Success and Oil & Gas Can Mix

We will discuss in tomorrow’s post why it is that I think People, Ideas & Objects Initial Coin Offering (ICO) will be successful in raising the budget necessary for building the Preliminary Specification. Today I want to discuss the change initiative that we’re undertaking with the implementation of the Preliminary Specification and the rebuilding of the industry in that vision. In our prior plan I set out the scope and scale of the changes being contemplated through the implementation of the Preliminary Specification, were comprehensive from an industry scale. The sense of urgency in which these needed to be approached was what was believed to be the decline and demise of the “old” oil and gas industry through the forces of creative destruction. Seeing our implementation as the formation of the infrastructure of the new oil and gas industry. None of that scope and scale has changed. The sense of urgency for action has now past. We are now in what I consider to be the crisis stage and the future will be an interesting one in my opinion. We therefore have much to do. In order to make this initiative a success in either the new or the old version of the industry it is difficult for me to understand how one individual could be accountable and responsible for its success and therefore the industry. In our prior plan we stated that the risk of failure was not an option for the producers and if they were seeking to transfer that risk and responsibility to me through their classic tactic of issuing a Service Level Agreement, I wasn’t biting. No SLA can capture the ingredients necessary to make this successful. No one individual or organization can make this successful. In the old plan I therefore shifted the responsibility for the success of this initiative to the oil and gas producers themselves. Stating that without them it would not happen in the manner that would meet their needs. Their direct participation was not requested but demanded in order to ensure that the outcome would be successful.

Under our new plan we have to a large extent accepted the outcome of the North American oil and gas industry as final. Therefore the plans that we had to hold industry to the success of the initiative was destined to fail due to the rapid decline we are now seeing in the producer firms. How then under our new plan do we achieve success? I insisted that the producers pay the full budget for the development of the Preliminary Specification in advance. This was primarily a result of the need to protect the user community from the vested interests who would like nothing better than to attack any identifiable member of our user community or service provider. That must be the case in our new plan as well. There must be the assurance that the user community and service provider members and anyone else that subscribes to participate in this development is protected by the knowledge that we have the financial resources to at least complete the job. Starting off on a pay as you go basis would only have had the bureaucrats shut down any further funding after three consecutive days of oil price increases. Then what do the members of our community do? Will they be ostracised from the industry permanently? Based on my treatment I think I have a pretty good idea as to what the results would be.

The first element to our overall success and the subsequent success of the oil and gas industry is the security of the user community and service providers. Which demands that our $8 billion budget be raised in its entirety. A tall order for today’s ICO market. More on that tomorrow. If they can’t feel secure financially in the work that needs to be done what compromises will they then find that need to be made and will they be more concerned about their future. The financial security of their part-time income from being a user community member will help them bridge the distance from being a fully financed participant in the oil and gas industry today to the enterprise they will be building as a service provider in the new oil and gas environment. Therefore with our budget secure their user community fees will be able to be paid in full until the job is complete and then transition to the revenues that they’ll earn in their service provider organization.

Success for the delivery of the Preliminary Specification and its implementation will be as a result of our user community. I’m able to swear on a stack of 100 bibles that I will do everything to ensure the success of this initiative. The problem is that statement amounts to about as much value as it took me to write it. Although the user community will be proceeding with the assumed lack of direct assistance of the oil and gas producer. It is still they who are the ones with the tacit knowledge of how the industry operates. And it will be they who are able to ensure that the explicit knowledge is captured in the system and their tacit knowledge is available and deployed in their service provider organizations, with our software, to the future oil and gas producers. Relying on 3,000 individuals in our user community is the only way in which I see the success of this coming about. It is unfortunate for them to undertake such a burden, however we have seen the depths that the bureaucrats will take their firms before any action occurs. And that of course is never.

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 profitable North American 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.

Whom has the Real Cash Flow?

In our March 1, 2019 plan we have set ourselves on a course to raise our budget from the Initial Coin Offering that we’ve been discussing for the past year and a half. We believe we’ve proven that the oil and gas producers, directed by the self-absorbed bureaucrats, have no interest in recognizing they have an issue or are dealing with it in any way. As much noise as we make in the marketplace the harder it becomes for the producers to deny our existence but that does not stop them from doing so. We need to look to other methods of raising the necessary resources to build the Preliminary Specification and the ICO is the optimal market for us. Based on the rights that we grant the coin holder, they will be able to earn a percentage share of the extrinsic value of what the current producers have stated, through their inaction, they’re not interested in. We have defined the extrinsic value as the difference between the base case of what the industry has accepted as today’s operating environment and the environment created by the Preliminary Specifications decentralized production model’s price maker strategy. Currently the price of oil is averaging $57 and we believe, based on our analysis of a sample of 23 producers, that the true cost of oil and gas exploration and production is in the range of $150 to $160. With the price maker strategy only profitable production is produced and therefore the only production that will be produced would attract a price that covers all of these costs. The extrinsic value, as we call it, would therefore be the difference between today’s base case and the $150 to $160 that is needed to cover the actual costs of exploration and production. Or $93 to $103 would be the amount subject to the levy that the coin holders would be assessing on production.

Producers today are grateful that I’ve provided this additional comedy into their lives. They are free to make what they like of our plans and we are certainly opening ourselves to their further abuse. The fact is the industry under the current administration is dying. There is no future and the travels that people have had to endure while bureaucrats have whistled past the tombstones is unnecessary and as we recently noted, evidence that we have half of a well cooked frog sitting in the fry pan of boiling water. The frog didn’t jump when it could, and now it can’t. I recently took the stock price of a sample of producers from the beginning of this month, from the heights that they achieved just prior to the difficulties in the financial crisis and on December 31, 2013 which was the day that the Preliminary Specification was published in its final form. Enabling them to have taken action at that time. A time when the natural gas prices had declined and were breaking down as a result of shale. Oil was still unaffected by shale overproduction. You can practice this for the producer of your choosing but in most cases you’ll be surprised at the damage that has been realized. In most cases there was a sizeable drop from 2008 to the end of 2013. As would be expected and not many businesses and individuals were immune to the consequence of 2008. It’s 2013 where the natural gas business declined precipitously and the producers were able to rely on the otherwise healthier oil side of the business to cover off any difficulties. The fan was completely overwhelmed with what was thrown at it when oil prices also declined putting both oil and gas in difficulty. Named companies like Apache are trading at 22.5% of their former glory, Chesapeake who’s story is well known, is rumored to be on the mend and is trading at 5%. There are also a number of well managed small intermediates such as Bonavista trading at 3.48% and not so well managed Obsidian at 1.1%. That is today’s oil and gas industry. I can only recommend that the bureaucrats chuckle hardily at our plans.

