Friday, June 09, 2017
Thursday, June 08, 2017
Something for Everyone, Part VII
In natural gas it’s generally agreed by the producers that $6.00 to $7.00 / mcf is necessary to cover the costs of natural gas exploration and production. Natural gas prices have dipped below $3.00 recently and shale production continues to increase. As does the rig count. Mostly due to the fact that oil and gas is not a business but an exercise in unconstrained spending. Shale was introduced to natural gas well before it began in oil. For the first few years the natural gas prices were depressed and everyone believed that they would rebalance. They never did. Eventually the natural gas prices fundamentally broke down to the levels they are today. Natural gas is as a result the dead zone. You could put your money in, which is what North American producers do, but you won’t see it again. Ever. Only through long term, systemic, industry wide rehabilitation through use of the Preliminary Specifications decentralized production model and price maker strategy is the price of natural gas going to come back. The producers fundamentally destroyed it.
It took the North American natural gas producers about the length of time that the oil prices have been depressed today to begin to destroy the natural gas market. What then is the prospect for oil prices? Overproduction and oversupply are systemic and chronic the world over. Inventories are at record levels and storage is at a premium. A chronic situation. OPEC has done what it could be expected to do to remedy the situation and it’s ineffective in the face of increased North American unconstrained and unprofitable production. As the media says the market will rebalance. Why would we doubt them? The only question that comes to my mind is when will oil prices fundamentally break down? I say it's imminent. Certainly before our September 25, 2017 software developments start date.
In the scenario that we laid out yesterday, if the oil price broke down, the oil and gas producer would then be outside of their survivable “walking dead” scenario. Today’s market where the prior capital investments are returning enough cash to keep the overhead paid. If the oil price broke down producers would be extinguished quickly as their financial situation has been on life support for many years. The cash crisis is several years old and they have no support from investors or bankers. Their ability to buy time is measured in seconds. I’m sure that’ll be the time when we’re asked “what have you got.”
The logic of all of this is best expressed in the donut shop analogy of a few days ago. The donut shop manager, flush with banker and investor money, has filled all the neighbors parking lots with the excess donuts. Therefore he undertakes to buy some adjoining land and road paving machines to build more parking lots to increase his excess donut storage capacity. The logic of oil and gas producers has escaped me. They will have no one to blame for their demise but themselves. It will be abrupt and it will be violent. In the theme of Something for Everybody, if you don’t see the opportunities here, then you're in the frightened camp, not the exhilarated camp.
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.
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Wednesday, June 07, 2017
Something for Everyone, Part VI
The North American producer has therefore as little as a year to get their house in order before the IPO of Saudi Aramco. If North American producers can establish to the markets satisfaction that they’ve caught that old time religion of real profitability, then OPEC may not see the need to flood the market with deliverability post IPO. North American producers would be able to provide the market with this information by developing the Preliminary Specification. This would ensure that all North American production would be profitable. And, as the highest cost producers, would define the global commodity prices realized in the oil and gas marketplace. This would also bring back their investors and bankers who are unable to support the industry in its current, unprofitable configuration.
This does not preclude North America from becoming energy independent. It only precludes North America from becoming unprofitably energy independent. The false hope that drives the market bravado today. It should be clear to any independent thinker that the investors are unwilling to pay the additional capital costs of increased deliverability in North America with no expectation of any return. They have subsidized the consumers of energy for four decades. With the amount of the subsidy being clearly advertised as property, plant and equipment on the producers balance sheets. These actual capital costs of past production are never realized and therefore are stored there to represent the subsidy the producers have granted to the energy consumer. Never recognizing the costs of capital in a capital intensive business is ludicrous. Producers today report that their profitable only after they deduct overhead and oilfield operations such as pump jacks etc. The costs of drilling, completion and equipping are stored on the balance sheet for decades at a time. Demanding that each producer issue more stock each year to stem the chronic cash shortfall. Diluting existing shareholders holdings, only to do the same in each subsequent year. What the Soviets did in their economy in the 1960’s was more productive then this economic system.
Establishing the oil and gas producer as a spender, like a drunken sailor, is how the oil and gas industry is currently configured. Can they become profitable? Traditionally the power of creative destruction steps in and wipes the garbage away. That’s not happening. The producers are being supported due to the high intensity of capital requirements in the industry. The prior investments are returning enough cash to the organizations to pay the overhead and keep the operation performing at the bare minimum. Probably for a few more decades. Therefore how do People, Ideas & Objects, the user community and service providers obtain the financial resources to institute the necessary changes in the industry to enable profitability? Certainly the producers are able to survive in today's environment. The question we need to ask is, will they be able to survive in the environment where the post Saudi Aramco IPO, low cost producers will accept any price?
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.
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Tuesday, June 06, 2017
Something for Everyone, Part V
People, Ideas & Objects determined that we would not play the service level agreement game with the producers. It has been an interesting game that has had our competitors occupied meeting the detailed terms and conditions set out in those agreements. We feel the producers should ask themselves what have they’ve truly gained? And in a dynamic marketplace where the unknowns are as substantial as what we collectively face, do they want to stick to the static definition in a service level agreement, one that is unchanging and may have no bearing on the success of the initiative? Our software developments will most certainly require some skin in the game by each and every producer firm that endeavours to be successful in the future.
