Markets

During our research phase one of the topics that we spent significant amounts of time on was the study of markets. This was primarily through the work of Professor Richard Langlois and several other prominent researchers. Review of our work in this area can be sourced from here and here. The important question that we needed to ask was; if producers were too bureaucratic and inefficient today, what organizational method would facilitate a more dynamic, innovative, accountable and profitable oil and gas producer and industry. The answer of course was the use of markets in allocating resources, developing capabilities and organizing the industry. Only then could the performance trajectory of the industry begin to be addressed and we begin to move away from the constraints of our current organizational issues. Therefore for the oil and gas industry to change its future prospects it must change its organizational methodology.

Within the Preliminary Specification there is a decided move toward markets. First we establish the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable producer. Align the compliance and governance frameworks of the hierarchy with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee to achieve a speed, innovativeness and accountability that is unobtainable in the current organizations. Then by establishing the Resource Marketplace, Financial Marketplace and Petroleum Lease Marketplace modules as part of the Preliminary Specification we have the software to define and support these frameworks and markets.

We then take the concept of markets one step further by establishing the marketplace of our user community that defines the software that is developed by People, Ideas & Objects developers. For all intents and purposes this is a stand alone market established for providing the quality software that the oil and gas industry needs. In addition we have established a market for service providers who will provide the administration and accounting services to the producers in connection with our software.

Without these structural changes to the producers and the industry then no change will occur to the behaviors that we see today. And particularly in this day and age where we are so dependent on software to define and support our organization's, changes must be planned and implemented in the software before the changes can take place in the organization. We see a number of businesses today believe they can make the transition from one business model to another when the time comes. Yet I have never seen it happen in real life outside of the forces of creative destruction. You have two seemingly opposing objectives of growth and profits. Where profits are foregone at the expense of growth. This was the model used by the oil and gas producers. It is the model that is currently being employed by Amazon and Tesla. Amazon has made such little money in its lifetime that it’s strategy of being everything to everyone will only fail as that strategy has failed so many times before. And Tesla has proven itself, like oil and gas to have great technology, no profits and no cash. Elon Musk has also displayed the propensity to spend money like only oil and gas producers can.These organizations can not now just hit a switch, say they’re going to make the change from growth to profits, as the producers are parroting today, and transition to a profitable organization. It has to be built from the ground up, brick by brick and stick by stick. Like Apple who have experienced phenomenal, substantial and real profitable growth throughout its second life.

Creative destruction has always been the force in which People, Ideas & Objects implemented these changes. Today the financial performance and structure of the industry is in desperate condition. Producers believe that their well defended balance sheets with large balances of property, plant and equipment reflect value. It is an illusion. These are the unrecognized capital costs of past production and are supported by equally bloated share distributions and debts. Who wants to invest in an unprofitable, spendthrift operation that forces you to dilute your interest to a negligible value at closing? The revenue of these firms barely cover the cash costs of production as the industry experiences a cash crisis like no other. The transition to markets will begin soon as the status quo becomes untenable even to its current cheerleaders. This is creative destructions finest hour and the beginning of a markets based approach to oil and gas.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Like an Ostrich, With It's Head in the Sand

Although it’s a myth that Ostriches stick their head in the sand when confronted by a predator. For our purposes here we can draw the parallel of the producers with their heads in the frac sand. Unable, or most probably unwilling, to comprehend the business that they operate extending beyond the well bore. Critical review of the third quarter financial statements of the producers should have embarrassed those that are responsible. There is a tragedy unfolding and they’re oblivious to it and their involvement in it. All that we’ve heard from the media and PR departments is how comprehensive the producer's control over the science and technology of the oil and gas shale operation. And that in the face of chronic, unprofitable, full production, everywhere and always, that markets will rebalance.

In business you have to be tough and be able to fight. When you get knocked down you pick yourself up and get moving again. Over and over, year after year. Resiliency is a characteristic that ensures you’ll be back another day. Success is the only objective and that can only be measured in profits. For the past fourteen years I’ve detailed the deficiencies in the oil and gas producers business model and offered an alternate solution to those issues. Although initially times were good in oil and gas and the Preliminary Specification was easily ignored. The problems began soon after the 2008 financial crisis. Natural gas prices declined in early 2009. Oil prices followed in 2014. Nothing has been done to remediate these issues while the producers have spiraled downward in their capabilities and capacities. Today with no support from their investors and bankers they pretend that they’re viable going concerns because their field operations continue to attain great scientific and operational performance. The problem they don’t see is that they’re in desperate financial condition with little time to deal with significant issues and currently have no alternatives in which to deal with them. Resiliency therefore is not a characteristic of the oil and gas producer.

Commodity prices have responded well to the OPEC production sharing agreement. What we can determine from their actions is that the commodities of oil and gas follow the characteristics of price makers. Removing 1.8 million barrels per day has effectively doubled the price of oil. A small sacrifice enabling everyone to win. The difficulty with the production sharing agreement is the method is bureaucratic and uneconomic. What is needed is a more reasonable methodology of production allocation that would preclude the need for any agreement, include the North American producer and be fair and equitable. People, Ideas & Objects propose the only fair and equitable method of production allocation. Where only profitable production is produced.

This reasonable business approach to the oil and gas business. To only produce what is profitable is considered to be collusion by the bureaucrats in power. What I think we can now prove is that in both the oil and gas commodities North American producers, for whatever reason, are colluding to keep prices down. Why any business would do this and incur the kind of financial losses and damage that oil and gas has experienced is an interesting situation that I think we’ve never seen in business before. Our efforts to convince them to make the changes to improve their businesses have been met with nothing but violent resistance. An undying, misguided faith in the myth of “market rebalancing” providing the cover story for their inaction.

With an overall increase of 12% in the price of oil during the third quarter of 2017 producers anticipated good times. However in the second quarter our sample of 23 producers reported $6.33 billion and in the third quarter reported $7.83 billion. A $1.5 billion increase in suspect accounting profits for the three months. Clearly 12% isn’t going to be adequate to solve the issues of the day. Our calculations show producers need close to $150 / bbl in order to deal with the financial damage they’ve incurred and be profitable in the current environment. The question then that needs to be asked is, what is it that they’re doing?

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Maybe the Investors Will be Happy

Bloomberg’s Alix Steel was interviewing Conoco’s Chairman and CEO Ryan Lance on the floor of the New York Stock Exchange. During the interview he stated the following.