I could very well be wrong and these companies are fully supported by their investors and bankers and will be rehabilitated to their former glory. I’m on record otherwise. We know the industry continues to generate cash flow as a result of the prior investments in a capital intensive industry. This cash flow, in our opinion, is being diverted by the bureaucrats to buy the allegiances of others to ensure that there’s no support for any industry change. Currently these allegiances include the people who work in the industry, as would be expected, and those with immediate contact with the producers head office. Such as our competitors. There are also demands on that cash flow being made by banks and investors in terms of the large loan balances outstanding and the investors who have been deceived by the specious accounting in prior decades. They are getting their pound of flesh and will continue to do so. There will therefore be no action arising as a result of them. The point of this is to show that People, Ideas & Objects et al remain isolated and alone in our pursuit. Which is fine by me as we’re able to move at light speed in terms of our actions and accommodate any changes or opportunities in the marketplace that come our way. We remain unconstrained in our approach.

What our March 1, 2019 plan does is begin the process of carving out the cash flows of the industry in a manner, based on the Preliminary Specification, that support our initiative. If bureaucrats can do that to support their efforts, we’ll show them how to do it with style. Buying allegiance is not difficult to do. We have the credible plan in which to do it with the Preliminary Specification. The industry has been destroyed by the incumbent management. And therefore we are able to compete in terms of how the industry will be configured and who will participate in the future. The one distinct disadvantage that we have is that we are doing the right thing in resurrecting the industry and rebuilding it. Versus what the producers bureaucrats are doing which is fundamentally destroying it, they still don’t have to give a damn. The one distinct advantage that we have, is based on profitable pricing, we have much more cash flow.

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 profitable North American 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.

What's the Plan, Part VI

Our new plan seeks to fund our budget from a pending cryptocurrency offering, our ICO. We expect that we will raise our revised budget of $8 billion there within the next three and one half years. The question therefore is what will happen within the oil and gas industry during that time. That is certainly adequate time for any “recession” to have yielded back to the forces of growth and prosperity. And that is where we have the difference of opinion between what we’re doing at People, Ideas & Objects and the bureaucrats of the producer firms. They believe it to be a temporary setback in which time will heal whatever its cause. We understand it to be rooted in the structure of the industries culture and organizational methods which are incapable of dealing with the issues the industry is presented with, and hence these factors are terminal and an existential crisis to the current producers. Creative destruction is being played out in slow motion due to the large cash flows being sourced by the bureaucrats, for the bureaucrats health and financial welfare. The startup producer has been eliminated from the scene. Junior producers are being challenged financially as never before and all of them are finding the environment so hostile that they’re unable to deal with the force and volume of issues they’re faced with. The weaker intermediates are being challenged in the same manner and will also be replaced. There are no healthy producers when the industry is a rotting corpse, only those that believe, and those that unfortunately now know better.

Bureaucrats have feigned ignorance and at the same time the confidence that they knew what ailed their firm. All the while pursuing a declared universal strategy of “muddling along” and “doing nothing.” They persist in claiming to be unaware and unknowing what it is that the investors and bankers are so concerned about. After three years of an investor strike they feel the majority of the investor induced austerity is over and their perseverance will soon be rewarded when investors finally capitulate. Listening would provide the answer in clear and unpleasant terms. The see no evil, hear no evil and speak no evil tactic has them state that they’ve innovated to reduce costs of drilling by massive amounts and will continue to do so. It is the simple act of drilling wells that unleashes the untold wealth acquired when reserves are discovered. That is how you make money. That this is done unprofitably throughout the industry has never been an issue. There was always one more sucker to bleed for their last bit of cash in any of the thousands of rounds of investor fleecings. However, cash and more specifically working capital, has now become such a critical issue that its management is becoming a major part of the business. It is a drilling and cash management business.

I was surprised the other day when the Alberta Premier rolled over the mandatory production allocations for the month of March. She being from the NDP party which is far left of the Democratic party in the U.S. she stated that inventories were still high. Now why would an industry use inventories to determine actions? Everyone knows in oil and gas when prices collapse you scale back your capital expenditures. That is how you reduce supply! That a government with a left leaning background knows that it is far more important and effective to watch inventory levels than to cut back capital expenditures shows the level of understanding and care that is taken by our oil and gas producer bureaucrats. This fienging of any knowledge or understanding of business is systemic, cultural and leads to the belief that reduction of capital expenditures is the one and only solution. People, Ideas & Objects suggest that reducing capital expenditures is the dullest, bluntest instrument known to business in this universe. It is a useless tool. Both OPEC+ and the Alberta government have shown the management of inventories is the solution to the chronic overproduction. An issue that is aggravated by deceptive and specious capitalization of any and all costs to property, plant and equipment and shows any fool with a size 2 hat can be profitable in oil and gas and therefore the responsibility for any overproduction always falls to “other producers.”

You can not deal with these people. They are quick to blame others and accept none of the responsibility. They sit on the cash flow of a primary industry and disrupt the flows to the secondary and tertiary industries that they depend on fundamentally. Then they are treated as if they’re leeches. Yet not once have producers expressed or considered the long term consequences of these actions. Calgary, and to a lesser extent Alberta are one industry towns. Wholly dependent on oil and gas and its follow on industries. There is an election coming and Jason Kenney the leader of the opposition published the following graphs from Statistics Canada. Showing that almost one third of the payroll of the province has evaporated as a result of the actions of the producer bureaucrats. $5 billion per month taken off of the diner table of every family in the province of Alberta. But hey, who’s counting. What is the consequence of the producer inaction across North America? It probably is not that identifiable in the U.S. due to the diversity and depth of the economy in Texas and other oil and gas based states. Other graphs from Statistics Canada show the severity of this downturn is unprecedented in Alberta’s history. Reflecting a $109 billion drop in Canada’s economy from the probable oil and gas difficulties. Seems like $8 billion to People, Ideas & Objects would be an investment!

Here we see the radical, and completely unnecessary gyrations that the producer bureaucrats, a.k.a. throttle junkies as we call them, create with their application of the dullest, bluntest instrument in the universe, reducing capital expenditures. Only to catch up again soon. Why would you run an industry on this basis in the 21st century?