Shale is not a commercial operation. Oil and gas is not a commercial business. As a result investors have left until the industry can prove otherwise. Reporting profits, as the producers are today, are hollow, transparent and false when the capital costs of these operations are left on the balance sheet of the producers for a decade or more. Never recognizing the capital costs of past production. In what world would you want your capital returned over a ten year time line? Only a fool would invest in such a ludicrous proposition. Particularly with the flush production of shale on a steeper decline curve than conventional reservoirs. Producers need to turn their capital over quickly, repeatedly and efficiently if they expect to call themselves businesses. Watching it glow as property, plant and equipment on their “well defended” balance sheets has been the key financial criteria that producers want to be evaluated on. This represents the very low level of business understanding currently resident in the industry. Investors see oil and gas as non-commercial as a result and will sit on their hands until producers can prove a viable commercial business model exists in the industry.
Continuation of the ongoing argument with People, Ideas & Objects et al is also a foolish proposition. Disintermediation is extracting bureaucrats from every industry and putting them out to pasture. However, for bureaucrats to continue to hang on to this failed business model is a viable opportunity. This is due to the fact that oil and gas is a capital intensive industry. The return of capital from the prior investments is adequate to cover the overhead of the producers for the next decade or more. The bureaucrats are safe. Which they have been throughout this downturn. It's everyone else that sees the difficulties as a result of living them. The industry is therefore the walking dead. How this deadlock is broken is unknown. People, Ideas & Objects needs the financial resources of the producers to be provided to us prior to our start date of September 25, 2017. The point being bureaucrats sign the checks.
Our value proposition has $25.7 to $45.7 trillion in incremental revenues to the producer firms over the next 25 years. That hasn’t been enough for the bureaucrats to fall on their sword, yet. Who can make the decision to proceed in the industry? It’s no longer just a handful of people who see the industry in the dire scenarios that I paint on this blog. It's becoming common knowledge that there is more to the downturn in prices than what the current producers business model can handle. That shale is not commercial. Many are rallying around the Preliminary Specification as the solution. It’s coming down to the point in time when individual decisions need to be made. The kind of decisions I’m referring too that make the big difference in your life and those around you. The ones that benefit society and move us all forward in ways that we don’t fully understand at this point. We stand at a crucial point right now. You’re either frightened or exhilarated. What’s your decision going to be? How will you be successful?
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.
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Monday, June 05, 2017
Something for Everyone, Part IV
I would think the dynamic, innovative, accountable and profitable oil and gas producer would be appreciative of not having the burden of developing the accounting and administrative expertise necessary in the industry. The Preliminary Specification moves away from the fixed producer based accounting and administrative capability to the variable industry based accounting and administrative capability. Where the producer accesses the industry based capabilities that they need to operate. This eliminates the redundant duplication of administrative and accounting capabilities that are currently resident in each producer firm. These capabilities are essentially the same in each producer firm except that they’re a fixed cost and unshareable between producers. The costs of duplicating this overhead burden in each and every producer firm is one of the reasons the industry is not profitable.
Therefore we have chosen not to replicate this redundancy in the Preliminary Specification with the user community and service providers. The service providers will be provided with an exclusive license to operate their process for the entire oil and gas industry. (Some exceptions may apply.) These licenses will be granted through the Intellectual Property that is what holds this community together. Service providers will know that they will not have another service provider set up shop in the adjacent office space and begin undercutting the service providers price or service offerings. That is not the basis of competitive advantage that will be used in this sub-industry and we’ve detailed the basis of competition between the service providers two days ago.
Earning a service provider license will be based on the processes that People, Ideas & Objects software manages and the performance of the user community members during our initial development. If you’ve been an active participant in the area of the lease rental payment process, developed some innovative solutions to the issues in that area, and provided overall leadership qualities that make you stand out in that area, then our assessment would consider those and determine who was the appropriate candidate(s). Note we are looking ultimately for 3,000 members of our user community. These are the leaders in their areas of expertise. We will be managing, we believe, approximately 3,000 processes and will be issuing 3,000 service provider licenses. It is these elements that should also stand out in your application for user community participation.
One of the benefits of the service providers configuration is that they provide the industry with an objective and independent resource dedicated to the quality of the information in the Joint Operating Committee. Under the Preliminary Specification the concept of operator is somewhat expired. Participation by all of the producers in the Joint Operating Committee is required due to the reasons documented in the various modules of the Preliminary Specification. Having this objective and independent accounting and administrative resource provide these processes management will assure the industry that no favorites are being provided for. There will be some processes that are producer specific however the majority of the processes will be charged directly to the Joint Operating Committee.