If you asked me to be a betting man today and I had to average the price over the next five or six years, we’re not making bets on a higher price. I think if you need that higher price to bail out your business model, you’re going to be really disappointed.

I think Mr. Lance is mistaken about the purpose of our business model, the Preliminary Specification, with its price maker strategy. We are not focused on raising prices we are focused on producers earning real profits. If the property can earn a real profit considering all of the actual costs of exploration and production, based on a reasonable accounting then that property will produce. If it can’t generate a real profit then it is shut-in until such time that it can. What is it that the oil and gas industry is doing? Diluting their profitable properties with unprofitable production is a fool's game. If you shut-in your unprofitable properties, your profits would increase. It’s also true that commodity prices would rise however that would then stop the investment community from subsidizing the consumer for their energy needs.

Several years ago investors and bankers abandoned Mr. Lane’s “business model” due to its misguided adventures in destroying their capital and not charging enough for their products. None of the producers have ever made any money if you consider that the capital costs of past production are glaring at everyone in the property, plant and equipment account. In Mr. Lane’s case he’ll be depleting Conoco’s $47 billion in assets over the next 9 years. Why? Are your investors that patient that they can wait for that capital to be returned to the company for reuse? It’s a capital intensive business, doesn’t that impute that capital should be reused again and again or is it as these producers suggest that capital is used just once in the lifetime of the business? And what about Conoco’s $2.4 billion in losses so far in 2017? I know, profits don’t matter in oil and gas. It's how efficiently you inject the sand into the formation during the frac that makes the difference.

Although $1.5 billion in third quarter earnings may be satisfactory to the likes of the oil and gas producers. It’s a poor performance when you consider that property, plant and equipment totals $478 billion for our sample of 23 producers. Though earning 1.25% annual profits on conspicuous accounting would be a big step up from last year. Cash continues to bleed from these producers at a rapid pace. Without the annual injection from investors of free money to spend, and the business not performing as a business, because we’ve determined it to be a consumer subsidy, I’ll accept Mr. Lane’s criticism of the Preliminary Specification. Recall too that producers claimed that they’re profitable at as little as $30 and prayed for $50 oil to return. These profits and the hemorrhaging of cash show that even with the prices that they prayed for, and the deferral of the recognition of their capital costs for decades to property, plant and equipment, the bath tub that is oil and gas continues to drain at a remarkable rate.

The fact of the matter is that any producer will say anything on any specific day. Today it’s profit’s over production, tomorrow they’ll say they're committed to energy independence. There is no plan other than to drill and complete that next well. The entire focus of the organization is on the technical aspects of oil and gas exploration and production. Thinking that the business end of the business will take care of itself. The problem with that is there is a crisis undergoing in the business of the oil and gas business and no one is paying attention or listening to what others might be saying.

We learned last week that crude oil production reached 9.66 million barrels per day. This being the highest point of oil production in the shale era. It’s a good thing that producers are focusing on profits and not production, so they claim, otherwise who knows how high this number would have been. The issue is that there is no control whatsoever over the volume of oil that a producer will produce. It is full production everywhere and always. I’ve completed my review of the third quarter reports of our sample of 23 producers. With a 12% increase in the price of oil much was expected from these producers. I’m afraid that we’re not in the position, as an industry, to continue on in the manner that this industry is proceeding.

These comments from the CEO of Conoco, and comments from others are evidence of one thing, in my opinion. The producers are not enamoured with our free money strategy. That we are proceeding with our developments without their involvements is not something that we could have contemplated earlier or what they would have considered possible. Our coin offering will create one of the producers largest costs in the future of the industry. A cost that is incurred in providing them with “real” profitable operations. Something that they’re unwilling and incapable of accepting as necessary. That the Preliminary Specifications price maker strategy is openly criticized now is good news for us.

What the third quarter reports show is that the trend in which the decline in producers performance and financial health has continued unabated. No remedial action can be seen on any of the producer's behalf regarding any aspect of their organizations. These third quarter reports also provide evidence that their investors still believe that shale is, and never will be commercial. Action on part of the producers is what the investors have been waiting for. People, Ideas & Objects provided an alternative for producers but we have chosen to build our software with our free money strategy. Oil and gas investors were previously only on strike, now they know producers haven’t done anything, and most importantly, now can’t do anything. It sounds to me like action by those investors is necessary and probable.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Third Friday Off

Thanksgiving

No Posting Today

Still Under the Weather

Need a few more days to heal.

Will be Taking This Week Off

Remembrance Day / Veterans Day

No Posting Today

Bright, Shiney Object

Successful implementation of shale technologies in China and Argentina are the news of the day. Other areas of the world such as Africa are also pursuing the technology. There is little in the way of each country accessing these technologies to develop their shale reserves. The United States holds 17% of the world's shale reservoirs. Just the initial phase of the implementation of the technology has had the effect of destroying the global oil and gas commodity prices and the financial health of the North American producers. The real question to ask is what will be Saudi Arabia’s strategy when the world is awash in shale based production. Will they continue to forgo their low cost production in order to support a price that somewhat covers the high costs of shale? Or will they, as it is suspected, soon after their IPO of Saudi Aramco, just produce their low cost fields for whatever price they can and at least obtain some value from them? Leaving the price issue in the hands of the shale producers. What then is the logical strategy for each side to pursue?

What we may see is a continuation of the low price environment that we’ve all come to know and love. With continued and increasing unconstrained production of everything all of the time the oil and gas industry is destined never to be a commercial enterprise again. This must be what the investors see for the business and can only find verification of these facts with each of the producers quarterly financial statements. Where is the mid to long term logic and strategy for shale? A technology that has in as little as ten years increased the global oil reserves to the point where we have double what we need for the next fifty years. And why is it that the only strategy being pursued is full production everywhere and always? Is oil and gas still a scarce commodity or did shale change the business of oil and gas exploration and production?

North American producers have not resolved this issue in the first phase of shales implementation. As shales technology goes global it will be beyond their scope to deal with as countries such as China may satisfy their own internal markets. Reducing the global demand in the supply - demand equation. People, Ideas & Objects are currently focused on the North American producers however there is no reason that once our technologies are developed they can’t be deployed globally. Maintaining a global discipline where all production of oil and gas is profitably produced.

