned the outstanding interest itself into a another debt obligation. Expect to see the term unsubordinated debt start to creep into the vocabulary of the oil and gas producer in 2017.

All of these costs, the capital costs that were incurred in the past. The debts that are still outstanding on those assets. The volumes of shareholders that an existing oil and gas producer has are impediments, legacy constraints to the current operations and their growth prospects. Producers will at best be frozen in time as a result of the manner in which the industry has been managed for the past four decades, the muddle along strategy and these cost structures. You can’t fool all of the people all of the time. And the oil and gas producers have been able to fool a lot of people for a long time. However, the investors and bankers are wise to the game and can read the outcome of the financial statements these producers are putting out. I still think there’ll be hell to pay when these producers continue to say they’re profitable at $45 but produce financial statements that show greater than $15 billion in losses. Is this a scam or are you really that lost?

A clean slate approach to the industry is the only solution. That is the startup organization. Buying properties off of the existing producers will be the way in which they are able to grow quickly and profitably. Buying at rock bottom prices due to the volume of properties on the marketplace and the desperate situation of the vendor. Keeping their debt and shareholders within reason, they will use profits to fuel the business. Providing the means to drive forward with the most profitable means of oil and gas operations and a healthy industry. Society will be relying on the startup oil and gas organizations to remediate the assets and turn the industry into the profitable industry it should be. It will be obvious during this time that not much will be done in terms of field operations to bring on new supply. But then the overproduction is the issue. Once the transfer of the assets from the old to the new is complete, then drilling can resume.

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.

Best Business Opportunity, Ever, Part XXXVII

There comes a point in this disaster when things do change. We’ve talked about this on several occasions before, but not in the context of being the best business opportunity, ever. Creative destruction accurately reflects the opportunities that occur during an industry's destruction. But what is the point in time which causes people to make the changes in their own lives and their own situations. It was best put across by Sir Winston Churchill in the house of commons at the outbreak of World War II.

When the situation was manageable, it was neglected, and now that it is thoroughly out of hand, we apply too late the remedies which then might have effected a cure. There is nothing new in the story. It is as old as the Sibylline books. It falls into that long dismal catalogue of the fruitlessness of experience and the confirmed unteachability of mankind. Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong -- these are the features which constitute the endless repetition of history. 

This is what we’ve referred to as the “jarring gong” on this website a number of times before. There comes a point where action overtakes inaction. I think we’re very close to this point in time. For ten years Winston Churchill was ostracized for his thoughts and views on Hitler. He tried to warn everyone about the dangers of what he thought might happen as far back as the early 1930’s. While no one listened to him, there was a strong movement within Britain to form an Anglo - German alliance with Hitler. Not until after Hitler invaded Poland, and was at France’s door step, did people realize the dangers that Churchill had been warning about. It was at that time that the British house of commons appointed Churchill to be the Prime Minister and deal with the issues he had warned everyone about.

Certainly I don’t equate anything that we are doing here with the work of Churchill. The forces of creative destruction have been realized in many forms in many industries. It is the one constant that refreshes the western based economies and keeps them competitive in the long run. Action taken too soon, that is before people can see the destruction that is occurring will not be successful in the implementation of the solution. People have to go to the limit in order to be convinced. And once convinced there is no turning back. The need to make the change, and then for the changes to be successfully implemented, make instituting the changes not an option.

What People, Ideas & Objects have done is to prepare the solution that will resolve the issues that has led to this destruction of the oil and gas industry. By taking the time to prepare we have been able to eliminate the long and difficult process of determining what and how the next “creative” aspects of creative destruction would look like. These are usually done at minimal cost but take an enormous amount of time. Oil and gas doesn’t have the ten years that is needed to figure out its next steps. It needs a solution now. And the Preliminary Specification, which underwent ten years of research is ready to be built at this time. It provides the vision in which the industry can be rebuilt and function to provide for the issues and opportunities of today and for the foreseeable future. I am pleased at this point that I have the opportunity to make this offering to the industry. It was hard work and it looks at this time to have a high probability of being of great value across the industry.

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.