This last graph shows that some sanity reigned in the 1960 to late 1970 era in Canadian oil and gas. Someone had a steady hand on the spending and control seemed to be the operative word. The throttle junkies soon took over after the SEC implemented their accounting proclamations in either 1977/78 and the rest is history. 1980’s recession in Canada was purely political with Trudeau’s implementation of the National Energy Program. The depth of that recession wasn’t as bad but the scale of the loss was tremendous. Note that the initial decline that we’ve experienced here the past few years has been more dramatic than what was experienced in the 2009 / 2010 time frame. Either the residual of the financial crisis hangover or the beginning of the end for oil and gas when natural gas prices began their spectacular crash.

Issue, what issue? The one argument that I get frequently is the optimistic attitude that it will all be better soon. The media are all in for the producer and everyone just hopes and prays. I always tell people, no, this hasn’t been resolved, it will get worse. They are now believing me more than anyone else. Unfortunately. So it is in these next three and one half years while we work on other things that include our ICO we will sit and watch the industry continue to deteriorate rapidly and radically. It will only get much worse until the Preliminary Specification is implemented. It has been 27 years that we’ve been doing this, it will be 28 in May 2019. Of the past 33 years we’ve noted that the industry has had 28 bad years out of the past 33. To assess where we are in terms of the destruction that the oil and gas producers have done to themselves we suggest a quick exercise be conducted. Take two thirds of the property, plant and equipment account and write it down to depletion in some prior period. This is the net effect of where the producers and the industry exist today. Every producer has done nothing but incinerate money and destroy value. Calling rash spending accumulated over decades “assets” is hilarious. We know that the two thirds of property, plant and equipment account, when evaluating the performance of the producer, is nothing more than the unrecognized capital costs of prior production.

We can solve this. This plan and budget which are designed to build the Preliminary Specification is the solution to all that ails the industry. Three and one half years sounds like a lot of time, and it is, however 28 years doesn’t seem that long ago. We also have many things to do. Review of the user community vision will give you an understanding of what. It may seem like we’re thousands of miles from the resolution, and we are, yet the time will be well spent and the following 25 years in oil and gas will be its best years. If we maintain the long term view and take this opportunity to do things right then we have the control that will ensure the industry realizes that. Big words I know but just look at what the bureaucrats are offering.

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 profitable North American 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.

What's the Plan, Part V

Ours is a 25 year plan to deal with the issues and opportunities within oil and gas, establish a foundation for innovation and profitable operations everywhere and always. It would all be so much easier if we could just phase this project in and take one stage at a time. Except it doesn’t work that way. We run into a unique situation with People, Ideas & Objects Preliminary Specification. With the shift away from the corporate model to the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. We change every element of how the industry operates. To have this part of the industry operate on some components of the Preliminary Specification, and leave others to follow on later wouldn’t work and we would gain none of the benefits of the decentralized production models price maker strategy. A strategy which would be the first objective attained in any interpretation of a phased plan. Service providers can’t be built to operate on some functional areas of the industry and not on others. In order to make the transition to the service providers there must be the change where the service providers are available to implement the entire Preliminary Specification. Otherwise that would require duplicate administrative and accounting administrations throughout the industry. One industry based, the other producer based. The service providers are the key organizational change that makes all of the producers costs variable. Taking the fixed overhead capabilities of the producers and rebuilding them as the variable based administrative and accounting capabilities of the industry. Variable based on production.

In order for each producer to benefit from the implementation of the Preliminary Specification each producer has to be operational on the Preliminary Specification. That’s not stating that it's our way or the highway. The Preliminary Specification is more of an industry based ERP system with components operational in each of the oil and gas producers. Each producer needs to be able to use the service providers in order to shut-in any of their unprofitable properties or they will not be able to compete in the new, dynamic marketplace for capital that would be created once the system was operational, the determination of which property is shut-in is based on the profitability of the property. Therefore all of the data and all of the functionality of an ERP system needs to be available in order to determine the profitability of each property. Currently producers know the revenues, capital and operations of a property but use allowances for overhead. These allowances are inadequate to determine the real cost of oil and gas administration and accounting. Service providers will bill for their services directly to the Joint Operating Committee. Therefore the actual overhead costs will be known.

In addition the producers role has been expanded to include two separate and distinct revenue streams. One is oil and gas production. The other is the services of their earth science and engineering capabilities that are provided to the properties they own, or are provided as a service to other producers. The Preliminary Specification costs these resources to the various Joint Operating Committees that these people work at during the month to generate the revenues that offset the producers overheads that are incurred to maintain their earth science and engineering capabilities. This is a detailed costing of these resources, without this feature being available the actual cost of the properties will be unknown and some properties that are unprofitable and should be shut-in will not be, and some producers that should have offset their overhead costs will not have. What we would have is a far more inaccurate accounting then what were provided with today. The Preliminary Specification is seeking to attain an accounting throughout the industry that is timely and accurate, failure to implement the full specification would lead to the reverse of this accounting holy grail. Besides anyone who has worked in oil and gas knows that manually matching and patching systems together to make some kind of coherent sense is what the bureaucrats are good at. Therefore we would only guarantee them further employment. I wouldn’t want to be responsible for that.

Automation, innovation, the benefits of specialization and the division of labor, integration of new technologies, quality and gaining the leadership of the user community and service providers in dealing with the issues and opportunities of the oil and gas industry throughout the industry must be done. Why undertake the review of a mostly manual 1970’s / 1990’s concept of accounting systems and bring only one element of our plan into what can be done, and has proven to be of value in other industries? Bureaucrats believe they can muddle through for another 25 years without revisiting these points. Ours is a comprehensive plan due to the scope and scale of the issues that are destroying the industry. Any critical review of the industry shows that the current model is untenable and must be addressed. Ours is a highly interdependent oil and gas system that deals with the issues and opportunities that are present and sets in place the capabilities to deal with them in the future. Pursuing one issue at a time is beyond the time scale that the producers currently enjoy.

There is the opportunity to have each producer cobble together all of the needed elements mentioned above on their own. What they state is impossible for People, Ideas & Objects to undertake in terms of scope and scale can easily be scaled at each and every producer location with their much smaller individual budgets and with the greater demand for IT services by these producers in an ad-hoc disorganized fashion. One of the elements of People, Ideas & Objects et al’s offering is the permanent software development capability that is being purpose built through this plan. Change will be enabled within the oil and gas industry as a result and the issues we face will be able to be dealt with in this era where software sets organizations in cement. The only way to have the flexibility and dynamism that change demands is for an industry to have the software development capabilities available always.