Of course all of this is as clear to anyone who’s familiar with the industry. Why producers don’t hedge their bets and pursue two opposing ideas at the same time, that is continue with their current strategy but also develop the Preliminary Specification is beyond me. Maybe they know something that I’m unaware of. If they’re unable to implement a dual track strategy now how will they do it when shale is produced globally? Maybe we should see this as evidence of the terminal nature of their approach and their business.

All of this can be attributed in large part to the deferral of recognition of the producer's property, plant and equipment. As I should have noted yesterday this makes a young producer look very profitable as they have flush production and can defer most of their costs. Causing investors to rush into what appears to be a highly profitable enterprise. Creating the overproduction of the commodities that appear, even today, to be profitable. As producers age to the level the industry is today the buildup of property, plant and equipment conspires against the producer. As time passes, they begin to recognize more of those deferred costs while their production curves decline steeply downwards, in a marginal enterprise where investors are frustrated with performance. In a capital intensive business it makes no sense to defer the recognition of your capital. A business competes by turning over its capital quicker than other businesses and other industries. Why oil and gas is permitted to defer the recognition of its capital for decades is a unique situation that should never have happened. Accountants should have known better that accounting is about performance. Competition for capital is why we assess performance in the accounting that is produced. Therefore why would you defer the recognition of capital assets for decades? Of course this argument is rendered mute due to the fact that oil is up 1.5% on the day.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Industry Update

I’ll have a full report based on the third quarter financial statements of our sample of 23 producer firms on Monday. I’ve been pretty sour on the oil and gas industry for the issues that I identified on this blog and the solutions that the Preliminary Specification resolves. Suggesting that these issues will be terminal should the producers attempt to “muddle along” much further. Although not all the producers have reported at this time, what we do know is that there is a tragic cash crisis accelerating in the industry. Working capital is evaporating at a much faster rate. Earnings are down substantially from the second quarter. It appears that the third quarter may have generated no earnings even though oil prices were up 12%. That includes a decrease in the amount of property, plant and equipment being recognized for depletion in the third quarter. Operations are consuming more of the revenues. And the volume of cash being consumed is epic. The volume of short term liabilities has also grown disproportionately to the rest of these firms accounts. Producers are now pushing their suppliers for extensions on their payments. The amount of cash is becoming dangerously low and I would express my concern that there is little being expressed by the producers concerning their cash balances. They are either unaware of their situation or fundamentally do not care.

What we do know is that these producers can’t, won’t and will not ever subscribe to the Preliminary Specification as the resolution of their issues. Which wouldn’t matter anymore anyways. We are of the belief that they’ve moved beyond the point where we’d be able to help them. We have chosen to pursue other methods of implementing our solution in the oil and gas marketplace and believe fundamentally that these financial statements are the beginning of a meltdown in the industry. Who will jump in to support them? Both the investors and bankers have been absent and unwilling to participate for years. They too can see that the amount of capital necessary to fix this problem is well beyond the capacities of the investment and banking communities. Even if they did re-invest the producers would only regress to their old behaviors, resume their typical operations and be back at this same spot in as little as five years, wasting the trillions that were given to them now. They are beyond hope.

Prospective members of our user community must realize the time for them to act is upon us. It will be our collective action that will be looked upon as the method that the industry is able to rebuild itself. There is no shortage of hard, difficult work in which we need to do. Preparation of your application to the user community should be your first priority with an understanding that action may be called upon us much sooner than we’re prepared. Our preparation as a community is the most effective thing we can be doing. It begins the process of software development and brings us closer to the day we deliver our software.

These excessively bloated balances of property, plant and equipment are dead weight that will pull these producers down faster than in a normal environment. If an investor were to look at a producer with the prospect of investing they would see those bloated assets supporting the large number of shares outstanding and prior capital raised. Demanding the new investors spend large amounts of capital for half and quarter percentages of the outstanding number of shares. Exciting. Investors know that these bloated numbers represent the unrecognized capital costs of prior production and their investment dollars are in essence only providing working capital for the producer to keep the lights on for a few more quarters. Very exciting. If the producers attempt to eliminate these bloated balances they’ll only show the world how spendthrift they’ve been and end up recording losses that exceed the entire capital structure of the company. The only thing I think they can do is keep going until people’s paychecks bounce and then move on to another industry.

This is a very tragic situation. I am unaware of any industry that has so destroyed capital in this fashion. For four decades money has been raised and spent with no respect to value or understanding of profits. It may become obvious to most what has been going on for many decades now. But I’m happy to have been the thorn in the side of the industry for these past 14 years. They knew what I was talking about and instead of doing anything about it they did everything they could to silence me. My point is that all of this was unnecessary.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Starting a Successful Oil and Gas Industry

People, Ideas & Objects primary focus will always be on our user community. There is no purpose or reason for anyone to develop a system such as the Preliminary Specification without the involvement of the user. User community based developments are the only means in which to provide the quality systems that the users want and need. Development of our user community began as soon as the Preliminary Specification was published in its final form in December 2013. We then began seeking out users to join the community and published our user community vision. Providing it with the power and capabilities necessary to drive the transition in the oil and gas industry. Our commitment to user community based developments is uncompromising.

With all that has happened in the last quarter with People, Ideas & Objects. The cancellation of the project's software development start date in late September most particularly. Our focus has not changed. And neither has the user communities. We don’t currently have any software development plans however there are many things that the user community can be doing. Those that are interested in participating with these software developments should continue with their applications and prepare as if we’re moving forward imminently. Preparation is the key to success. If we wait until our ducks are all in a row then we’re unnecessarily wasting time now by not proceeding with the user communities development.

Our commitment to our user community requires us to have it developed before we begin software development. The more time and energy that we spend on the user community at this point the sooner we’ll be able to deliver our systems. The key determinant to our quality and our delivery date is the development of our user community. Something that we’ve been doing since December 2013 and continue to do. We will not begin developing software without the direction of the user community. Therefore this is our focus and priority. If ever you wanted to have systems that meet your needs, they’ll only happen with your involvement.

We may at anytime find the resources to proceed with developments. That’s not the point we should be looking towards. We should be asking ourselves what is the state of affairs in the oil and gas industry? What is its future for the next 25 years? Its issues and opportunities and how will these be met by the current producer organizations? Can we get there from here? If you believe the current producers can fulfill this future then our user community is of no interest to you. If you believe that changes are necessary and that the current course of destruction is terminal then the user community may be what you can do to make the industry dynamic, innovative, accountable and most important of all profitable. Real profits, ones that will generate value outside of accountings financial statements.