Best Business Opportunity, Ever, Part XXXVI

It’s Monday, I forgot if we’ll get good news or bad news coming out of Opec today, never can remember. With last week's commentary regarding Opec’s decision. The commentary coming from industry unlike that of People, Ideas & Objects, did not look to the downside of a negative announcement. It was all focused on the upswing in drilling activity and production increases that shale producers will be able to provide. Even if Opec does agree to a production cut, this doesn’t resolve the overproduction and oversupply issue. Producers are not financially healthy and will still attempt to deal with their issues by overproducing. Their only source of cash. Creating today’s situation once again down the road.

Also why is there no attempt at a resolution outside of Opec actions anyway? For four months we’ve sat and watched Opec put a deal / no deal together with nothing being done here! Whether or not the Opec’s deal goes through, is the status quo acceptable? We can’t leave the industry in the hands of these bureaucrats. Why aren’t they planning and dealing with the issues at hand? All that we’ve heard are assumptions that shale producers will pick up any production cuts that Opec makes. Rig counts have increased each week since August. And, unfortunately there have been discussion regarding the opportunity of attaining energy independence. Producers don’t have the financial resources or capabilities to achieve energy independence. They don’t understand the term profits and there is not enough investors in the world to continue on even with their current operations.

Waiting for these irrelevant Opec events is not how you manage an enterprise. Active management has to overtake the “muddle along” strategy in order to deal with shale, as a minimum. Last time we waited this long for Opec to make an agreement, when they finally did make the decision, and it was a negative decision, producers suggested Opec doesn’t mean anything anyway. Attempting to redirect the conversation to other topics that would distract people away from the producers mismanagement. Last time this redirection involved production declines due to events such as the Alberta fire in Fort McMurray, Nigeria conflicts etc. as the reason that prices would soar. What will be the diversionary topic this time?

When no agreement is put in place, prices will drop and the producers will be left in desperate condition. Those in control will have nothing in place to remediate the situation and I think that those in authority will just walk away. The current cash crisis is critical. Payrolls will be missed and the people will be without their paychecks. With no one in authority showing up for work, who will they turn too? What is left in these producer firms to hold on to. Production is consuming cash. Their financial performance is reflecting losses. No investors, and certainly no bankers will touch them. Who is going to stand up and sacrifice more money, time and energy to make this industry function. Those people whose paychecks are bouncing?

“Brace for impact.” This will get ugly. After four decades of deceptive accounting these producers were hollowed out carcasses, and I’m talking about during the boom times of a few years ago. Then they discovered shale and the commodity prices dropped too low to even report profits on the basis of “full cost” or “successful efforts.” Now they’ve cleared out all of the value through successive, massive and tragic losses through 2015 and 2016. Scaring the daylights out of the investors and bankers. Yet still sit on massive piles of “assets” on the balance sheet, or what we at People, Ideas & Objects call unrecognized costs and future losses. Producers can’t generate any cash, can’t stop producing for the shear fact that the losses would grow exponentially. Soon those “assets” will be moved to the income statement and will continue to reflect the industry is a lost cause financially. Showing investors and bankers that the competitive and cost structures of the industry are so fundamentally destroyed that there is nothing that anyone can do.

No one want’s to think about such dire consequences. Certainly no one wants to live through anything so difficult, although times are certainly bad today. That doesn’t provide the justification for producers to ignore the problems and hide under the desk. However, in this cheery scenario we see the fact that the startup producers can come in and poach these assets from these producers, remediate them into real profitable operations. Use the Preliminary Specification and gain the trillions of dollars that our value proposition provides. And then earn the trillions of dollars in additional value that would be available by achieving energy independence. This is creative destruction at its most violent, rapid and opportunistic.

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

No posting today.

American Thanksgiving

No posting today.

Best Business Opportunity, Ever, Part XXXV

We’ve been identifying many of the deficiencies in which the oil and gas industry has been operating. I want to shift gears here for a minute and discuss what kind of environment the Preliminary Specification will create when it comes to developing a new property. How would a producer approach the development of a property when only profitable production is produced. They certainly wouldn’t want to deploy their capital to areas where they wouldn’t be profitable and as a result the property needs to be shut-in. Therefore new disciplines and policies have to be adopted in order for the capital to be deployed efficiently and effectively.