People, Ideas & Objects et al believe that oil and gas energy independence on the North American continent, for the remainder of this century, is a viable and worthy objective. It is unattainable however with the current bunch. Profitability is foreign to the culture of the industry and they have proven incapable of changing or understanding our point of view. Theirs has been 28 bad years out of the past 33, “so what if the next 25 years doesn’t generate any more value increases.” Energy independence can only be attained and sustained by a profitable industry. As a result we have started down our own road to provide the systems that the dynamic, innovative, accountable and profitable oil and gas producers will be needing not only today but for the next 25 years. Our timelines are a bit scattered here as a result of our new plan. We know that it will be 3.5 years for us to complete the financing of our Initial Coin Offering. Making our delivery of commercial software somewhere beyond the time in which we can accurately plan for. There is much to do, as you could imagine, and there is one main ingredient that is necessary and that is you, so join us.

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 profitable 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. 

What's the Plan, Part IV

I’ve now published our revised budget to the Preliminary Specifications wiki. I have also updated this plan under the Implementation heading. Both the plan and budget are located on that one page. The old April 7, 2017 plan has expired, however I’ve left it there for the understanding of some background to the process that we’ve passed through and the origins of our current plan. We’re no longer attempting to create a sense of urgency for industry to act in their own self interest. They do not respond to any outside input and have established for themselves a comfortable regime where they’re satisfied with the performance and future of the oil and gas industry. Simply they don’t care, and to build a sense of urgency is futile. There’s is a self-centered and destructive pursuit that realizes the industries cash flow will always be adequate to maintain their fortunes. I believe the remainder of the industry, the secondary and tertiary industries, investors and bankers, governments, royalty holders and most importantly the people involved in these groups are not the concern of the current crop of bureaucrats and I believe we’ve established our credibility in attempting to deal with them.

The relief that I sense in no longer having to create a sense of urgency to act. That we hold the solution no longer implies to me that we hold the responsibility to solve it anymore. We are changing our perspective from an overall concern and sense of urgency to one where the primary focus and concern of the larger community involved here of People, Ideas & Objects, our user community, the service providers and our coin holders is on the quality of our offerings we ultimately deliver. That will be the manner in which we can approach a task that has the scope and scale of difficulty that we are collectively undertaking. We now have the time, and will have the money in order to make this transition successful. We continue to permeate more and more minds each day throughout the oil and gas industry and it is this slow and time consuming process of having people evaluate our offering, assessing the difficulties of the current administration and making their own decisions that will grow to the point where the impossible things we are attempting will become the inevitable.

Of the past 33 years 28 have been financial disasters, all of those as a result of the overproduction that is chronic throughout the industry. Therefore we can be assured that this will not be going away as I see the producers behaviours and actions continuing. The dull blunt instrument of reducing capital expenditures in the face of these issues is now being done for the 28th time in these past 33 years. Anyone see a correlation? There is also handsome profitability being reported by the majority of the producers so each of them know intuitively that they are not the ones that are responsible for any overproduction. And so it will be if their administration is in control of the industry in 2045, who knows, they may be able to muddle through and do nothing to survive that long.

The other characteristic we see through this situation is that the cyclical nature of the commodity prices. When this is married to the phenomenal capability of the industry to suddenly produce oil for $40.00, in a capital intensive industry, where the historical costs of production was I assumed fixed, if the price of oil should happen to drop to $49.00, is the other reason why the producers have the upper hand today. Although more layoffs are still being reported there is a calm in the market that all will be well soon. Which is the same calm that arises almost annually since the natural gas prices collapsed in 2008. The fourth quarter reports show that cash continues to be the area that bureaucrats are unable to resolve. Oddly this has been the case since investors and bankers abandoned the industry. The point being the behaviors have been evident in the industry for decades. These behaviours were overlooked when investors were backfilling the producers with their cash each year. The industry has developed under these behaviours, sees nothing at issue today and these have now formulated into the culture of the industry.

In terms of how I see the situation this frog’s legs are well done, the body is only cooked rare at this point but the brain is still functioning. Therefore the frog still believes it has a future. And we can see through the actions of the bureaucrats that the frog has never been happier. It may be unreasonable to compare the industries leadership to the mind of a frog slowly cooking, however I find it quite appropriate. It is the producers responsibility for the demise of the industry. We went well beyond the call of duty in attempting to deal with them. Sure I had some fun in the process, but they needed to see the other side of the issue and my criticism provided that. Now we need to move forward and do our thing. We have 3.5 years before the financial resources will be raised through our Initial Coin Offering. People who wish to participate in any aspect of our offering will need to be able to use this time productively. Please review the user community vision to determine what it is that you can and could be doing during this time. The most important thing about this plan is that people need to understand that there is a plan in place. It is these people that are the most important aspect of that plan and the solution we are providing for the future of the oil and gas industry. Their role is critical. Taking a moment away from the noise at this point to think about the Preliminary Specification and the role you could take in the future is what you should be thinking about as the opportunities in my opinion are amazing. Now is the time to leverage what we have and begin to bring it all together.

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 profitable 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.

What's the Plan, Part III

Now that I’ve dispatched that Neville Chamberlain characteristic to the history books and taken on the Winston Churchill point of view. Attempting to work with the bureaucrats and have them do the “right thing” was never going to come about. We’ll need to “fight them on the beaches” and such, and most importantly on their ability to generate value for all concerned in oil and gas. The Preliminary Specification is designed to resolve the issues of the industry and build a foundation of innovation for the future. People, Ideas & Objects, our user community, the service providers and our coin holders will provide the most profitable means of oil and gas operations throughout North America. Our value proposition is in the range of $25.7 to $45.7 trillion over the next 25 years and is derived from two critical aspects of the deficiencies in the bureaucrats current business model. Our price maker strategy will bring about at least $5.7 trillion in incremental profits over that time period. The $20 to $40 trillion is based on industries estimates of what amount of capital expenditures will be needed in order to meet the demand for oil and gas during these next 25 years. Bureaucrats believe that they will raise that money from dopey investors who will watch with amazement and excitement at the size of the producers balance sheets, as property, plant and equipment grows to unseen and unheard of heights and spectacle! We believe the capital investment in the industry is adequate as it currently stands and will recycle the approximate $1.5 trillion sitting in property, plant and equipment in rapid fashion, recovering that invested cash repeatedly in order to meet whatever the future demands for capital will be. Bureaucrats have proven that they love to sit on their duff’s, spend money and fill their pockets. Expecting action to be taken by these bureaucrats was foolish of me to have ever considered.