The key attribute of the service providers is that they make the producers administrative and accounting overhead costs variable, based on production. With shale being as prolific as it is, and the costs being as high as they are, not all of the well bores can be exposed to the commodity markets at once. That is a losing proposition. Therefore People, Ideas & Objects Preliminary Specification, our user community and service providers turn all of the producers costs into variable costs. That way they can always achieve the most profitable means of oil and gas operations no matter what level of their production profile they produce at. This is how businesses and industries are operated. No one who owns a donut shop continues to produce donuts until the parking lot is full of donuts. And then, the only remedial action taken by the management of the donut shop is to buy more advanced, faster donut making equipment. Filling the neighbors parking lot. That wouldn’t work would it. And it certainly doesn’t work in oil and gas. Producers, like the donut manager, will lose all their money waiting for the “market to rebalance.” And shy away from the alleged manipulation of the market the Preliminary Specification recommends in our decentralized production model. Shale requires that supply be managed to stop overwhelming demand. That’s not collusion, it's operating a profitable business. The Preliminary Specification does this by providing the actual, factual accounting of the property to determine if it's profitable. If it’s unprofitable then it is shut-in. No collusion, no market manipulation just business decisions being made independently based on actual factual data. Why is this not common sense in oil and gas, as it is in every other 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.
Posted by Paul Cox at 6:00 AM 0 comments
Labels: SomethingForEveryone
Friday, June 02, 2017
Something for Everyone, Part III
In our user community vision we clearly define that the user community is funded by the financial resources that People, Ideas & Objects source from the producers. These part-time user community participation revenues will be a small percentage of the funds that are necessary to drive this new sub-industry. Review of the methods of how and why those funds are expended are detailed in that vision. Where do the service providers revenues come from? We’ve indicated that the service providers are replacements to the current accounting and administrative resources of the producers. The resources funds that are being incurred today at each of the producers would also shift to support the service provider sub-industry. This would include all of the costs of these resources. The salary and benefits, office space, support personnel, power etc. Each of the service providers will have a service level agreement with each of the producer firms in the industry. These service level agreements may seem onerous and unnecessarily administratively inefficient, however, standardization and other tools could make this administratively efficient for both service providers and producers. Understand that much of the work that industry does with the user community is what would be captured in a service level agreement, although much more detailed, and that Microsoft has end user license agreements with any and all Microsoft product users and the simplicity of this comes into focus.
Making these changes to the industry structure and the structure of the dynamic, innovative, accountable and profitable oil and gas producers enables their overhead, and therefore all of their cost structures, to become variable. I believe that once producers fully understand this implication they will hold to the strictest interpretation of this model and turn over all of their accounting and administrative processes to the service providers for management. These tasks are not key competitive advantages of a producer firm and to turn a fixed cost into a variable cost brings about significant structural flexibility and profitability. Producers that understand this will move quickly to exploit this advantage.
The advantage to the producers is that it will relieve them of their overhead cost concerns. If they produce 100,000 boe / day this month, and as a result of some phenomenon, the oil price declines precipitously the next month to where they can only profitably produce 50,000 boe / day. They will immediately shut-in the unprofitable 50,000 boe / day in order to maintain their maximum profitability. The overhead costs of the 50,000 boe / day of shut-in production under the Preliminary Specification are not charged by the individual service providers as no work comes through to the service providers through our task and transfer network and hence no billings from the service providers will be issued to those Joint Operating Committees. However, that does not eliminate the service providers overhead costs associated with the 50,000 boe / day of shut-in production. These costs remain fixed for the service providers. And the cost control of the overhead costs of the oil and gas industry have indeed been shifted from the oil and gas industry on to the sub-industry of the service providers.
As a service provider you will understand that at anytime during the year you may be faced with up to 15% of your revenues declining as a result of industry shutting-in production. Or whatever percentage of the industries deliverability is shut-in at that time. I believe, this can be managed within the scope of a service provider operation with revenues of $6.67 to $10 million per year through the budgeting process. Enabling for the first time true overhead cost control capabilities for the oil and gas industries overhead costs.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Labels: SomethingForEveryone
Thursday, June 01, 2017
Something for Everyone, Part II
Your field of competitive advantages are many and far more diverse than what are available today. Certainly technical capabilities and industry understanding will be features of your service provider offering. However there will be much more. Automation will be a key part of your tool set. Through your work as a user community member you will be able to move more of the process to an automated process. This may concern people that jobs will be lost in the industry as a result, just as this concern was raised when computers were introduced in the 1960’s. We are focusing on the work that humans do best in these processes, the leadership, issue identification and resolution, decision making, creativity, collaboration, research, idea generation, design, planning, thinking, negotiating, compromising and innovating. And leaving the storage and processing to the computers. This will open new areas of opportunity to build value for the oil and gas producers and increase the quality of your service provider offering.
All economic development is a result of the expansion of specialization and the division of labor. For the industry to achieve energy independence we will need to increase our capacity and capabilities from the same resource base. Therefore to achieve that higher level of industry throughput, service providers will have to develop ways to increase their throughput through the application of specialization and the division of labor. It will be these tools that will become the competitive environment that exists between the service providers. If for example you are licensed for the lease rental payment process, you will be the exclusive provider of lease rental payments. There will be no other service provider that comes in and undercuts your pricing or offering as a result of the manner in which the Intellectual Property is developed and distributed in the user community and service providers. That process that you manage will be your domain exclusively and the means in which you will compete with other service providers is through iterative levels of automation, specialization and the division of labor.
Review of our user community vision is a worthwhile reread at this time. The combination of user community member and service provider is the means in which the industry moves forward. Each service provider actively moving their process forward into areas where we can’t imagine at this point in time. This won’t be a mindless application of going through a mountain of data each month. The processes that will be managed by the service providers will become highly scientific and determine new and quality information that is otherwise unknown today. All the while enabling the dynamic, innovative, accountable and profitable oil and gas producer to produce only profitable production through our decentralized production model. Only as a result of the service providers existence.
