What we've experienced over the past four decades in North American oil & gas is unique in all organizations and business history. Although we learned during the great depression the economic consequences of overproduction, and experienced its consequences in oil & gas since the 1980s, no one seems to have explained it to North American producers' officers and directors. Oil & gas overproduction or unprofitable production in North America has been systemic and chronic throughout the producer population. It will continue unless there is effective production discipline. 

The history of this period is stark and clear. In the late 1970s the SEC imposed its Full Cost Accounting and associated Ceiling Test requirements on producers trading shares on American markets. These requirements allowed producers to record costs in property, plant and equipment as assets up to the limit of the present value of their independently evaluated petroleum reserves. Consequently, accounting statements were distorted since then due to an unnecessary amount of flexibility. Simply, shifting accounting from an evaluation of performance to one of value, hence the producer's foolish objectives of “building balance sheets” and “putting cash in the ground” etc came about. This is the mindset of officers and directors, CEO’s, CFO's and COO’s and other officers. Business knows that overreported asset valuations result in commensurate overreported profitability. Leading to investors rushing in to capture those profits and hence overinvestment begins. Overinvestment in a producer's productive capacity leads to overproduction of commodities that are then subject to economic price maker principles. Causing repeated collapses in commodity prices over the past four decades. The first commodity price collapse occurred during 1986 when $10 oil prices decimated the industry for a decade. This is counter to the cultural belief that oil & gas commodities are price takers. These definitions are from investopedia.com

Price maker

A price maker is a monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes. A price maker that is a firm within monopolistic competition produces goods that are differentiated in some way from its competitors' products. This kind of price maker is a profit-maximizer as it will increase output only as long as its marginal revenue is greater than its marginal cost, so in other words, as long as it's producing a profit.

Price taker

A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. All economic participants are considered to be price-takers in a market of perfect competition, or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market. This holds true for producers and consumers of goods and services and for buyers and sellers in debt and equity markets.

The following argument supports People, Ideas & Objects' claim of price taker characteristics. Officers and directors interpret substitutes to be; if they don’t produce others will, therefore substitution is everywhere. This is not what substitution means. Does it mean Elon Musk could reach Mars if he replaced rocket fuel with hydro dams? Or could we use wind energy to lubricate our crankcases? How about storing nuclear fuel rods in a jerry can when traveling outdoors this weekend? Returning from the weekend adventure to return to the office in that stylish solar panel, or pine bark suit. Alternatively if bottled water ceased to be produced people would switch to soft drinks, tap water, juice or other substitutes. Any overproduction of bottled water would see inventories swell and the price remain the same. As would the price of the last water bottle found anywhere in the world.

The connotation of the economic term price maker has caused producers and directors to conclude that this is collusion. We argue otherwise when the Preliminary Specification uses the Joint Operating Committee and will produce standard, objective, detailed, actual, and factual financial statements for each property. Producer firms will definitively know the “real” profitability of each property. A task that is not done today and more importantly cannot be done today. And therefore producers will independently decide to shut-in their unprofitable properties to ensure they attain the highest level of corporate profitability when unprofitable properties no longer dilute their profitable properties. Saving petroleum reserves for a time when they can be produced profitably. Maintaining the commodity as reserves makes sure they don’t have to carry the incremental costs of unprofitable production. Keeping production and inventory costs lower by not unnecessarily producing and storing unprofitable production. Additionally, ensure that the marginal production is removed from the commodity markets so that the marginal price of the product can be determined. Attaining the marginal price not only for the individual property but for all properties. Replacement costs for any production needs to be provided. Investors have stopped doing so and are not and should never have been that source. In a shut-in situation, the producer can take advantage of their innovative skills to restore the property to a financially viable state. Profitability is the only fair and reasonable production allocation method. People, Ideas & Objects decentralized production models price maker strategy provides all the financial resources producers will need to meet their challenging future. It allows them to contribute to society productively and constructively. 

We believe that People, Ideas & Objects and our user community are the appropriate business approaches to chronic and systemic overproduction. Without “real” profitability there is only waste and deterioration as we’ve experienced in the past decades. Without investors and bankers who were duped by these specious financial statements, there was no sustainable value generated. And today the industry is worthless as it demands capital to operate.

Wikipedia defines collusion. 

In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is overt, on the other hand, is known as tacit collusion, and is legal. 

By definition, the Preliminary Specification price maker strategy may fall under overt or tacit collusion. Which is legal. Each of the producer firms will make independent business decisions about whether or not to produce on each and every one of the many properties they own. Those decisions will be based on actual, factual, standard and objective accounting that provides the information for that decision. In the event that a property is shut-in due to unprofitability, a null operation will follow, no profit, but also no loss. Achieved when the Preliminary Specification makes all of the producers' costs variable depending on profitability. The decision to avoid a loss of corporate financial resources and assets, in the form of petroleum reserves, when producing an unprofitable property at a price that does not cover the marginal cost, in the long term perspective of marginal cost, (as per Wikipedia “analysis is segregated into short and long-run cases, so that, over the longest run, all costs become marginal,”) is a rational business decision, not collusion. This method provides for the first time in the industry history the ability for the producer firm to indirectly control their overhead costs based on their profitable production profile.