It’s in that sense that we need to discuss our user community. Our focus and the point of our quality software offering. We initially published our budget in November of 2013 as part of the final version of the Preliminary Specification. It was determined at that time the standard charge out rate for user community participants would be $185 U.S. per hour. We are changing that to $250 U.S. per hour in this revised plan. We are also increasing the volume of hours that are dedicated to the user community by 10% to accommodate the recently completed 12th, or Blockchain Module. This therefore increases our budget by $324.7 million for the user communities requirements. With the required Intellectual Property royalties and profit margins of People, Ideas & Objects our budget is raised by $955 million for user community changes. With respect to the increases in cost and the addition of the Blockchain Module we are increasing our development dollars as well. The principle we have always used is that for each user community hour there will be one hour of software development. Therefore there is a commensurate increase in the development costs in terms of hours and we’re also including the rate change in these budget revisions. I am satisfied with this increase due to the fact that we did not adjust our budget in 2018 for the change we made in hiring Oracle Consulting to conduct the work. This was done to reduce the number of calendar years that would have been consumed by People, Ideas & Objects in terms of recruiting, building and having our team perform at the level necessary for the oil and gas industries demands. Or at least what we expect they will need. By cutting the number of calendar years off in this fashion we were able to save the industry substantial amounts of money due to the fact that the price maker strategy would be operational sooner and without it, the industry is losing hundreds of billions of dollars each and every year.

As an incidental item I’m increasing the research budget of People, Ideas & Objects from $10 million for the project to $30 million. We recently refocused our organization around the changes where we’re using Oracle Consulting for our software development. Reclassifying ourselves as a user community, Intellectual Property and research firm. This will help us to deal with the many changes that are occurring in the marketplace from a business, technical and market perspective. Therefore what was a $6 billion budget has now been updated to these new realities and is a $8 billion budget, for now. Time's a wastin and time is money. In our case the value proposition we provide is highly leveraged to those within the oil and gas industry. We have the opportunity to provide our software with any two of three priorities. On time, on budget or feature rich. The general rule in software development is you can pick two at the expense of the third. Therefore we’ve picked the timeliness and feature richness as our two priorities which causes the solution to be inordinately costly.

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 profitable 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.

What's the Plan, Part II

When we’ve discussed the coin holders in the past we’ve always discussed the idea that they would be capturing their revenues from the producers for their share of the extrinsic value of the industry that they negotiated with the producers. It would be from that revenue stream that the coin holders in turn would pay People, Ideas & Objects for the use of the software, any further and future software developments and the user communities participation in those developments. We have also held out the option, at the coin holders discretion of whether or not they also wanted to collect the fees from the producers for the service providers as well. In doing so they would be able to attract a cost plus fee structure of the service providers fees in addition to earning their share of the extrinsic value. The service providers fees would be a current cost to the producers that is paid within the normal accounts payable cycle and as such would take minimal capital requirements in order to participate. The attraction would be that they are earning a fee off the total administrative and accounting costs of the North American oil and gas industry.

To suggest that these incremental costs that are being incurred here and there by People, Ideas & Objects et al are detrimental to the viability of the oil and gas industry is evidence of the inability of current management to critically review the situation as it stands in the industry today. Although our costs are higher in comparison to the current model, we are profitable in that we are applying basic business sense to the exploration and production of oil and gas. In order to motivate the people to make the changes to divert the cash flows away from the current and highly destructive management of today, we will have to incur some small incremental costs. The focus of the People, Ideas & Objects is to provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. This is what we will have to do in order to achieve that. Just out of curiosity what is it that is being offered today?

Having two sources of revenue for the coin holders makes our ICO more appealing. To raise the amount of money needed for this project the attraction will have to be highly compelling, mitigate as much business, technical and market risks and be very profitable for the coin holder. Therefore we will do what we need to do in order to achieve this. The opportunity to participate in the ICO is open to everyone in our community, oil and gas investors, people within the industry and John Q. Public. As opposed to arguing the rising cost issues the point should be to evaluate the Preliminary Specification to determine the viability in the marketplace and its capacity to deal with the well identified issues in oil and gas. Then determine if the ICO is an investment of interest for yourself.

We are unaware of the amount of administrative and accounting costs that will be incurred by the service providers when the Preliminary Specification is operational. Under our model the actual costs of the overhead of the industry is charged directly to the Joint Operating Committee in the current period. This allows the producer to turn around the cash that is used in the payment of the overhead, charge it to the consumer of the oil or gas and reuse it repeatedly throughout the year. What happens in today’s bureaucratic nightmare is that up to 80% of the overhead of the industry is capitalized and held on the balance sheet as property, plant and equipment for upwards of a decade. Then the cash that is consumed each month by the overhead is very slowly returned over the next decade in the form of depletion. A brilliant use of the cash resources of their investors. If the coin holders choose to also manage the service providers revenue stream as part of their value proposition to the industry, then they will add their levy on top of the amount of industry overhead being charged to the Joint Operating Committee and have that cash recovered in the subsequent months accounting period. This is due to the fact that the treatment of overhead under the Preliminary Specification is as a cost, not an asset as it is today. The coin holder would then be able to earn a handsome finance fee for the management of these costs.

We do not expect to define the coin holders percentage of the extrinsic value that we think they should be entitled to. They will better understand their process and will be able to negotiate with the producers what it is that they expect in terms of access to the software. We also do not expect to define what the percentage fee of the service providers costs would be. We see the coin holders being somewhat separate and distinct from People, Ideas & Objects, our user community and the service providers. It's in that sense too that we don’t want to limit the types of revenues that the coin holders would have available to them. There are possibly many other sources of revenue that would be just as valid for them to pursue. As we develop the coin offering these can be better defined with some of their input and begin to assess the incremental costs that will be incurred by the industry. The key point of their business offering is that we are providing them with the access point in which producers will access the oil and gas ERP systems that are being built in the vision of the Preliminary Specification, based on the input from the user community and financed by the Initial Coin Offering or coin holders we’ve discussed here. The value proposition of the coin holders business offering is substantially greater than today’s base case and that will be the draw for oil and gas producers investors to demand they participate in the use of this software and receive their share of the extrinsic value that is generated throughout this community.