Granting of the service provider licenses will be based on the performance of the individual user community members. In some cases service providers may have multiple user community members. And user community members may have multiple interests in several service providers. These will be assessed based on the outcome of the software’s process management requirements and the participation of the user community members during our initial developments. The key at this point is to submit your application for the user community.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Labels: SomethingForEveryone
Wednesday, May 31, 2017
Something for Everyone, Part I
As a practical matter then the Preliminary Specification is the industry's first step to move down this road where profitability fuels the industry. We can then organise ourselves in a manner in which only profitable production is produced in North America at anytime in the next 25 years. Leveraging the investors installed base of investment in the existing reservoirs profitably. Providing them with the long awaited return on that investment, payoff the debts of the producer firms, and fund the capital expenditures that we noted in the first part of this post. That is our plan.
Our plan involves the development of our software that we’ve defined as the Preliminary Specification. People, Ideas & Objects, our user community and service providers are commencing developments of our software on September 25, 2017. What we need from industry is our first years development budget of $100 million and the securing of our complete budget by September 2018. We also need their active participation with our user community. Expressing to the user community what and how it is they do their work. Software developments only provide value to those who actively participate. You only get out what you put in. This by necessity will have to be an industry wide initiative.
Producer firms who may consider letting others do the heavy lifting are mistaken. Coming in to use the software and services after the software has been built will be too late for your firm to benefit. By then those that will have participated in our development will be on a different performance trajectory and I would seriously question the producers ability to bridge the ever growing gap in their performance. Did the record store manager ever respond to iTunes, or Nokia to the iPhone? What makes you think that deferring your participation in the development of the Preliminary Specification will enhance your position?
The reality is that Information Technology is changing every industry on the planet. New business models are replacing ones that no longer perform. Software defines and supports the organisation and the industry. To make any change in the makeup of the industry will require that we develop the software first. Why wouldn't you need to be a part of that?
And for the community of people who would be interested in participation in our user community. We believe at this time that this community will number about 3,000 individuals. Subsequent to our initial developments these user community participants will form the service providers organisations that deliver our software and their services to the dynamic, innovative, accountable and profitable oil and gas producers. These will be replacements to the existing producers accounting and administrative capabilities. These are therefore substantial business opportunities for that community. I expect this newly defined sub-industry will have annual revenues in the region of $20 to $30 billion per year. An average of $6.67 to $10 million to each service provider. Each user community participant / service provider will focus on one process and manage that process for the entire industry based on the vision of the Preliminary Specification. Please proceed quickly with your applications for consideration for our September 25, 2017 start date.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Labels: SomethingForEveryone
Tuesday, May 30, 2017
Battle Lines Being Drawn
Al-Falih, in a clear message to the U.S. industry, said it would be "wishful thinking" to expect that Saudi Arabia and OPEC "will underwrite the investments of others at our own expense" through production cuts.
Clearly, in the mind of the North American producer, OPEC exists to accommodate them. The precision planning undertaken by these producers to make OPEC do exactly what they wanted them to do is impressive. So what’s the plan now? Maybe they could exert this mind control over the Chinese and have their people consume twice as much energy. The sky's the limit really. People say I should cut these producers a break and maybe they’ll fund the project. If the producers only deal with people who kiss their feet we may have identified another critical issue in the industry. Kissing the bureaucrats feet only generates an industry full of blind sleepwalking agents of whomever would feed them. My aim is at the bureaucrats who in a self serving manner have destroyed the producers and the industry.
Oil prices fell on news of the renewed OPEC agreement. Primarily as a result of the phenomenon of “buy on the rumor, sell on the news” and the reduction of the OPEC production doesn’t deal with the real overproduction and oversupply issue, the North American shale producers. Of course with producers only mirroring the commodity prices, all of their stocks were down too. Leading one to ask if investors might be better off just trading in the commodity? It used to be the belief in management that managers added value in up and down markets. But these rules don’t apply to oil and gas bureaucrats.
The reason producers are able to survive in such a difficult financial environment is because oil and gas is a capital intensive industry. Where the return of capital from operations is being diverted to fuel the bureaucrats pocket book and keep the lights on. That may be the primary point that the investors are trying to express to the producers. That although they have capital discipline and judiciously spend the money that is raised through stock issuances and banking, the return of that capital from operations are directed towards lining the pockets of the bureaucrats. Now that the investors and bankers don’t support the industry with new capital, there is a critical cash crisis. Producers should ask themselves why in the world would this happen?
I used to believe that our appeal to the oil and gas investors would have them direct their oil and gas producer firms to develop the Preliminary Specification. I’ve changed my thinking on that. I now think that the oil and gas producers are going to have to deal with their problems constructively before they receive the focus and attention of their investors again. Their investors continue to own the producer firms, and as noted here earlier, with the diversion of cash flow to the bureaucrats, these producers are not going to go out of business, they are the walking dead. Therefore investors will continue to hold their financial interest and not invest any more cash into the industry. Putting more money in will only waste financial resources, dilute their current interests, and provide no one, other than bureaucrats, with any upside. Therefore it’s up to the producers to act to develop the Preliminary Specification in order to set the industry right before any investors show any interest.