If you see a future for yourself in the oil and gas industry then the user community may be the ideal vehicle for you. There will be plenty of very hard work for everyone to get through. Overproduction and oversupply are unquestionably the biggest issues oil and gas has ever had to face. How it handles these from this point forward is purely a function of the user communities success and dedication. We are not losing any time in terms of the delivery of the Preliminary Specification to market if the user community continues to be developed. We are the first element that needs to be put in place and we can organize ourselves here and now in anticipation of the time that we’ll be needed. If we don’t prepare in this manner then the oil and gas industry will never be successful again, its that simple.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.

The Dynamic Nature of our Coin Holders

Organizations are defined and supported by the ERP software that they use. Any change in the organization must be made through the software first, before it can be implemented in the organization. Otherwise with the software unchanged any attempt to change the organization will cause it to subsequently regress to its former state. This is the reason that People, Ideas & Objects and our user community provide a software development capability to the oil and gas industry that is so critical for today’s business environment and for the long term. In order to make the changes in the behavior of the producers they’ll need to change the software first. Now as a result of the inability of the producers to support our September 25, 2017 software development start date, issues such as their chronic overproduction and oversupply will continue.

There have been a number of new dynamics introduced into the oil and gas industry. We have indicated the state of affairs in the ERP marketplace in terms of choices the oil and gas producers could make. Without People, Ideas & Objects there are no systems developments being undertaken as a result of the history and past behavior of the producers. Everyone has left. I would seriously question the producers ability to raise the attention of any vendor at this time. The market is small in terms of the number of producers and their habit of abuse in the past is legendary. With People, Ideas & Objects efforts over the past fourteen years of promoting our solution which uses the Joint Operating Committee, who will come up with a more competitive offering that solves today’s issues, in a reasonable period of time and will continue to pursue that solution on behalf of the producers for potentially decades? It would seem that the bureaucrats who run these producer firms would rather run their companies into the ground than solve their problems.

The opportunity for producers to participate in our September 25, 2017 developments would have enabled them to acquire that software development capability and move forward with resolving their issues which include the chronic overproduction and oversupply that plagues them. As a result they will not have this capability made available anytime soon. And therefore the issues and opportunities that the industry faces in the short, mid and long term will not be resolved or realized by any known current method. They will be stuck in this current state until such time as some alternative and unknown ERP software enables the industry to implement the changes that are necessary.

At the same time People, Ideas & Objects are focused on our true customers, the coin holders from the Initial Coin Offering (ICO) that we are preparing. These are the disgruntled oil and gas investors who have been on strike for over two years. We feel we offer a highly competitive offering in terms of return for these investors to consider. Especially in comparison to what the producers have been able to provide these past decades. What our coin holders will do will be to negotiate with the producers for a share of our trillion dollar value proposition that we provide the industry. More can be understood about our free money strategy here. This also provides our coin holders with the means in which to begin the much needed transition of the industry, through creative destruction, into a dynamic, innovative, accountable and profitable industry.

It will be our coin holders that will have the means in which to make the changes to the oil and gas industry that they want and need. They will have the exclusive software development capability of People, Ideas & Objects and user community available to them. They will also have the service providers which provide the administrative and accounting capabilities in which to operate the industry. We have always believed that the level of change that is introduced in the Preliminary Specification is too dramatic for the existing producer organizations to undertake. Rebuilding the industry brick by brick and stick by stick has been what we have stated all along, even as far back as 2007. The financial damage to the current producer firms has been catastrophic. A rebuilding would seem to be necessary. Will these organizations be able to deal with the future of the industry? We do not believe they will ever be able to approach North American energy independence. They will need to establish themselves as profitable organizations before they can expand their throughput. Profits, real substantial profits, not the accounting profits they’ve reported for decades, have never been part of their culture. And as we’ve noted, they won’t have the software development capabilities to reconfigure themselves in order to begin to earn real profits.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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

Oil Prices, Again

People, Ideas & Objects have proven that oil and gas producers can’t, won’t and will not ever develop any ERP systems on their own. After a decade of losses they did not participate in the proposed development of the Preliminary Specification starting September 25, 2017. We use this as evidence, upon the history, culture and behavior of the producers over the past decades in terms of dealing with ERP providers. That our coin holders will not face any competition as a result of any industry sponsored ERP software developments. We can also state that for Oracle and IBM to return to the market would require that same change in behavior of the producers that we know is missing today, and that these vendors identified earlier this century which prompted their exit. We can also assure our coin holders that no alternative ERP software developments will be sponsored based on the Intellectual Property inherent in the Preliminary Specification. The Permission Rights the coin holders earn are exclusive.

I have been highly critical and sarcastic towards the oil and gas producers throughout the last decade on this blog. The tone has been consistent and establishes a level of conflict between People, Ideas & Objects and the producers. It’s never wise to criticize your customers publicly. Based on the producers past behavior towards ERP providers I don’t think I ever saw them as customers. I’ve been told a hundred times that they’ll never get involved in this project, something that I agreed to quietly. I think I always knew the producers weren’t customers but were more the source of the issue and that was how they were treated here. Our customers were the investors in the oil and gas producers who we share a frustration and anger with. They now have the opportunity to participate in the transformation of the industry, and their interests in oil and gas, by participating in the ICO we are preparing. Choosing to invest in the coins as opposed to the producer firms themselves.

What we need to do now is to prove that the oil and gas producers, during a period of rising oil prices, have a flawed business model that is the source of low oil and gas commodity prices. We certainly don’t see any investors or bankers stepping over each other financing any of the producers. This should be relatively easy for us to prove that the overproduction and oversupply is inherent in the business model and nothing has changed since the late 1980’s and 1990’s when I first began to study and resolve why producers don’t just shut-in some of their production to raise prices to the level where their profitable.

That the Preliminary Specifications decentralized production model’s price maker strategy resolves low commodity prices is irrelevant to the producers. They see it as collusion and will not be involved in it. They prefer to spend decades where they lose money as a result of a fundamental change in their business, driven by prolific shale reservoirs. Ending up losing the investors, banks, service industries, their employees and all the others interests instead. Where a common understanding of business would dictate that the market provides one thing and that is the price it is willing to pay. If they as a producer can earn a profit at that price then they should produce, if not they should shut-in their production. That is not collusion as they suggest but good business practice. Producers will allege that this is what they’re doing.