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 profitable 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.

What's the Plan, Part I

No one can successfully argue that People, Ideas & Objects haven’t been patient and persevering in attempting to resolve the issues we see in oil and gas. The one thing that I would suggest is that we’ve given the bureaucrats ample enough time in which to evaluate our solution and begin the developments of the Preliminary Specification. It is not that the Preliminary Specification is inappropriate or unworkable as the reason that it has been rejected by industry. It is a workable model that deals with the chronic overproduction and lack of innovation within the oil and gas producers themselves. That the bureaucracy is conflicted and know they would be eliminated from the industry if the Preliminary Specification ever came to be. Disintermediation is a trend that is affecting all industries in similar ways and the resistance to these changes comes in many different forms. With the destruction of value in the producer firms, with the landscape littered with secondary and tertiary industries that are struggling even more, where the towns and cities where oil and gas has operated all being forced into a depressionary period that never seem to end. With an oil and gas industry that is alleged to be so innovative as the bureaucrats have always claimed, why in the world has this downturn continued for so long and been so deep? Maybe I’ve been patient and persevering but the real award for this has to be presented to the bureaucrats for their ability to hang on to what they have.

As hard as we’ve tried, and maybe I could have been kinder and more pleasant with my approach towards the bureaucrats. There has been no movement, none, zero, nothing from the other side. They are further entrenched than they’ve ever been. They will not move to save the industry from the damages that are being generated by their hands. They have it under control and are truly unchallenged in their position. After more than a decade they know that they are invincible to any force that desires any change in the business. Therefore People, Ideas & Objects must begin a different approach. Change will not come about internally, therefore it will be forced upon the industry in a manner where it will in essence be taken from those that have managed it so irresponsibly to this point.

As I indicated yesterday we will be working to disrupt the cash flow that the producers bureaucrats are dependent upon. Providing an alternative investment vehicle that will compete with the performance of the current producers. The cash flow that is the bureaucrats source of compensation and seemingly everything outside of that is of little to no concern to them. As long as they maintain the cash flow they will remain where they are and with the resources necessary to live a long, prosperous and happy life. As it stands today they’ve also used that cash flow to buy the allegiances of others, such as our competitors and those who are dependent on the status quo. This has effectively aligned most of the current industry against People, Ideas & Objects and our Preliminary Specification as people know where their bread is buttered. Expecting the producers shareholders would support People, Ideas & Objects has to be classified as a failed strategy on my behalf. We have seen them withdraw their money from the industry. They still maintain their positions in the producer firms today. And are demanding that they receive large portions of the cash flow from operations in the form of dividends. This has been granted by the bureaucrats as they have no alternative but to comply. In the course of doing so the shareholders and investors have become satisfied with the status quo. Whoever controls the cashflow will therefore control the fate of the industry. The phrase is money talks and bullshit walks.

We’ve been discussing and considering the Initial Coin Offering for the past 16 months here at People, Ideas & Objects. We have it as our stated objective of how we would raise our funds. Although the cryptocurrency marketplace has taken a strong hit during that time it is showing some resilience. I am satisfied that this is a viable method of raising the financial resources that we need in order to proceed with the development of the Preliminary Specification. Cryptocurrencies are new to the oil and gas landscape and the coin holders will not have any current allegiances to any of those with the status quo. Earning the rights to exclusively control access to the software, and if they should choose, the service of the service providers once the Preliminary Specification is operational. They would be able to compete with the status quo bureaucrats by offering a better value proposition then what is being provided by the producers bureaucrats today. By using the Preliminary Specification we are able to capture the extrinsic value that the bureaucrats feel is of no interest to them, and is unavailable to them. That is many trillions of dollars over the next 25 years and would be the source of determining the price of the software and services they offered. Offering a better deal financially is what we have to offer to all concerned in the industry. The producers, their employees, their investors and bankers, the service industry, and tertiary industries that depend on a healthy and prosperous oil and gas industry. With the larger monetary value being generated by People, Ideas & Objects, our user community, the service providers and now our coin holders we can buy the allegiances of our own communities and align ourselves with those who choose to become unaffiliated with the bureaucrats.

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 profitable 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.

Our Plan, Part XXII

Discussion with the producers always leaves one with the confidence that everything will be handled and is under control. Producers have reduced their operating costs as a result of the recent downturn. And that provides them with the knowledge that cash will flow and profitability will soar. It also represents a fundamental lack of business understanding and is the modern equivalent of running your business out of your left front pocket. Cash comes in during the day, cash goes out during the day, I have more cash at the end of the day, therefore I have cash flow and profitability. In a world where chronic, systemic overproduction and oversupply in oil and gas is the issue, the great minds of the producers focus on cost control over their operating costs! This is changing deck chairs on the Titanic.

What may not be too obvious at this point is that the overproduction and oversupply issue is what the Preliminary Specification was designed to correct. The collective overproduction by the producers just doesn’t stop. They say they have discipline, this time, but here we are four months into a production sharing agreement and the prices are about to fall as a result of higher shale volumes. It’s the same issue that was present in the 1980’s and 1990’s. The one that motivated me to start developing this solution. And it is the same issue that has fundamentally destroyed the natural gas commodity marketplace and is about to do so to the oil commodity market.

In order to solve this problem it is necessary for everyone in the industry to change “what” they do, and “how” they do it. Reading your particular section of the Preliminary Specification isn’t going to provide you with the understanding necessary to function in this new environment. You need to read the entire Preliminary Specification in order to fully comprehend all of the changes that are happening in the industry. That way the work that you do, and will do in the future, can fit into what is happening in the remainder of the industry.

The results of my industry analysis at the beginning of this year showed that each and every producer needs to triple their revenues in order to mitigate the damage that had been done to their firm and deal with the future. Running around cutting more staff to reduce your overhead. Beating up service industry representatives because you can isn’t going to solve this issue. The depth of understanding and thinking here is that when A occurs, do B. When profitability and cash flow are down, cut costs. Completely blind, deaf and dumb to the issues and opportunities that are ever present in the industry. And I have said all along that the reason for this is that we have an entrenched, complacent, lazy and happy bureaucracy who are challenged and disintermediated by People, Ideas & Objects and the user communities Preliminary Specification. Might as well through corrupt scammers in there as well. Acting stupid is just how they justify their actions and seemingly get away with it.