Information Technology is disintermediating every industry on the planet. Oil and gas is not immune. The Preliminary Specification eliminates the bureaucracy from the scene and they chose in 2004 to begin our sessions with the baseball bats. Things were really good in the industry in 2004. When I began saying that we provided the most profitable means of oil and gas operations these bureaucrats laughed and said no one in the industry is concerned about profits, its cash flow. It would seem in 2017 that profits have become the issue. The producer's problem is that they may be profitable, but they’re fake profits as they don’t have any cash and their companies are consuming cash at phenomenal rates. So much for cash flow too. With investors on strike, the only source of cash is new production and they can’t get enough. Which of course leads to more of the overall problem.
People, Ideas & Objects, our user community and service providers have chosen to do something about all of this. I find it great sport pointing out the deficiencies of the bureaucrats. However, if we’re sitting here complaining about the bureaucrats a year from now then we’re no better than them because we won’t have done anything either. We have a plan to solve this through the Preliminary Specification and a start date for our software developments of September 25, 2017. As we’ve noted above, the producers are going to continue as the walking dead and as a result the bureaucrats know that their franchise is safe for the next few decades. Therefore it will be interesting to see how this log jam gets broken. Someone needs to fund our first years development costs of $100 million. With follow on financing of our entire budget. I’ve drawn the battle lines, which side are you on?
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.
Posted by Paul Cox at 6:00 AM 0 comments
Monday, May 29, 2017
Friday, May 26, 2017
What's in a Name
Societies that generate and tolerate new ideas, and that continuously adapt to changing economic and technological circumstances are a precondition to sustained economic growth.
This makes People, Ideas & Objects user community, the way that it is constructed, critical to the success of the oil and gas industry. And why our September 25, 2017 start date is important for those potential user community members to be working on their applications. This point is also the basis of my commitment to user community ERP systems development in oil and gas. We will not build software without the involvement and direction of the user community. Our software and services quality is represented in the ability of the user community to provide the oil and gas producer with the most profitables means of oil and gas operations. And to do so by moving producers forward economically. There is no more important role, in my opinion, than what the user community will hold in both our software developments and the oil and gas industry.
It is the user communities strategic competitive advantages that come to mind. The producer firms are currently burdened with developing accounting and administrative capabilities. None of these capabilities provide any incremental value to the producer. They are necessary as a result of compliance and governance, and mostly regulations. Whereas our user community will be able to provide a replacement to these capabilities as part of their strategic competitive advantages. That will be their business offering and they will be able to provide these in the most innovative and valuable way that they can. And as a result of the configuration of the user community, and the configuration of their service provider organizations, they will enable the price maker strategy of the Preliminary Specification for the oil and gas industry. A substantial value proposition for the oil and gas industry.
When was the last time that accounting and administration was discussed from the point of view of strategic competitive advantage, value propositions, economic growth and dynamic change. That is what we are able to provide the dynamic, innovative, accountable and profitable oil and gas producer. With your participation in the user community this will be our future in the oil and gas industry. The process of completing your application is the beginning of that future. It’s that simple.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Thursday, May 25, 2017
T Minus Four Months and Counting
In none of the annual reports or quarterlies that I’ve reviewed over the past decades, has any producer mentioned that accounting or administration were their key competitive advantages. The dynamic, innovative, accountable and profitable oil and gas producers key competitive advantages are their land and asset base, and their earth science and engineering capabilities. The closer they move to a strict interpretation of this division of labor the more focused they’ll be, and the more variable their cost base will be. The Preliminary Specifications takes all of the producers overhead costs and makes them variable costs that are accessed from an industry wide capability. No longer will each producer have to generate accounting and administrative capabilities in-house that are fixed in terms of costs, unshareable and replicated within each individual producer firm. This reorganization under the Preliminary Specification allows for an enhanced profitability across the industry.
This industry based, variable accounting and administrative capability of the service providers enables the price maker strategy of the Preliminary Specification. Each service provider assesses the Joint Operating Committee for their service fee. Not the producer itself. Therefore when the producer finds that a property is unprofitable and shuts in that property no information will be generated as a result in our task and transfer system, our system that drives the service providers. As a result no work will be done by any of the service providers and as a result no invoices will be sent to the Joint Operating Committee. Enabling that property to record a null operation. No revenues, royalties, operations or overheads. No profit but also no loss, a null operation. Therefore the producers profitability is maximized due to the losses on operations are no longer diluting the profitable properties, as they do today. The marginal production has been removed from the commodity markets, enabling the oil and gas prices to increase. The reserves are saved for the day in which they can be produced profitably and those reserves costs will remain constant as none of the losses that otherwise would of occurred would be added to the reserves cost base.
People, Ideas & Objects user community is the critical source of quality for our offering. The user community is endowed with significant and substantial power to affect change within the oil and gas industry. This is not your grandfather's user community. They will be the ones that our software developers work for. We are blind, deaf and dumb to anything and everyone else. The user community is also in complete control of the Intellectual Property that makes up the Preliminary Specification and its derivative works. As a result of these two key components, significant power is attained by them to ensure that they are not blind sleeping walking agents of whomever will feed them. And are able to develop and direct the changes that the oil and gas producers need in order to ensure that their future issues and opportunities are addressed. We do not want to lock the industry into the Preliminary Specifications business model permanently if there are better ways in which to manage the industry. Review of People, Ideas & Objects Revenue Model shows that we are change oriented software developers. That is how we generate our revenues. Through the changes that are initiated by the user community. If you want change based, user community driven ERP systems in the oil and gas industry, what are waiting for?