Spendaholics is the term that I’ve used to describe what the oil and gas producers are. There are practical reasons for spending money, while on the job site it’s better to spend the money as opposed to incur the time. Time is the ultimate cost. However, overall the producers are rabid spenders that have traditionally loaded the firm with investor capital and fired it out the backdoor within the year. Rinse and repeat. Over the past four decades producers have devolved into this being their one and only function. With the overall objective of increasing the company's production profile. As limited as this sounds you can fit any and all producers into this tiny category of what producers do.

In a world where shale exists this business model is destined for the scrap heap, as we see the performance of the producers today. We can assume once the Preliminary Specifications price maker strategy is in place that oil and gas prices will be much higher. They will be high enough to cover the real costs of capital, operations and overhead of the industry. And of course a profit for those that take the risks today. The commodity prices will be more stable as the industry's costs are somewhat fixed, however, escalating due to the effort per barrel of oil equivalent always increasing. We can also assume that the highest cost production will be offline or shut-in. This will preclude the oil sands plants due to their long investment horizons and operational inflexibility. The higher cost production and the lower yield fields will be the properties that are subject to being shut-in as they will be the ones that struggle to earn a profit. Older properties that have retired their capital will probably produce consistently. The demand from the marketplace to replace the natural decline of the known reserves will still be with us.

This is now a different game in a different ball park that we’re playing. Access to capital to burn like a drunken sailor is no longer the key competitive advantage of the producer. Innovation in the earth science and engineering capabilities of the producer, the land and asset base, and now the strategic and tactical business capabilities will be the competitive advantages of the dynamic, innovative, accountable and profitable oil and gas producer.

How do you manage a business and an industry with this dynamic? I don’t know, other than intelligently. You’ll need to be precise in your actions. Expectations of profitability will be the new standard. Just because People, Ideas & Objects price maker strategy provides you with the most profitable means of oil and gas operations. Does not ensure corporate profits. Those will still need to be earned. It’s a brand new world.

The environment in which oil and gas producers will be competing will also be fundamentally changed. There are trillions of dollars on offer to the oil and gas producers that are established today. These trillions are available to those that can prosper in the above environment and build value for their shareholders. First by acquiring the producing infrastructure from the comatose industry of today. Rehabilitating those assets into profitable properties. Secondly by using the Preliminary Specification they will be able to source our $25.7 to $45.7 trillion value proposition that is part of our offering. And then finally, they can expand their throughput to achieve energy independence in North America with all the value that has to offer. Making for a dynamic business that will be prosperous for those that can deal in this environment. These next 25 years will be the most exciting and dramatic in the oil and gas industry. Starting a firm to participate is by far, the best business opportunity ever.

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. 

Best Business Opportunity, Ever, Part XXXIV

Generally when a supplier comes to you and offers to cut their costs, I don’t know, I would take the deal. It just seems the right thing to do. To follow up on a post from March 23, 2016 in which I detailed the Quebec and Ontario natural gas marketplace was being looked at by the Marcellus shale producers. Looked at as a ripe candidate for their gas. Apparently since that time Transcanada Pipelines (TCPL) went to the natural gas producers in Western Canada, who are currently servicing Ontario and Quebec, with an offer to reduce their tariff on shipping their gas there. Helping these natural gas producers to put their pricing back in competition with what the Marcellus producers are able to offer Ontario and Quebec.

I may not have shown the due respect to the producers of the oil and gas industry here on this blog. They have certainly made my life entertaining as a result of my offering People, Ideas & Objects Preliminary Specification to the industry. It is also difficult to sit here and not be critical of the destruction that is so extensive and will be so long lasting. Particularly when we have a solution in hand that addresses the issues that are affecting the industry today. That these solutions are not taken up by the industry is purely due to the fact that we disintermediate the people who are causing the destruction in industry today. However, the decision was made by these Western Canadian producers to decline TCPL’s offer. Now the way I see it, the Marcellus gas is highly competitive. It is abundant and has a very short distance to travel to Quebec and Ontario. Western Canadian gas has fueled Ontario and Quebec since the beginning of time. This over a vast distance provided by “Transcanada’s” Pipeline. We understand that the Western Canadian producers are between a rock and a hard place. Their choice is to give up on the Quebec and Ontario market or permanently recognize the differential (of about $0.50) in continuing to supply the Ontario and Quebec market.