We can begin the process of replacing this convoluted BS by making your application to the user community. That way we can begin the process of rebuilding the industry brick by brick and stick by stick. Based on the Preliminary Specification and making the industry and producers dynamic, innovative, accountable and profitable. From stem to stern. Producing oil and gas in the 21st century should be done on the basis that all of it should be done profitably. And profitable based on a real accounting that recognizes the capital costs of this capital intensive industry. Where producers will have balance sheets that have cash and financial resources that replace the bloated balances of property, plant and equipment that now only represent the capital costs of past production.

Our plan consists of a prosperous oil and gas industry. One that approaches the next 25 years as the best 25 years of the industry's history. A time where the industry achieves profitability in each one of those years. Funding their own capital expenditures, replaces and refurbishes the infrastructure that we see decaying with greater frequency on the daily news, a future in which the investors and bankers, past and present, are treated with respect and their money treated with the appropriate accountability and not used just to fund the discount to the energy consumer. An energy future where responsible people are making the appropriate decisions at the appropriate times and dealing with the opportunities and issues as they arise. An industry that doesn’t blame the Saudi’s or OPEC, a warm winter or just the way things are on their poor performance and lackadaisical “muddle along” strategy and “do nothing” operating procedure. An industry that has respect for those who have committed their careers to the professions in the industry and expect to have more seniority than what casual labor has in the construction industry. An industry that has respect for the work that is done in the service industry and works hand in hand with those innovative and dynamic people who make the industry operate. And yes will actually pay the people who work in the industry and service industry on a timely basis. A place where it is not an honour and privilege to still have a job but a place where you can make a difference. And they say I’m the crazy one, that’s just because I expect more and dare to ask, what’s their plan?

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Our Plan, Part XXI

People, Ideas & Objects have established September 4, 2017 as our development start date for a variety of reasons. The first is we need to act, we are and will be no better than the bureaucrats that we’ve criticized for their inaction over the past decade. We need time to develop our software and I can assure you that the first question that producers will ask when they realize they need the Preliminary Specification is “what have you got.” We’ll need to be well on our way with this plan when that time comes. The impatience of the producers will become one of our issues in developing the software that the industry needs. The second reason for our start date is the looming crisis in oil and gas. There is a lot riding on the belief that oil prices will remain in the $50 range from this point forward, that those prices provide for producer profitability, that OPEC will continue to reduce production to accommodate U.S. based shale producers and natural gas has bottomed out. That the industry has weathered the worst storm ever and is on the comeback trail. The stock prices of the producers are far too high to fairly represent the value that these companies are providing. The bureaucrats have sold a story that everyone, once again, is believing. They need to now deliver that promised profitability in their first quarter reports of 2017 or the faith that they’ve got it under control may be eroded. We’ve been here before with the only difference being that the stakes just get higher with each round.

The only thing stranger than the high values of the producers stock is the promotion these stocks are receiving from the brokerage community. If you watch the movie “The Big Short” you can see that the banks offloaded their junk on an unwitting public just before the crash occurred. Even though it was known that the mortgage market was ripe for collapse people were hoodwinked into buying the bank's positions in these products. I think the same thing is happening here. The promotion of the producers is completely out of left field. It makes no sense to me. Commentary does not fit the producer firm that is being covered. The ability and capability of the producer to survive the next two years is in serious question, in my opinion, and the brokerages are stating that it's the next Apple.

To contrast the ridiculous nature of the commentary we will take the most extreme example available. That is Chesapeake Energy. The commentary is coming from this Financial Times column. Below I’ve separated some of the comments between those that I believe are truthful and those that are not consistent with the truth.

Some truth

Chesapeake still faces an uncertain future.

When Mr Lawler arrived, he faced a two-fold task: improving performance to make Chesapeake’s operations more profitable, and cleaning up the Augean stable of the balance sheet.

A renewed slump in prices, though, would threaten his plan to cover spending from cash flows by the end of next year, and Moody’s has warned that Chesapeake’s ratings could be downgraded again if it appears unlikely to deliver production growth in 2018.

Some mistruths

Notably, the company’s profitability is higher now with US crude prices at about $50 per barrel than it was at $100 per barrel in 2014.

Mr Lawler suggests that real success at Chesapeake would mean not just keeping the company afloat, but being able to show that “not only did we fix our problems, during the worst commodity price cycle in decades, we also positioned the company to show extremely competitive growth versus some of our peers”.

“The company’s profitability is higher now with US crude prices at about $50 per barrel than it was at $100 per barrel in 2014.” I don’t understand any of this comment. In 2014 Chesapeake reported $1.917 billion in earnings. During 2015 and 2016 Chesapeake reported losses of $19.086 billion. $4.399 billion of that loss in 2016. Chesapeake is 75% natural gas. Oil prices are not material to their profitability. These two statements provide the reader with the false hope that, with current, somewhat higher oil prices, Chesapeake has weathered the worst of the storm. It’s production profile has also declined precipitously over the past two years, from 770,000 boe/day to 575,000 boe/day.

Oil and gas is predominantly held by institutions. They certainly wouldn’t be buying this. If, as I suspect, these institutions are rotating out before the big collapse, so that John Q. Public can be left holding the losses in their recently purchased oil stocks, then the industry will be in for the reckoning that I’ve been writing about. The big, or smart money moving out of the industry is a sign of a loss of faith that there is any plan for the future. Producers can’t, won’t and will not ever change, and there is no plan. Other than drill more wells and lose a lot more money. This is why we need to be prepared and moving forward on September 4, 2017.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Our Plan, Part XX

A lot of the arguments against the Preliminary Specification and the commentary made here. Is that they’re accounting related arguments and therefore not really relevant to the real world of oil and gas production. I understand that point of view and would assert that it’s a point of view derived from the earth science and engineering perspective of accounting being the efficient and effective paying of bills. Accounting is about performance and our last two blog posts show that there is more than just drilling wells and paying bills to be considered in the oil and gas business. If we contrast our last two posts, with the performance opportunities detailed as a result of the Preliminary Specification, with the desperate situation that the industry is in today, we see that my critics could stand to reconcile these two perspectives. If on an accounting basis I had lost all the money that I had ever raised in the debt and equity markets I too would demean the People, Ideas & Objects arguments.

