Time Is Not The Bureaucrats Best Friend, We Are
Time is the enemy of the producers. It has been the bureaucrats' obstinance in holding to their “muddle through” and “do nothing” strategy and operating procedure that have brought them to this critical point in their timeline. Let’s be honest, these have never worked in the shale era and have had plenty of time to prove that. Their inability to make the appropriate changes to their business models as a result of the fundamental change that shale has introduced, that oil and gas is now in an era of abundance, has put them in a situation where they’re facing a handful of imminent crises on top of those that are already present. Officers and directors of the producer firms have been seen to have direct personal jeopardy as a result of the manner in which they’ve operated these firms over the past many decades and their current financial deterioration and its trajectory. It has always been unacceptable to me that an industry would depend on outside capital each and every year to the extent that oil and gas has done since the early 1990s. Without the investment from others there would not have been any activity in the industry as it is my opinion that at no time was the industry self supporting or building value. It was leeching off the value of its investors and that which was built in the many generations that came before it. This is evident today in the financial statements of the producers and the activities that surround them. The North American industry is now worth nothing as it demands capital just to operate. A net present value in the negative. Bureaucrats credibility has been trashed in the eyes of those that would have supported them if they hadn’t felt so betrayed and fooled by the inappropriate financial statements that were published and claims that have been made, yet never materialized. As I’ve stated many times these bureaucrats have no credibility. No one expects them to be the ones that will turn things around as even today they feign no propensity to understand what it is they’ve done. If oil and gas in North America has a future it will be in the hands of new leadership based on a business model that is consistent with basic business principles. People, Ideas & Objects proposes the Preliminary Specification for the bureaucrats consideration to bail them out of their difficult personal risks they currently face.
Lingering about, accusing the dog of eating their homework doesn’t really cut it with anyone anymore. This blaming, excuses and viable scapegoating of anything and everyone has been going on for decades. The issue the bureaucrats are facing is the personal liability they’ve incurred in the process of milking the producer firms for all the bounty that they could. It is the personal risk that is now the only point and the only consideration that’s holding them in their place. Their take or bounty has diminished to the point where it is “probably not worth their while to stay” the pious bureaucrats might say. If they could deal with their personal liability from outside of the firm they would, but they would then risk encumbering their personal fortunes. They’re unaware of how to deal with that risk and therefore they’re forced to stay where they have access to the resources necessary to deal with their personal risk. What is clearly evident is the producer firms are on a steep, downward trajectory that can not be stopped until such time as these bureaucrats are gone. And therefore the personal liability they’ve incurred will be with them for the rest of their time. Or, as when bankruptcy arrives and the directors will be summarily eliminated with the shareholders they so poorly represented. Officers may have an opportunity in the new corporation when it is subsequently configured and may then be able to expand their innovative executive compensation to cover their past risk.
Either way bankruptcy of the producer does not absolve them of these personal risks they’ve incurred. They can still be sued by those who’ve incurred a loss as a result of their (in)actions. The timing of a bankruptcy therefore becomes a much more critical issue each day as a result of the alleged SEC investigations and audit opinions including the dreaded “going concern” comments. It is alleged the SEC has launched an investigation into Exxon based on a whistleblower report regarding the assets valuation used. This investigation is also alleged to extend beyond Exxon to all shale producers. An opinion that is consistent with the beliefs of People, Ideas & Objects and the issue we’ve sought to resolve, and in fact have. If these investigations are the case the need for the People, Ideas & Objects Preliminary Specification by these bureaucrats has never been more desperate. They could almost start calling me their best friend! By adopting the Preliminary Specification and funding it they will have undertaken to do their fiduciary duty and can achieve what we’ve called “issue mitigated, nothing litigated.”