One look at the disjointed nature of their financial statements will find that none of the capital costs of past production has been recognized. And the real costs of oil and gas exploration and production are fundamentally unknown. By capitalizing everything including the receptionists Post-it-Notes and the service charges for the phone they use. Only to be recognized over a twenty year period. One mans profits are another mans accounting fraud. Producers have ignored our commentary about this point. Primarily I think because it’s something that has formed a cornerstone of their legacy of destruction. You can’t profitably retire these balances in the short or mid term, therefore why admit it’s an issue. It is the albatross around their neck that makes investors unwilling to dilute their future investments against past costs of a questionable nature that have never performed. That goes for banks too. And the outsized nature of these balances can only be reduced through long term profitable operations. Something that these organizations were never structured to provide. They were spending machines. The money comes in and then goes out. Only to be replenished next year by newer, more naive investors. As an oil and gas investor it's the continuous, annual dilution of your interests that’s the prize!

We see today that the Saudi’s and Russia are committed to extending their production sharing agreement throughout 2018. This is having upward pressure on the price of oil. This is also good for the Saudi IPO of Saudi Aramco which will also occur in 2018. What happens when that is complete? As the low cost producer they will have a number of different strategies to chose from. Elimination of the high cost producers through low commodity prices is the most probable one that I see them employing. Already in the 12% increase in prices during 2017’s third quarter and the 5% increase in October 2017 producers are found to be racing to get more production on line to secure more cash. The U.S. is projected to be producing over 9.9 million barrels of oil per day in 2018. A record volume that was previously established in 1970, in comparison to the approximately 8.9 million barrels per day when OPEC first put their production sharing agreement into place.

How many times are we to believe the “market rebalancing” story? It is just the cover story for a complacent and satisfied bureaucracy. It also reflects the lack of thinking in the industry as “market rebalancing” has been the only commentary since the decline in natural gas prices in 2008. I am very satisfied that I have a decade or more of critical commentary about the producer's business. Their business is flawed and has no future. That will soon be proven again as they overwhelm the market with surplus production. We now have our customers clearly defined and are able to provide them with substantial business value. And just to show the trend is our friend, the CME Group are experimenting with BitCoin to see if they are able to begin trading in cryptocurrencies. Establishing a possibility that our coin holders could trade on the Chicago Mercantile Exchange.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Trillions in Free Money, Part IV

The Better Investment?

Nothing has changed in oil and gas since the development of production methods for shale based reservoirs. These developments began in the late 20th century and by 2010 had totally destroyed the natural gas business. That business went through a number of false new beginnings where it was expected that the market would rebalance and prices would recover. Eventually after many iterations of slightly higher prices, leading to a rush of new production, everyone gave up on the natural gas business. No one hears any news about that market anymore. Prices are trading at 18 times the price of oil. Historically natural gas was 6 times. So much damage has occurred as a result of the overproduction and oversupply from shale. Today we remain optimistic that oil prices will recover, just as we did with natural gas almost a decade ago. It’s been a far shorter time that oil prices have been depressed and hope takes time to completely erode. Those that agree with the North American producers that all has been resolved in the commodity markets may be correct. I would ask how many times have we been here before? Then suddenly production increases in North America, and the price collapses again. Nothing has changed in the business to stop the overproduction and oversupply of these commodities. The business model of these producers will continue to overproduce forever.

All that is needed is for each producer to shut-in a small percentage of their properties in order to realize a tripling of the prices and the ability to cover their costs. So simple but it will never happen with the current producers structure. And they can’t, won’t and will not ever change. People, Ideas & Objects have proven that. Producers are giddy with excitement because they have OPEC cutting their production and somewhat supporting the price. Saudi Arabia is planning their IPO of Saudi Aramco in 2018 and when that is complete their desire to have a stable price will no longer exist. Their costs are single digit and in the face of prolific high cost shale they are the low cost producer that will always be able to compete. Therefore they will put all of their production on the market and leave it to others to deal with their costs. Meaning the North American producers have less than a year in which the bottom falls out of the oil market, just as it did so many years ago in the natural gas market. This is not the investment communities nirvana that producers should be giddy about.

It is the inability to address these issues that have concerned the oil and gas investor and banker. They see no discussion or identification of the issue, or resolution being put forward. They now understand that the accounting has been suspect for decades. Where recording every cost as a capital asset has become the art and the science in the industry, and depleting the capital asset over decades has reported false profits that demand the investor's annual cash injection to stem the producers cash shortfall. A few years ago the investors cut the industry off from new capital and have created a severe cash crisis throughout the industry which has motivated no discussion and no change. At the same time People, Ideas & Objects have fought with these same producers over our solution to these issues. Our resolution of this conflict is that we now turn to others to begin the process of turning over the industry through the process of creative destruction.

We have identified a number of groups that we will be targeting in the process of issuing our Initial Coin Offering (ICO). Members of our user community can participate in our ICO and enhance their interests in the ecosystem that is being offered. We have stated that producers may be interested in purchasing adequate coins to have their production profile processed through People, Ideas & Objects software. That however may be a bit of a stretch of logic for them. The one group that would be lucrative for us to recruit for their participation in our ICO would be the overall oil and gas investment and banking communities. We are a proxy to profitable oil and gas production. Therefore it would be in their best interests to participate in the ICO and skip the direct investment in the producer firms. Providing these investors with greater opportunity for returns and a seat at the table in terms of how the oil and gas industry is restructured and reconfigured to ensure real profitability is attained.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Trillions in Free Money, Part III

Coin Holders Strategy

Owning the oil and gas asset isn’t enough in the 21st century, you’ll also have to have access to the software that makes the asset profitable. Since People, Ideas & Objects will be distributing Permission Rights to coin holders for exclusive access to our software. The profits will be earned by the coin holders and the assets will be held by the producers. That is initially, then these assets will be transferred to the coin holders through the process of creative destruction. Something producers seem to be quite satisfied with. Coin holders will share in the differential that is generated between what producers are satisfied with today, $50 for oil and $3 for natural gas, and the amount that is generated as a result of the use of People, Ideas & Objects Preliminary Specifications decentralized production model’s price maker strategy. As we stated elsewhere in this discussion, it will be the bold producers who have the means in which to tell their shareholders that they will not be participating in the upwards of $67 / boe in free money they would earn by dealing with the coin holders and accessing our software.