What I see in the industry are a lot of people who are the walking dead. They may have had the good life in oil and gas a few years ago. But were laid off recently. Now on one income, a small family and a mortgage the size of King Kong their standard and quality of living has eroded to third world status. With interest rates on the rise they have the added risk of becoming beholden to the banks for eternity and in death. The need to move off of this poor standard of expectation of economic performance in oil and gas is now necessary. Why has this third world status ever come to be considered acceptable for the people who had committed their careers to oil and gas? The additional frustration is that there has been a solution to what ails the industry for over three years. It however challenges the status quo and that is not acceptable as far as the handful of bureaucrats that are still benefiting from the industry are concerned.

It bothers me too that we continue to hear the bold faced lies of how costs have been reduced in the industry. Nothing of the sort has or could ever happen. Drilling operators can be raked over the coals and told to sign the deal offered at half the price it was last year, or walk away. This is not a sustainable cost reduction. And don’t let anyone tell you that this is evidence of the producer’s being innovative. Any cost reductions from the current downturn are not attributable to producer innovation. And can only apply to future projects in an abnormal environment. The rest of the producers production has to deal with the historical costs that were incurred to develop those assets. How can a producer, who developed 95% of their production profile over the last 20 years suddenly see the cost of all of that production drop? Producers said their costs were $85 / barrel when oil was over $100. The only difference is that oil is barely over $50. The costs to produce are the same, no one can go back and change the historical accounting costs that they’ve incurred on a property. They’re historical, it's a myth that they could and an outright lie that they have.

What producers are quoting are not historical costs but recycle costs. The costs that they’ve been quoted over the phone by suppliers as to what it will cost to complete an operation. These numbers are completely inconsistent with the financial statements of the producers. There the historical costs have to come into play and it is there that we see none of the producers are making any money. And that is on the basis of accounting for the capital over a period of ten to fifteen years!

On a somewhat related note when we begin developments on September 4, 2017 producers can't sit back and point fingers if we fail, they don't have that option, they have to participate in the developments of the Preliminary Specification and be the ones responsible for this project's success. What other options do they have. Coming in and holding People, Ideas & Objects and the user community accountable to the success or failure of this software development are not going to be effective. It will ensure failure. What is needed is a commitment to the success of this initiative by the producers to ensure that they have a future. Otherwise producers don’t have one.

The oil and gas industry will tell you that all is well and the future looks bright. I’m not seeing that, of course that is based on me looking at the financial statements of these producers. Something that I think the engineers and earth scientists don’t understand or appreciate. There is a myopic level of thinking going on in the industry these days. It's more along the lines of see no evil, speak no evil, hear no evil. Anything to avoid dealing with the truth. It's been many years that the industry has been stuck in this malaise. Nothing has been done. And all we ever here is that things are great and the future looks bright. One thing we can count on for certain is that the Saudi’s will continue to reduce their production to nothing so that shale can make up the difference. Delusion reigns supreme.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Our Plan, Part XIX

Keeping with the topic of performance. The capabilities of People, Ideas & Objects Preliminary Specification from a systems performance point of view might have been an issue in the past. If we were required to purchase all of our hardware and manage it then the producers would have had to define what kind of performance it was that they would expect from us. Build that capability and support that infrastructure. Providing the industry with a fixed cost and a fixed capability. We are a cloud computing user and provider. We are using Oracle’s cloud offerings for both our development environment and our production systems. If we need to provide better performance, then we’ll just need to define those requirements and provide for them. Cloud computing enables us to acquire variable capabilities with fixed costs.

If you haven’t had the opportunity to use a cloud computing offering I would suggest that you sign up for one and try them out. Both Amazon and Google have very good starter programs where the initial upfront costs are discounted. In the case of Google Cloud Platform they provide you with $300 U.S. in initial free use. Which is a lot of power. The capabilities of these systems is realized the first time you use them. What might have taken fifteen hours for your computer to process can be done in a matter of a few minutes for very few dollars. That is the power of cloud computing. Massive power available when it's required and at extremely low costs.

These services will provide real value to the industry when we need to process the month end for the producers. For example it may have taken 72 hours in order to conduct all of the processing on hardware that we would have had to purchased. And with cloud computing capabilities we may be able to turn that around in as little as 30 minutes, or even 30 seconds for essentially the same cost as the 30 minutes.

People, Ideas & Objects have always focused on people doing the things that people are good at and leaving the storage and processing to the computers. The things that people do well are the leadership, issue resolution, decision making, creativity, collaboration, research, idea generation, design, planning, thinking, negotiating, compromising, innovating and financing to name a few. By allowing people to do the work that we’re best oriented to then we will be more productive and I would think happier than we are with the work that we are doing now. In a related note Michael Milken, the former junk bond king and now head of the Milken Institute had an article in the opinion pages of the Wall Street Journal last week. Entitled “How Technology Liberates Human Capital” he raises an interesting point.

Through People, Ideas & Objects and our user community the oil and gas industry is being disintermediated. The positions and the types of work that will be done in the future, particularly in the accounting and administrative areas, will change significantly. Leading inevitably to some job displacement and outright losses. In the WSJ article Mr. Milken points to a McKinsey Global Institute report “that almost half of paid work can be automated with current technologies.” The knee jerk reaction to this news is one of concern and protection of one's turf. Mr. Milken suggests otherwise and has historical references to back up his opinion. That same McKinsey article notes that only 5% of any specific job could be completely automated.

But the very technologies eliminating jobs can be part of the solution for disrupted workers. To see what pessimists are missing, go back 40 years when powerful financial technology first started being used on Wall Street. The combination of mainframe computers with new types of securities and trading processes increased access to capital, especially for small and medium companies. Pioneers in the cellular telephone industry, for example, previously had a hard time convincing lenders that they could revolutionize how people communicate. There were only a handful of capital providers -- primarily banks and insurers -- that most companies could turn to. 

This changed beginning in the 1970’s when capital markets began a long process of displacing the established financial institutions as the leading sources of funding for corporate growth. Innovative fixed income and equity linked instruments helped create more than 60 million net new jobs in the U.S. over the last third of the 20th century. This proved an important formula: Prosperity comes when financial technologies multiply the sum of human capital, social capital and real assets. 

This liberation of human capital is what is the promise that our future holds. Instead of being preoccupied with the tedious and mostly irrelevant we as people can focus on the value added components of our society and do the work that we are best oriented to do. Leaving the tedious and irrelevant to the computers. That is the promise and the opportunity that stands in front of us. The performance that we can generate as a result of the user community and the service providers reconfigured in the way defined in the Preliminary Specification can open these benefits to the industry.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.