Les Borodovsky provided the following graph from @SoberLook. What this graph is representing is the status quo perception of costs and how management of production is handled in oil & gas.

Producer officers and directors perceive their total cost per barrel of oil produced in various shale formations to range between $48 and $54, with operating and royalty costs varying from $28 to $37 per barrel. However, the $20 to $23 attributed to capital costs are allocated across the entire reserves of a property—a practice we argue is unreasonable. In today's capital markets, the demand for capital performance far exceeds what can be achieved when producers tie up cash in investments that may take decades to recoup, if ever. This issue is further aggravated by shale formations, which, while revealing prolific reserves, require substantial incremental capital to offset their inherent steep decline curves and maintain deliverability.

As an alternative, People, Ideas & Objects recommend that producers retire their capital costs within the first 30 months of a property's life. This approach allows for the reuse of previously invested cash, providing the means to meet internal demands for future capital expenditures, shareholder dividends, and bank debt repayments. It better aligns with the rapid decline rates experienced in shale formations, enabling producers to compete effectively in North American capital markets. Achieving this necessitates selling commodities at prices above the breakeven point, which must accurately account for all of the actual costs of exploration and production. This strategy enables producers to repeatedly reuse their cash investments rather than waiting decades for returns.

Currently, producers continue operating properties as long as commodity prices cover operating costs, regardless of capital cost recovery. If even a dollar of capital costs is being returned—just one dollar above their alleged shut-in price—they will keep the property in production. They only consider shutting-in production when commodity prices fall below operating costs. This represents a fundamental misunderstanding of the term breakeven and is a key reason the industry has struggled financially for the past four decades. Producers assume that as long as there is cash flow above operating costs, they are making money and will continue to produce—even if they are not truly breaking even. As a result, they accept stranding unrecovered and unrecoverable capital costs in abandoned properties over the long term.

Under the Preliminary Specification proposed by People, Ideas & Objects, the decision to shut in a property would occur at the breakeven point or below. Our breakeven point would be higher due to the competitive recognition of capital over a thirty-month period. This approach instills production discipline by recognizing that producing any property unprofitably dilutes corporate profits. Producing below the breakeven point initiates unprofitability. In an industry where commodities are price makers, one producer operating below breakeven can depress commodity prices industry-wide. When all producers consistently produce below breakeven for decades, it drains value from the industry annually—a situation that likely began in the 1980s, with sustainability occurring only when investors were willing to subsidize losses.

To avoid allegations of collusion, officers and directors claim they operate within legal boundaries. However, catastrophic losses have occurred, disrupting the financial stability of every producer over the long term. The industry's financial, operational, and political frameworks are now in disarray. Officers and directors consider this the normal course of business, believing that the destruction of their firms' assets and the capacities of the oil & gas and service industries is an acceptable consequence of a "boom/bust" cycle managed through "muddle through" strategies. This is unnecessary and unacceptable, especially when the Preliminary Specification offers a viable, business-oriented approach to operating the oil & gas industry.

Conversely, the Preliminary Specifications decentralized production model and price-maker strategy provide a solution. When operational, higher commodity prices would trigger production volumes that meet profitability thresholds, allowing previously shut-in properties to resume production. Enhanced commodity prices would allocate necessary financial resources toward innovative exploration and production methods. This approach empowers dynamic, innovative, accountable, and profitable North American producers with the most profitable means of oil & gas operations—everywhere and always.

People, Ideas & Objects recognize that the oil & gas industry possesses unique characteristics that must be acknowledged and respected. These commodities are valuable and, in the long run, limited. To demonstrate to future generations that we have utilized our share of these resources appropriately, we must first ensure that all production is profitable—everywhere and always. Secondly, we need to pass on a profitable, viable, efficient, and effective oil & gas and service industry. Failing to do so would be unwise and unjustified, especially when these commodities operate under the principles of price makers. Consumers understand that secure, reliable, and affordable energy independence in North America is achievable only when producers are profitable. The question of why this hasn't been accomplished must be directed at those who had the opportunity to implement alternatives like the Preliminary Specification but chose not to.

Just as producers were compelled to shut in production when oil prices plummeted to nearly negative $40 per barrel and refineries refused to accept feedstock, they should find compelling reasons to bring any shut-in properties back online to meet consumer demand profitably. Operating the primary industry of oil & gas profitably, everywhere and always, will enable the maintenance of the capacities and capabilities of the broader oil & gas industrial economy. The fact that People, Ideas & Objects faced abuse and punishment for advocating this position and for the content within the Preliminary Specification indicates that officers and directors knew better. Our alternative was available during this time but it was refused because it disrupted their methods of management and personal compensation. They will now have to live with the legacy of their inaction.