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.
Posted by Paul Cox at 6:00 AM 0 comments
Wednesday, May 24, 2017
Some Deep Soul Searching
Within the first year of our software developments, and well before September 2018, producers will need to fund People, Ideas & Objects entire development budget. Stopping and starting is not an option, there is only stopping and failing. User community participants need to see that the producers themselves can take the actions necessary to resolve their problems by funding our full budget. There is no other way in which these overproduction and oversupply, and unprofitability issues will be resolved. We should also be concerned with the short attention span of the producers. If the marketplace should happen to temporarily improve this may lead some bureaucrats to believe the follow on financing of People, Ideas & Objects et al is not necessary. This lack of follow on financing would be a critical and fatal mistake and something that I would point out now to the oil and gas investors.
And what’s in it for the producer to follow our recommended course of action. People, Ideas & Objects, our user community and service providers provide the oil and gas producer with the most profitable means of oil and gas operations. We do this with our business model as defined here. Our software defines and supports a reorganization of the industry and the producers to operate a new business model that deals with today's issues. Our value proposition is priced in the trillions of dollars over the next 25 years. With our price maker strategy producers will be able to only produce profitable properties which will remove the marginal production from the marketplace. Producers will then be able to recognize the capital costs they’ve stored these past decades in property, plant and equipment by passing them through to the income statement. This way they will be able to replace those balances with balances in the accounts of current assets and then be able to pay dividends, pay down debt and fund their own capital expenditures.
These changes can only be done through the deliberate act of developing our software. Any attempt to make the changes without the commensurate changes in the software first, will cause the industry and producers to regress back to what the software that exists today identifies and supports. We need to take control of the development of the software that the industry uses in order to take control of the ways and means of the industry. Spontaneous order, of which we have relied on for centuries, is circumvented by the software that we use. Software cements the organization in an unchanging structure. Until now it has been convenient for the bureaucrats to distort this fact and ensure their position remains unchallenged by never changing the organization's software. However the damage to the industry and all concerned is tragic and will only continue to escalate. We may find days which are acceptable intermingled with days where everything is falling apart. What we do know for sure is that the overall trend is on a steep downward trajectory.
Later this week OPEC is meeting to discuss the extension of their production sharing agreement. North American based producers believe they’ve proven that their costs are lower than OPEC’s and have established themselves as the priority in terms of who produces. This may be incorrect. If as the BP Chief Economist suggested a few months ago. That there is adequate oil to supply the world twice over up to the year 2050, and as a result, the low cost producers, which are OPEC, will find the economics of production at any price is better than never realizing any value. This would preclude the North American producers from the oil and gas marketplace, because of their high costs, until the year 2050. There has been an acceptance that North America is the new swing producer. However, there is a misunderstanding as to what that means in the North American marketplace. The swing producer will be the first to curtail their production to support the price. Something producers would achieve dynamically with the Preliminary Specification. I would suggest some deep soul searching on behalf of the North American producers and suggest they develop a plan to deal with the next 25 years. A plan that is consistent with the reality of shale reservoirs, which happens to be the one that we recommend and are moving forward with the commencement of its development on September 25, 2017.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Tuesday, May 23, 2017
The Producers Choice
Running a producer as a business is the solution. Moving the balances of property, plant and equipment to the income statement in a timely manner would have recorded a collective net loss of $397.3 billion. Providing key evidence to our claim that producers need a tripling of oil and gas revenues to survive. This would therefore also represent the amount that the investment community, the source of the capital to fuel those losses, has subsidized the energy consumer. With these costs sitting on the balance sheet for eternity the industry will always look profitable. Oil and gas is a capital intensive industry, the real costs are in the drilling and fracing operations not in the operation of pumpjacks. This is not just ludicrous from a business point of view, but from a practical manner as well. If the producers only produced profitable production as with the Preliminary Specifications decentralized production model and price maker strategy. They would obtain the prices necessary to eliminate the property, plant and equipment balances and recognize the real costs of the oil and gas business. In turn the “business” would generate cash that could be used to pay dividends, pay off debts and fuel future capital expenditures. Their property, plant and equipment account on the balance sheet would be replaced by current asset accounts they could use. That would however require they begin running a business.
Our price maker strategy is the issue the bureaucrats point to as being unacceptable. They will never intervene in the market to “make” prices. They want to see the “market rebalance.” Markets do one thing and only one thing and that is provide information by way of price. If the price is adequate for you to produce and make a profit, you produce, otherwise you don’t. And that is the way markets everywhere and our price maker strategy work. If the property earns a profit, considering all of the costs, including capital costs on a reasonable basis of recognition, then it produces, otherwise it’s shut-in. This is not collusion as the bureaucrats claim, its independent business decisions being based on actual factual accounting information. You’re in business to earn a profit. Why would you produce if you didn’t earn a profit? You wouldn’t. With the Preliminary Specifications reorganization of the producer and industry the shut-in production incurs a null operation, no profit but also no loss. The shut-in property will incur no royalties, operating costs and no overhead of any kind. Therefore the producers profits are maximized as a result of only producing profitable properties, no unprofitable properties are diluting their earnings. The commodity markets find the marginal costs of the commodities due to the marginal production being removed from the market. The reserves costs remain constant due to the fact that consecutive losses are not added to the reserves each year. And those reserves are saved for a time when they can be produced profitably.