Giving up on the market is typical of those that I’ve been critical of. They said they want a better offer. Ok, TCPL will get back to you in about a decade, how’s that. To oil and gas producers all business is the same. You're in business, you have to compete. They don’t understand that there are different classes of businesses that exist in the world. Some that have different rules and regulations. Different methods of existence. Such as TCPL for example, they are involved in a class of businesses known as “utilities.” Maybe you’ve heard of them before. Utilities don’t compete. They operate on the basis of cost plus. The cost of the shutdown of the Transcanada Pipeline, if shipments for some unknown reason should ever stop. Will just be shifted to some other part of their business so that the costs can be recovered there. Maybe the old Nova system.

Western Canadian producers may feel that they showed the world they’re tough businessmen. They only showed that they’re fools and don’t understand the business that they’re in. The Marcellus producers can walk into Ontario and Quebec with little fuss now. In fact, for no apparent reason, current month NYMEX:NG jumped over 5% the following day and all of the futures contracts echoed that sentiment. I guess that was a vote of confidence from the Ontario and Quebec consumers. Or maybe the Western Canadian production going offline. As we noted the other day, there is an attitude of entitlement in the oil and gas producers here in Calgary. Maybe the farmers and ranchers will pay for the TCPL tariffs to Ontario and Quebec.

Contrary to most of the posts in this Best Ever series this isn’t all good news for the startup oil and gas producer. It’s good news that you too will find these same people operating the industry today. Which is good. You always appreciate your competition doing stupid things. However, if you were basing your startup on Western Canadian gas, you may want to rethink your location and strategy. The good news is that as a startup you're still nimble and agile.

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. 

Best Business Opportunity, Ever, Part XXXIII

As I write this it is unknown what the outcome of the Opec meetings will be. The push to have the deal in place by the deadline of November 30, 2016 started last week. It seems everyone in oil and gas are convinced the deal is imminent and it will be sunshine and rainbows once again. We’ve come a long way since the oil price declined. The industries destruction as I’ve described it here has taken on its own momentum and will fuel the necessary creative destruction. I have also suggested that Opec was never attempting to put any production limits in place. Their new strategy is to provide a stable supply to their customers. Talk of limiting production, I believe, is to allow the North American producers to understand that moving barrels of oil on and off the market have a dramatic effect on the price. That the commodities behave with the characteristics of price makers. Something these producers refuse to believe and, as we’ve stated, don’t have the moral or ethical means in which to do so.

It is therefore a given in my mind that Opec won’t come up with an agreement on November 30, 2016. Taking this off of the table will have a devastating effect on the price of oil and will do two things. It will kill the hope that is building in North America for a return to normalcy in oil and gas. And it will be the trigger that investors and bankers use to liquidate their investments in the industry. If the only thing that producers have is hope that Opec will do something, then there are better places to put one's investments. As it stands today, producers can’t pay their electrical bills or their freehold royalties. Now is not the time that Opec is going to let them off the hook. All of the discussions coming out of Opec have been about how earnest they’ve been in working to make the deal. If they announce that there is no deal, then the world will know that they gave it their best shot and that it will be years before another attempt at another deal will be possible. Therefore it will be time for the investors to clean house at the North American oil and gas producers. What else could these investors be waiting for?

Natural gas future prices top out at $3.32 in January 2018. I would say that market is optimistic about the natural gas business. We need to understand that shale has changed the business from scarcity to abundance. It also changes the cost profile of the production. Multilateral fracing and horizontal drilling are very expensive. None of the shale producers are making any money at the current prices. Oil or gas. None of the producers are making any money based on their third quarter financial statements and that is the same situation for at least the past two years. The cash crisis in the industry is epic. Producers are stuck in a downward spiral of destruction. They have to produce everything, to pay the bills, to produce the oil and gas etc. If they stop producing anything their costs will soar and they’ll be out of business in a week.