It will be necessary for the coin holders to see their role in the oil and gas industry as initially implementing what has commonly been known as disintermediation. The use of Information Technologies to move the industry to a higher level of performance than the status quo. Once that is achieved and their share of the differential in the price of oil and gas natural gas is being generated they can begin the full force of creative destruction within the industry. Producers today have proven that they are unable to change with the dynamic changes introduced through shale based reservoirs. Chronic overproduction and oversupply, in addition to borderline fraudulent accounting methods for the past four decades have left the industry in a state where little is occurring that is productive. Cash flow in this capital intensive industry will always be great enough to pay the bureaucrats. The prolific nature of shale will always ensure they have cash flow. And overproduction and oversupply will continue.

People, Ideas & Objects have proven that the producers can’t, won’t and will not do anything in their business to mitigate the disastrous situation they’re in. We have been pushing the Preliminary Specification in the market since August 2003 and with a proven business model that provides trillions in incremental value, yet we are unable to motivate them to act. Our final efforts to convince the North American producers to act ended September 25, 2017 and we’ve then shifted our business model to granting Permission Rights to coin holders. It is in this way we can use the trillions in value that is being ignored by the producers to build the Preliminary Specification, disintermediate oil and gas and set the forces of creative destruction into play within the industry.

In addition to our efforts to provide ERP systems to oil and gas producers. There have been a long list of failures and false starts. IBM had the leading application in the industry, Qbyte, and were unable to generate any support for incremental development work. In frustration IBM sold Qbyte and left the oil and gas ERP marketplace in 2005. Prior to that Oracle invested their own money in an initiative known as Oracle Energy. From 1997 to 2000 they attempted to create commercial levels of interest in the ERP application and were unsuccessful, subsequently abandoning it in frustration. Producers may be able to turn to these vendors to build them their ERP systems in the future. There is also the SAP application that is popular with the larger producers. However, SAP and Qbyte are the standard entrenched solutions and we have the issues within the producers today. What changes will they implement to remedy these issues and why have they not done so by now? For Oracle and IBM what will their vision of a solution be should they decide to re-enter the market. New technology? It is the Intellectual Property of the Preliminary Specification that is inherent in the Permission Rights being granted to the coin holders. That is what protects the coin holders from any competitive offering. People, Ideas & Objects will not be granting any other solution with access to our IP. It will be through the coin holders control of the producers access that they can compete with the likes of Oracle, IBM, SAP and Qbyte.

People, Ideas & Objects are user community based software developments. As a result of the development of our coin holders this places the user community in a unique and different situation. They are now wholly independent of the producers themselves. They are working toward the future of the industry and remediating the issues that exist in the marketplace today. This unconstrained approach is unique and will provide the means in which the coin holders will be able to exercise their position to turn over the ownership of the oil and gas producers assets.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Trillions in Free Money, Part II

No Need for an Exit Strategy

One of the key attributes that I see in blockchain technology is that there is no defined need for an “exit strategy.” If you speak to angel investors and venture capital groups they raise this point almost immediately. Trying to determine how it is they’ll get their money out of a private company that they’re investing in. What they want to hear is that the firm will do an Initial Public Offering (IPO) or sell to a large competitor once it reaches scale. In many ways these objectives conflict with the founders of the firm as they weren’t necessarily doing it for the money but that they enjoyed the work and wonder to themselves what they’ll do when the firm is sold.

Each holder of the Permission Rights that we distribute with our coin will have the convenience of trading these coins with others immediately. These transactions are safe and secure without the regulatory burden that is required in the stock market. That safety and security is a feature of the blockchain distributed ledger technology. Redundant duplication of transactions in many ledgers across the Internet provide the security that the transaction can be verified at any time. Therefore the feature of an IPO, the liquidity the angel / venture capital investors seek, is available immediately the coins are issued. That’s just the beginning.

I don’t remember the specific details of the YouTube acquisition by Google however speaking in generalities you can see the real value of blockchain technology. The founders of YouTube used the sale of their company to Google as their exit strategy. They were purchased by Google for around $3 billion. The amount is uncertain and not relevant to this argument. If liquidity was what the founders and venture capitalists wanted they would have had that with blockchain technology without having to sell their company. The coins they would have used would have reflected the value of the company for all concerned. However, they would have also been able to choose to hang on to YouTube and realize the approximate $150 billion in incremental value that YouTube has provided to Google today. This value instead being reflected in the coins value and the original owners would therefore have benefited to a much greater degree.

Much of the entrepreneurial value that is created is now being concentrated in the large Information Technology organizations which have the means in which to pick off the promising startup technologies. The system today enables this, and no one really is complaining about it. However, what if the entrepreneurs who were able to start these firms were able to continue on and develop them for the benefit of themselves and their coin holders? That is the value and the key attraction that blockchain is providing the marketplace today. The ability to aggregate millions of participants for your ICO and raise substantial amounts of capital as the other. The Internet is able to aggregate these like minded people and ensure that their investment is safe and secure in the blockchain distributed ledger. Building value for all concerned for the long term.

The coin itself will be issued by its own separate legal entity. It will have its own board of directors, administration, revenues and expenses. These will make up the intrinsic value of the coin in terms of its trading value. The revenues it earns are its share of the differential of the oil and gas price. Its costs are the costs to use the People, Ideas & Objects software. It should be determined if, and it would be my suggestion that the coin holders undertake to pay for the service providers fees on behalf of the producers. This would, in my opinion, increase the value-add that they provide to the oil and gas producers and increase the amount of their percentage of the differential. The coin holders are providing a service to the oil and gas producers. The broader the scope of that service the more valuable they will be to the producer firms.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Trillions in Free Money, Part I

Our Free Money Strategy

What follows is documentation of “how” and “what” we are doing to raise the financial resources to fund our budget and develop the Preliminary Specification. An Initial Coin Offering (ICO) is being prepared in which to do so. The coin holders will be provided with exclusive access, known as the Permission Rights, to the software developed from the Preliminary Specification and the associated services of the service providers. Therefore the oil and gas producers will need to secure access to our system through the coin holders Permission Rights. The business model of the coin holders involves the extrinsic value of the oil and gas industry. The differential between the prices realized today, and those that are necessary for a profitable, healthy oil and gas industry. Producers have repeatedly expressed that they’re not interested in this extrinsic value. Something that People, Ideas & Objects have proven to be the case. Therefore this value is available to those that will develop our software and implement the Preliminary Specifications decentralized production model’s price maker strategy.