Let’s assume for a moment that the following scenario was to play out on behalf of the officers and directors of a doomed oil and gas producer. Civil litigation began as a result of disgruntled shareholders regarding the management of the producer firm and their quite tangible losses. Today the officers and directors are wholly susceptible to having their insurance coverage handle the cost of the litigation and the result of any judgement against them. This depends though on how much longer the producer remains a viable going concern and can function as one. In addition to the SEC concerns we’ll also see how many companies annual reports the accounting firms will ordain with their “going concern” commentary. A chicken or the egg paradox, will the SEC investigation trigger the going concern comments, or will it be the going concern comments that set off a chain of events across the industry. And just as Chesapeake found it difficult to operate with such a mark against them that subsequently saw them declare bankruptcy. (Other people become concerned about doing business with firms that have been deemed unviable by their accountants.) As I stated time is not on the side of the oil and gas bureaucrat. However, what if in this scenario this litigations Judge asked the defendant bureaucrat what it was that he had to say for himself. And in return the bureaucrat was able to state. “Clearly we misjudged the impact of shale based resources on our operations. We should have changed our business model to accommodate the new dynamic and did not change quickly enough. However in the first quarter of 2021 we did make the necessary changes to begin that change by funding our share of the Preliminary Specifications development that are ongoing to remedy the shareholders issues.” Issue mitigated, nothing litigated as I like to say. Bureaucrats will have conducted their fiduciary duty and can pass the responsibility on to new management to ensure the company is better managed in the future. Will either of these two issues and the stampede of producers towards bankruptcy cause the Justices to seize the officers and directors liability insurance coverage as an asset? In either of these three triggering possibilities, the jeopardy that the officers and directors incur become more concrete. How will bureaucrats defy the argument that a litigant could raise regarding who’s fault it was after the SEC rules and the accountant's opinion goes public. But let's not forget the litigants quantifiable and qualifiable losses at that point too
Chronic overproduction and oversupply has destroyed commodity prices for more than 5 years in oil and more than a decade in natural gas. Bureaucrats are the impediment to progress, they’re the ones that need to be removed for progress to begin. Before they’ll go they have to ensure their personal risks are mitigated, they need to do their job and ensure that the business survives the difficulties they’ve created. This can only be done by implementing the Preliminary Specification through funding its budget. A business model and associated markets that were researched for ten years to ensure that the use of the Joint Operating Committee, the legal, financial, operational decision making, cultural, communication, strategic and innovative frameworks of the industry could be integrated with the compliance and governance frameworks of the corporation. Our research defined how the producer would operate within a reorganized configuration of itself and the industry as a whole. The establishment of the necessary sub-industries and software development capability that would enable oil and gas producers to ensure that all production was produced profitably everywhere and always. This can begin as soon as the producers organize themselves to raise their cash and provide us with the financial resources to build the Preliminary Specification. I could do this organizing however it would take me 1,000 times as long as the bureaucrats would. How much time do these producer firms have? Alternatively producers could strike a committee and establish a new way of organizing themselves to deal with the issues in the market. It took me ten years to conduct this research to use the Joint Operating Committee, it will be interesting to see how long a committee would take using some new form of producer organization. And, again, don’t use any of my Intellectual Property.
Muddling through could also continue. What’s to say that the officers and directors are even concerned about any of these points? We did see them act when we first raised the insurance issue in June 2020. It is in that way we know we have their attention. If they didn’t act to fund the Preliminary Specification in a timely manner any new management would also need to find a new way forward. It is there too that the Preliminary Specification will become the best friend of those people. Their time frame therefore is as follows. The lottery will be played out in the next three months as to which companies will earn the coveted “going concern” comment from their accountants. Maybe this is a further concern to the bureaucrats, probably not. The time for them to exit is also constrained by them understanding and implementing their fiduciary duty or the company falling into bankruptcy and having to defend themselves in litigation, possibly without the support of the organization's resources, or the SEC making life even worse. It is evident now that there will be nothing but bureaucratic battles with the Biden regime. Since there are so many other issues and crises ongoing, organizing and developing the industry for a profitable future seems intelligent doesn’t it? It's time for the bureaucrats to pick their poison, roll the dice and choose who their friends are.
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, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. 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 Parler or Gab @piobiz, anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.