I’ll admit that People, Ideas & Objects our user community and service providers are part of the lunatic fringe as a result of this thinking. We are absolute evil, and how dare we suggest that the industry be operated as a business. It’s just what we do. This industry has been operated on this basis now for four decades. Most of the people in the industry don’t know anything different. It is culturally ingrained and the destruction is beginning to be recognized. Note the word beginning. When you don’t recognize your capital costs for the first few years, or even decades, it’s an advantage. Then as the balances of property, plant and equipment build up, that advantage turns into a disadvantage in order to equal things out. Mostly due to higher depletion rates, large balances of debt and large numbers of shareholders offsetting these very high balances of property, plant and equipment on the balance sheet. Where’s the upside for a new investor? Outsized balances of property, plant and equipment will be the albatross of these producers for decades to come, under the current methodology. The other consequence of not recognizing your capital costs is that you report healthy profits in the early years which draws in excessive amounts of capital. You remember those good old days don’t you. That excessive capital leads to overproduction or over capacity. Which from a business point of view, I don’t think there is a more dire and difficult business problem to overcome. Most businesses can’t survive when they’ve invested into too much capacity. The increased overhead of the surplus capacity eats you alive. The oil and gas industry has invested into too much capacity. What will happen as a result? Will it be that the producers support one another by participating in the development of the Preliminary Specification, or drag each other down? With the only source of cash being “more” production I think we have our current answer.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Monday, May 22, 2017
Friday, May 19, 2017
Thursday, May 18, 2017
Our Developments in Sight
Our software developers are a different story as they are full time hires and employees of People, Ideas & Objects. We are therefore looking to fill this requirement somewhat dynamically in the first year, if that makes any sense. These will be critical team members for the long term of the project. Therefore user community members may see rapid turnover in some of the developer positions in the initial phase of this development. This is one of the reasons that we need to start this development now. Our products and services are needed in the marketplace today, but nothing like what they’ll be needed in the next few years. As long as everyone understands that I’m sure we’ll be able to work through it.
Another aspect of what our developers will be working on is having the Oracle Fusion Middleware and Oracle Fusion Applications operational in a cloud computing environment. That way the user community will be able to see the base of the applications that they’re building upon. And they will be able to see their iterative developments as the developers code is committed and run on that environment for the users to see and use. It will be this facility that will enable us to move much quicker and the user community increase the quality of their offerings. Our only constraint is the speed of the user communities ability to think. Oracle also has one third of the costs of our initial budget made available to them to begin the technology transfer from their organization over to People, Ideas & Objects. We’ll need to learn many things and Oracle will be able to bring us up to speed in the shortest possible time. They will also be able to support their applications and our developments at a much higher level than what we would otherwise be able to do. We have a large technically challenging task ahead of us. Oracle has fully one third of all of the costs of our entire budget to ensure that these objectives are achieved in the long run. I have worked closely with Oracle in this capacity during our 1992 - 1997 joint development efforts. It is the superior methodology to ensure that we mitigate the technical risk we face and achieve the success that the oil and gas industry requires.
I have been abusive towards the oil and gas producers throughout the history of this blog. We have a MAAA (Mutually Assured Abuse Agreement) in place and I adhere to the spirit of that agreement. If they want to stop abusing the group that is providing the most profitable means of oil and gas operations. Who are conducting the only issue identification and resolution in the industry. Then I’m game. We are unquestionably the personification of evil but producers could easily overcome this by funding our first year's $100 million budget in a timely manner. Producers need to think and ask themselves critically, do they have the situation under control, and are their investors convinced that they have a plan for the future? Or do they need to address the business model in which the industry is operated and implement one that provides the oil and gas producer with a dynamic, innovative, accountable and profitable footing? As I said the other day, the writing's on the wall and my focus in on getting this software and the user communities services operational in a successful manner in the oil and gas industry. They are certainly welcome to join us here at anytime before our start date of September 25, 2017.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Wednesday, May 17, 2017
Onward and Forward
Almost three and one half years of user community development is the investment that has been made by People, Ideas & Objects. It had to be made. The user community is the critical point of success and quality of our offering. It is now the only major impediment to our speed in delivering our solutions. For the industry to move and implement the necessary changes the user community can be deployed in rapid fashion and deliver on the vision of the Preliminary Specification. It is the speed in which the user community can think that will be the constraint that we are now limited by. That multi-year investment has been made and now it's time for us to act on that investment and the vision of the Preliminary Specification.
I published the Preliminary Specification in December 2013. It provides the overall vision of how and what the industry and producer needs in order to to become dynamic, innovative, accountable and profitable. Since then we’ve worked to develop the user community. There is a saying that I think is appropriate for everyone to consider at this time.
‘Vision without action is merely a dream. action without vision just passes the time. Vision with action can change the world!’