At this point the glaring error in establishing the coin holders business model is the motivation that the producers have in using People, Ideas & Objects software and service providers and negotiating its access through the coin holders. Our argument regarding oil and gas is that all of the costs associated with exploration and production are generally capitalized in property, plant and equipment. These asset balances are now at obscene levels as a result of annually taking capital from investors and spending it, only to recognize these costs over a ten to twenty seven year horizon. This has “locked up” the investment capital of the industry in the property, plant and equipment account on the balance sheet of the producers and is unproductive as that investment capital is never turned over. Therefore the asset costs of past production, due to the steep decline curves of that production, are represented in those large asset balances. Hence much of the unrecognized asset costs of past production need to be depleted from the producers balance sheets in order to recover the prior investment capital and become a viable, profitable and healthy industry again.

It is our calculations that show the industry needs to be competitive and turn its capital over at a more rapid pace. We are suggesting that those balances be amortized over at least 2.5 years which would lead to the oil and gas costs of production in North America of $151 U.S. for that period. When this effort is complete there would be another two and one half years balance in which to hold as property, plant and equipment for the long term. The only way in which producers are going to exhibit the production discipline in order to attain $151 / boe prices is through the Preliminary Specifications decentralized production model’s price maker strategy. Therefore the differential between what the producers are willing to accept today and these prices from our price maker strategy are about $100 / boe. The motivation for the producers to negotiate with the Permission Rights holders for access to the system is to acquire these prices.

The coin holders will negotiate with the producers and determine a split between what the producer earns and what the coin holder earns of the differential. We would recommend to the coin holders that 33% would be a reasonable amount to be earned for what they are undertaking in developing the Preliminary Specification. The producers motivation would be to either participate with the coin holders for access to the software for their production or alternatively explain to their shareholders why they’re not participating in the $67 / boe of free money that is available to them. This is why we’re calling this the People, Ideas & Objects free money strategy. Our value proposition which has been in the range of $25.7 to $45.7 trillion over the next 25 years would be the extrinsic value of the industry and the amount that coin holders would share with producers. This is an obscene amount of money and I find it ridiculous and embarrassing to be the one who is authoring such an opportunity. If we ask ourselves why are these numbers so ridiculous and embarrassing the answer is that the oil and gas producers have so fundamentally destroyed their business today. We have proven they will do nothing about these issues. And the period of time in which they have conducted themselves this way has extended back as far as 1977. Unless and until they can access the software and services with no upfront time, money or effort will they begin to use them. The fee paid to the coin holders / Permission Rights holders will therefore become part of the producer's ongoing business.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Quarter Earnings Performance

Producers started publishing their third quarter financial statements this week, continuing through to early November. Expectations are high that the industry has turned the corner and will be reporting healthy earnings as a result of the 12% increase in the price of oil. OPEC’s production discipline has impressed and it is believed that half of the global surplus of inventories have been eliminated due to their actions. What I find interesting is the relative silence coming out of the producers this past quarter. None of the producers seems to want to mention anything about the industry, market rebalancing or their performance in case the commodity markets tank again.

What we have seen is a lack of investment capital flowing back into the industry. Investors don’t seem convinced that all is well. Recently there was an article entitled “Oil patch gets frugal as investors urge profits over boom.” You can access the article from our twitter feed in the left hand column of this blog. Not long ago producers believed profits were not important. And obviously the profits that are being reported by these companies are not adequate if the investors are expecting more. The deferral of the recognition of the producers costs to as long as 27 years has an effect of scaring investors away. It makes the profits look good, but in reality when the profits are higher than the cash flow of the company, investors generally know that something’s up with the accounting. When you can’t raise equity or debt and your working capital continues to deteriorate quarter after quarter. Something is wrong and a message is being sent to you. If you can’t hear that message or choose to ignore it then you’ll continue to experience that cash crisis for some time.

The investor confidence in the industry over the past year has been fading. After surging from the bottom of the market after the oil price decline in 2014. The oil and gas producers stock performance has been very poor in 2017. All anyone has heard is “market rebalancing” as the solution. That the issue is with OPEC and that North American producers continue to increase rigs and production. There is no way in which you can convince the producers that action is required on their behalf. And we hear, now that oil prices have surged 12%, that plans are being made to increase the rig count of North American producers. Which may be the wise thing to do as it’s the only source of cash.

People, Ideas & Objects attempts to deal with the producers have ceased as of September 26, 2017. They chose not to participate in our deadline to develop the Preliminary Specification. A deadline that we established at least six months ago and promoted heavily. Development of the Preliminary Specification with the decentralized production model’s price maker strategy deals specifically with the overproduction and oversupply issue. Passing of this deadline, which was only the latest over the past decade, proves unquestionably that producers are not interested in the extrinsic value of the industry. Fortunately we have alternative sources of funding for our budget and will be establishing that organization and mechanisms as our priority. This being our Initial Coin Offering (ICO).

Producers will engage the coin holders to have their oil and gas administration and accounting conducted by People, Ideas & Objects, our user community and service providers. Nothing has changed in any of those three organizations. The establishment of a fourth organization, the coin holders, is to secure the realization of the extrinsic value of the oil and gas industry that none of the producers have expressed an interest in. That extrinsic value is the difference in the oil and gas commodity prices which producers feel they’re profitable at today or $50. And the commodity prices that are necessary to be realized for a healthy industry. This differential will be earned by the coin holders as a result of their developing the Preliminary Specification and in turn earning the Permission Rights to access our software and services exclusively. Therefore if oil sells for $150 as a result of implementation of the Preliminary Specification, and as we suggest what the producers costs require. Then the coin holders will share in the $100 differential on a negotiated basis with the producer. I would suggest the coin holder earn 33% of this value which would leave $67 for the producer. What shareholder / investor in an oil and gas producer wants to hear that their producer firm is not participating in that $67 / boe of free money? On a larger scale, over the next 25 years, and based on our value proposition the amount the coin holders would earn would be $8.4 trillion to $15.08 trillion. Free money indeed!