Opec can certainly read the third quarter financial statements as well as anyone. And they’ve certainly lost money in the past years too. But if they put a deal in place and the price responds these shale producers have already committed to increasing their production substantially. The rig count is up for the last 15 weeks. The North American producer is down but not out. If they let up the pressure now the resurgent North American producer will be back and as much of a problem to oil prices as they were at the beginning of this process. Until the threat of a resurgent oil and gas overproduction and oversupply is ceased, Opec will not take their foot off the throat of the North American producer.

The best way that I know that the North American producer could convince Opec that it had seen the light and would implement a method of production allocation to deal with the overproduction and oversupply. Would be to fund People, Ideas & Objects Preliminary Specifications budget. That way Opec would see a solution to the overproduction and oversupply in the long term and the commitment of the producers to its resolution. Otherwise it's the trash heap of history for these North American producers and the best business opportunity, ever, for the startup oil and gas producers.

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. 

Best Business Opportunity, Ever, Part XXXII

That this destruction of the industry is acceptable, or is part of a normal process, is the standard of thinking in the industry. We see nothing in the way of steps to remediate the issues other than blaming the situation on the Saudi’s. Action by the producers has never been part of the “muddle along” strategy that has been the status quo of the industry for these past decades. Accepting that the industry will be generating losses, based on a contrived, faulty accounting, is just part of the game. I have pointed out in this series of posts that the situation has gone beyond what the producers have within their control to manage. The momentum of the destruction is against their efforts and the forces of creative destruction are in play. Creating the best time ever to begin a new oil and gas producer.

This muddle along strategy brings along with it other attributes that show a dark side to the human psyche. There is an attitude that the oil and gas producer is the one that is building the value in the business and everyone else, the people who work in the business, the service industry and others are leeches. This became evident when oil and gas prices were their highest and producers were calling out service industry representatives as lazy and greedy. Reflecting, in my opinion, a type of entitlement that the oil and gas producers were able to preach to their lesser classes.

This attitude took a decidedly dark turn here in Calgary over the past week. The cash situation in the producers has become quite difficult and many producers are going out of business. Even Canadian Natural Resources were mentioned in the article as part of this trend. The situation is that freehold royalties were not being paid by the producers. And now apparently electricity to the well sites are not being paid in some instances. Therefore the electricity provider is turning to the rancher / farmer to have the oil and gas producers electrical bills paid. Who would have thought things could get so difficult?

So here we have a lawyer by the name of Keith Wilson impart the despicable opinion of what the rest of the province should do in light of the difficulties in oil and gas. Quotation is from the cbc.ca

Lawyer Keith Wilson said that he also has represented clients who have had liens filed against their land for unpaid work done by oil company contractors.

"There's a need to rethink the system," said Wilson. "It wasn't designed for what's happening now [with the economic downturn]. And as it becomes more endemic, it underscores how Albertans have expected this one sector of our society to bear all these risks and hassles."

Here’s my argument for Mr. Wilson to consider. Oil and gas is a primary industry. It collects the revenues that are earned by the sale of oil and gas. Inherent in the sale of oil and gas are the efforts of the service industry and the people who work within the oil and gas industry. They are not leeches. They assist in the development of that revenue. It is a responsibility of the oil and gas producer to manage their business appropriately. Something that I’ve been arguing for the past number of decades that they haven’t been doing.

In addition, Mr. Wilson may want to take into consideration the involvement of the rancher and farmer. In Canada they have no choice but to let the oil and gas company operate on their land. They give up use of that land while the oil and gas companies are operating there. They should receive compensation for that. But for you to suggest that these farmers and ranchers undertake to pay the oil and gas companies electrical bills because of the greatness of the oil and gas industry is a bit of a stretch. Apparently it's the Saudi’s, the ranchers and the farmers that are the issues to the oil and gas producers.

Within the Preliminary Specification there is a heightened role of the societal responsibilities that the oil and gas producers and industry needs to take. Just because they are the ones that collect 100% of the proceeds of the oil and gas revenues doesn’t mean that they can demean the rest of the people who are involved in the process of earning that money. Greater understanding of this principle is an inherent part of the Preliminary Specification. One that looks to achieve what is in the best interests of providing society with abundant affordable energy and how that is efficiently and effectively done. Establishing a new startup oil and gas producer on this basis will set in place the kind of environment that will help to rebuild the industry that the existing producers and Mr. Wilson seem hell bent on destroying.

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.