With the participation of the user community in the development of the Preliminary Specification we can change the oil and gas industry to one that is dynamic, innovative, accountable and profitable. With no bureaucrats allowed! It comes down to the individual decisions of the people within the user community who have and will decide that enough is enough. What the producers believe today is that everything will soon return to normal. Shale is here for the very long term. Outsized balances of property, plant and equipment will be here for a long time. The debts will be here for a long time, and most probably, growing. The overproduction and oversupply issues are systemic and chronic and prompted me to seek a solution in 1991 to the overproduction in the mid 1980’s that caused the oil price collapse. Producers then just continued to lose money and increased production until the day they died. Sounds familiar doesn’t it. These problems are not going to disappear under these current administrations. These issues appear to me to be a feature of the business model that’s in use. Continued inaction, without any vision of the future, has us wasting time that is too expensive for all concerned. Which is exactly what the bureaucrats want.
I would argue that these problems will only become more protracted and difficult for the producers to deal with. The lack of cash is the current symptom that is plaguing the industry. And there are many ways to remediate that cash shortfall, none of which the producers are finding that they would consider affordable. And so they will muddle along and do nothing. It is now clear to those within the industry that shale production volumes increase at much lower price levels than first believed. Of course they would, it’s the producers only source of cash. Even in natural gas it was believed that shale production volumes stopped increasing last year. Now we find that to be untrue. Natural gas prices began their precipitous shale induced decline in the summer of 2008. Other than lose vast amounts of money and time since then nothing has been done. This business model is truly flawed. Our changes need to be made in the oil and gas marketplace and now is that time. Otherwise we’ll be stuck here forever.
It is the user community that is the source of the quality of the ERP systems that we’ll use in the future. People, Ideas & Objects have invested heavily in the development of our user community and now is the time for you to begin your participation. The issues in the industry are not being actively discussed and there is no vision and no plan to deal with them. More time will be wasted as a result and based on the financial performance of the industry a lot more money too. We can remedy this with the vision of the Preliminary Specification and the individual actions of the user community participants.
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.
Posted by Paul Cox at 6:00 AM 0 comments
Tuesday, May 16, 2017
We Are The Standard
People, Ideas & Objects, our user community and the service provider organizations that they’re developing will be the means in which the industry regains the trust and confidence of the investment community. Primarily by providing the oil and gas producers with the most profitable means of oil and gas operations. Something that we’re dedicated too and have developed as key elements of the Preliminary Specification. Everything that is done in the Preliminary Specification is to generate the profitability that a commercial industry needs. This is done so that society can prosper as a result of a healthy oil and gas industry. People will continue to be gainfully employed. People will be able to look to the industry as an area of interest to pursue through their university education. People in the service industry will be able to develop businesses that continue as going concerns and not risk everything on the “cyclical” nature of oil and gas. These people will pay taxes, as will the oil and gas producers. Who will also pay royalties. And lastly the investors who have made this all happen will be able to see the day when their investments have actually paid off. That is how an industry contributes to society. Other than the bureaucrats, whose benefited in the past four decades? No one.
People, Ideas & Objects, our user community and the service providers are the standard of expectation and the standard of performance that the industry will attain. Our Revenue Model specifies how we are able to source the resources that we need to achieve this. We are not blind sleepwalking agents of whomever will feed us. We are delivering the systems, accounting and administration that is necessary to achieve the most profitable means of oil and gas operations. By running the industry as a business we will be able to achieve much more than what’s been done to date. What will be expected of us in the next 25 years will be the most demanding period that the industry has ever faced. Where is the current discussion of this future? Muddling along through the next 25 years will only bring more of the poor performance we’ve seen throughout the past four decades. Muddling along and doing nothing are abject failures as the strategy of every producer. It was an inane strategy, ridiculous to consider and foolish to pursue. Now the evidence shows that it’s been a financial disaster.
We commence developments with our user community of our software on September 25, 2017. Producers need to realize the situation that exists today and take steps to remediate these problems. Otherwise the end is clearly in focus. Their participation is a necessary element of this development in a number of ways. They hold the financial resources that we need to build our product and services. We need the $100 million for our first years development costs in place by our start date. We then will need our full budget in place by September 2018. Producers should ask themselves if the act of funding our budget will satisfy the investors to the point where they’ll call off their strike? Another aspect of our need for producers participation is in terms of software quality. They need to work with our user community to ensure that they are receiving the software that they need to function. If you put nothing into this development I can assure you’ll get nothing out of it. There are fundamental and significant changes being made to the producer firms and industry. Being unaware and unknowing of these would be terminal to your operation. There would also be, in my opinion, no opportunity for you to catch up once the software is operational. The speed of the producers on our system will overwhelm your performance in the marketplace.
The writing's on the wall. What will you do? Try the junk bond market again? Muddling along will certainly be the operative strategy. However the difficulties will be about as high or higher as they have been these past two years. A constant chronic and regressive struggle throughout your future. Or you can choose to make the change that will end this destructive cycle that began long before most of the people began working in the industry. The culture is flawed and needs to be shelved. We need to adopt the dynamic, innovative, accountable and profitable culture that is the by-product of the Preliminary Specification.
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.
Posted by Paul Cox at 6:00 AM 0 comments