My Argument, Part XVI
Those that have been reading this blog know that I have a particular dislike to this methodology. Leaving assets for 12 to 15 years on the balance sheet disable the company from turning its capital over in an efficient way. That capital investment is just sitting their for 12 to 15 years before the money is ever returned. I believe, that none of the money in oil and gas has ever been returned as each year more is needed from the annual share issuance and the assets only grow in size and the period of time in which they are recognized. If producers were recognizing these costs in a more timely manner, I suggest a three year term, then the capital that was employed in developing those assets would be returned to them in that time frame. This of course assumes that they’re running a profitable operation which imputes that the prices are able to cover the costs of the operation and provide for that profit. This is where the bureaucrats fail to achieve any sense of a commercial operation. They spend and when it comes time to spend some more they go to the markets and raise some more capital. That’s not a commercial business operation. That’s what Pravda would call the five year plan. Or maybe what I’ve been talking about here lately, a scam.
What People, Ideas & Objects propose is that we recognize the cost of capital in the three year time frame mentioned. Returning the capital from the operation to be distributed to further capital expenditures, dividends and paying down debt. Literally a self funding operation, or business. In order to do that the industry has to stop the chronic overproduction and oversupply. In order to do that we have to recognize that the commodities of oil and gas are subject to the economic characteristics of price makers. That small changes in the volumes of oil and gas have large impacts on the prices. We do this by each and every property being evaluated monthly on the basis of whether it is profitable or not. Considering all of the costs of capital, operating, royalties, and detailed overhead. If it can’t be produced profitably then it should be shut-in where it will incur a null operation, no profit, but also no loss.
We would be able to incur these null operations as a result of the manner that the People, Ideas & Objects Preliminary Specification reconfigures the industry and what we call the service providers. The producer is a stripped down version consisting of the C class executives, earth science and engineering resources, some land and legal, and support staff. The remaining accounting and administrative resources are reallocated to service providers who focus on one process and service the entire industry as their client base. So that when the property that is not profitable is shut-in. None of the service providers are conducting any of the accounting or administrative work for that property during that month and the property records no capital, operation, royalty or overhead costs. A null operation. Overhead costs of any shut-in production will have been shifted from the industry itself to the service providers. Who, understanding at any time may see their revenues decrease by as much as 15%, or the amount of industries shut-in production, and are able to budget annually for this contingency. Oil and gas will therefore have a dynamic output of their product. Based on the demand level determined at the cost of the product. There will be no further subsidy of the consumer by the oil and gas investor. This is a business, or it should be. Let's start operating it as one.
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.