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The Natural Gas Business

There are some interesting developments taking place in the natural gas business. These developments reflect a long history of neglect regarding the management of the business and most importantly the impact of shale. It’ll be ten years in 2018 since the natural gas price collapsed, just before the financial crisis. For some reason “market rebalancing” has not worked in that commodity market either! I’ll go through a brief history of what has happened since that time and the impact that it’s making in the marketplace today, and what it could mean in the very short term.

The overwhelming and prolific nature of shale gas created an overproduction and oversupply situation in the North American marketplace. This market was isolated and as a result price declines were limited to that region. The differential that could be realized by exporting natural gas to areas such as Japan made Liquified Natural Gas (LNG) a given. The world soon undertook what can only be seen retrospectively as a boom in construction of LNG facilities. The North American marketplace was expected to realize increased demand from LNG, and as a result, natural gas prices would rise. The alternative scenario to that expectation is what eventually did happen. Natural gas prices around the globe now track closely with those depressed prices in North America. The shale gas reserves have overwhelmed not only North American markets but also global markets. What we have now is the rapid cancellation of any LNG facilities that were under construction or consideration as that market is beginning to show that desperate facility owners are having difficulty attracting customers.

The Marcellus field in Pennsylvania is the largest and most prolific natural gas field in North America. It is currently producing well in excess of 15 bcf / day. More than Canada produced in its heyday. Much of this gas is trapped due to pipeline constraints. Marcellus spot prices last week were $0.81 / mmbtu. To remedy this chronic situation, reversals of pipelines that used to bring in Canadian export gas will enable the Marcellus shale gas to service the region of Ontario and Quebec in Canada. Alleviating the price pressure on the gas in the Marcellus. Or alternatively, as in the case of LNG, would this release the downward price pressure contained in the Marcellus region to the larger North American marketplace? If this should happen how long would it take for the global marketplace to be likewise affected?

After ten years “market rebalancing” has not been able to deal with this situation. What’s even more surprising is that the economic texts have not taken up the concept of “market rebalancing” anywhere that I can see. What markets do is one thing and only one thing. They provide information in the form of price. If you can make money at that price then you produce. If you can’t make money at that price then you don’t produce. Markets don’t act or respond. Mindlessly drilling more wells and producing more into an oversaturated market thinking that “rebalancing” will happen soon is foolhardy. After ten years this has to be self-evident. We have so much gas as a result of shale reservoirs. In Canada the geological survey in the 1950’s stated that we had 150 tcf of gas. Before shale gas that survey stated we had consumed about half. For all the years that the entire country of Canada’s consumption and exports to the United States amounted to about 75 tcf. I don’t know the exact amount that the survey states Canada has now, but it’s around 400 - 450 tcf as a result of shale. The number is irrelevant because the survey in the U.S. estimates they have 2,355 tcf of natural gas. An 86 year supply as of 2015. The point of this is that in the hands of the current producers 2,354 tcf is rushing to market as we speak. And the important point to remember is the bad news doesn’t stop there. The bad news being that the United States holds 17% of all shale based reserves. Therefore the world may soon have 13,853 tcf of gas chasing after the market in the hands of these producers.

Market signals, ie price, must form the production discipline of the oil and gas producers. The only manner in which to gain that discipline is through the implementation of the Preliminary Specifications decentralized production model’s price maker strategy. Otherwise we will continue to see the market on a North American basis erode the global marketplace. Then continued overproduction will lead to a complete and total destruction of the global natural gas market. If you doubt me then come back to this website in ten years. This behavior hasn’t changed in almost a decade. It’s the same behavior being displayed in the oil market for the last three years. Shale has changed the business fundamentally however the way the business is managed can’t, won’t and will not ever change. Creative destruction is the mechanism that invokes these high level changes in industry. People, Ideas & Objects are invoking creative destruction through our efforts. Most specifically in our upcoming Initial Coin Offering (ICO) which will fund the development of the Preliminary Specification and earn the coin holders the Permission Rights to exclusively access the software derived from our efforts. That Is how we’ll rehabilitate these markets and establish a healthy oil and gas industry for the decades to come.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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. 

Revenue Model, Part VI

Change Based Software Development Capability

People, Ideas & Objects focus is on our user community. Providing them with the software development capabilities they need in order for them to support the oil and gas business opportunities and issues in the 21st century. This is not a static one time instance. As the oil and gas business changes, the software that is derived from the Preliminary Specification will accommodate those changes through our software development capability and user community. We are therefore providing a change based software development capability to the North American oil and gas industry. We are not providing “new” technology for technology's sake. With respect to our revenue model, technology has a substantial impact on our product delivery. However it is the business of the oil and gas business, and the changes in that business that drive our user community.

Traditional ERP vendors in the oil and gas marketspace have “sold” a solution to the oil and gas producers and then support that application through an annual service contract. Our competitors are selling a product that does not consider changes to the business environment. Contrast that to the People, Ideas & Objects Revenue Model that is dynamic in that we are focused primarily on the changes in the business environment. It is these changes that are the source of our revenue stream. Without changes to the software, there would be no developments and no fees would be assessed in that year by People, Ideas & Objects.

It is a fundamentally different point of view. The traditional ERP vendor is constrained by their code and their customers. Any changes to the code need to be populated to the variety of customers who use their software. Therefore there is resistance to change by the vendor. The more code the software vendor has the more complex the changes will be. And the more customers the vendors have, the more costs and conflicts that arise. People, Ideas & Objects will be using Oracle's cloud computing infrastructure where changes can be populated to the user base quickly and efficiently. We are oriented to the changes in the oil and gas producers business environment through the demands of our user community. It is these changes that drive our revenue. The contrast between the traditional ERP vendor and our change based software development capability could not be greater.

The scope and scale of our applications are to provide a software development capability to the oil and gas industry, service providers and service industries. One that enables the industry to make the changes necessary when the business opportunities and issues arise. We believe that proceeding through the 21st century without a team of committed and capable software developers will unnecessarily constrain the oil and gas industry within the Preliminary Specifications definition. Evolution of that model is necessary in order to eliminate the possibility of systemic and chronic issues such as the current overproduction and oversupply issue is today.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry 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 our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.