Over the past four decades, officers and directors have effectively run the entire oil & gas industrial complex into the ground, damaging a large portion of the service industry's industrial capacity. This has eliminated the service industry's capital structures and eroded any faith, trust, or goodwill within it. Consider the drilling rig investors or bankers from a few years ago who watched their investments being scrapped for metal while producer officers and directors continued their indifferent "muddle through" approach. It is now incumbent upon producers to provide the financial resources to rebuild the service industry—and to do so on a philanthropic basis. The principle is clear: "Producers broke it; producers need to fix it." Having used and abused the service industry, producers must now supply the funds and commitment necessary for the rebuilding effort; otherwise, they risk repeating the cycle of exploitation. Perhaps if producers invest their own resources in rebuilding the service industry, they will come to respect it. It is purely an instance of fool me once, shame on you, fool me twice, shame on me. The service industry will not allow oil & gas producers to fool them again.

Given the costs associated with exploration and production, particularly in shale reserves, it's unsurprising that producers have consumed all of the prior value built before them, the waste of valuable resources and substantial investments from investors and bankers. What is surprising is that producers have done nothing to mitigate the overproduction that has led to declining prices, subsequent financial losses, and the destruction of both producer reserves and the greater oil & gas industrial capacity. This reveals the motivation behind the continuation of these methods.

The root cause of chronic overproduction lies in producers' need to generate revenue to cover the out-of-pocket overhead costs incurred under their "high throughput production" model. In this model, overhead costs persist regardless of production levels. If any portion of their properties are shut in, it renders their operations high-cost at any production level. At lower production volumes, earnings are distorted, and overhead costs appear disproportionate. Consequently, the practice of producing at maximum capacity is expected to continue in both the oil & gas sectors, even in the face of significant financial losses or the inability to meet market demands.

Although most producers report overhead costs of less than 2% of revenue, this figure is generally unrepresentative of the true situation. Based on our experience, we believe overhead costs range between 10% and 20% of revenues. These amounts are rarely itemized or discussed in producers' financial statements. If they were detailed, the disproportionate and creative levels of executive compensation would become evident. To avoid accountability for these costs, overhead expenses are capitalized across the industry—approximately 85% of them. The motivation behind this practice is to evade accountability, and the consequences are significant. 

When overhead costs are capitalized to the extent they are in the oil & gas industry, it creates a significant financial drain on producers' finances. In most businesses, overhead is recognized as an expense and passed on to consumers through product pricing. However, in the oil & gas sector, overhead is capitalized, meaning that the typical "cash float" used to finance these costs doesn't function or even exist. Essentially, producers' cash is tied up on the balance sheet for decades and is eventually passed on to consumers through depletion at an undetermined future date. The industry has traditionally addressed working capital deficiencies by including next year's capital expenditures in prospectuses. Without support for capital structures, a lack of earned profitability, and inadequate revenues due to decades-long overproduction and loss of competitiveness, it's clear that cash management practices in the industry are lacking. When a business operates primarily as a spending machine, this outcome is unsurprising.

Our Preliminary Specifications decentralized production model offers a solution, enabling dynamic, innovative, accountable, and profitable oil & gas producers to implement our price-maker strategy. This model is defined by Professor Richard N. Langlois in his book “The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy”:

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. (p. 58)

Achieving Production Discipline

Production discipline is attained when producers realize that maximum profitability comes from producing only when it is profitable—everywhere and always. This incentivizes them to adhere to the principles of the Preliminary Specifications decentralized production model and price-maker strategy, much like all capitalist businesses have done since the Great Depression of 1929. Individual decisions by each oil & gas producer, based on actual, factual, standard and objective accounting of a property's profitability, determine whether a property should produce. This approach is essential for the industry to manage periods of low commodity prices.

As properties start losing money during declining price periods, producers will incrementally shut in unprofitable properties each month. Conversely, when commodity prices rise, they’ll increase production volumes by bringing previously shut-in properties back online once they become profitable. Shale-based reserves, due to their prolific nature, can overwhelm commodity markets with sudden increases in production and deliverability. Therefore, this production discipline based on profitability can only be achieved by reorganizing the industry according to the Preliminary Specifications decentralized production model, as detailed in the Specialization & Division of Labor section. This involves making overhead costs variable and utilizing our Cloud Administration & Accounting for Oil & Gas software and services. Our price-maker strategy ensures producers and the industry remain profitable while providing consumers with an abundant, affordable, reliable, yet profitable energy source.

The Effectiveness of Our Preliminary Specification

The logic behind our method highlights its effectiveness:

• Maximized Profitability: Producers maximize profits when losses from unprofitable properties no longer dilute the gains from profitable ones.

• Strategic Reserve Management: Holding reserves until they can be produced profitably means avoiding incremental costs associated with losses from unprofitable production. 

• Cost Reduction: Keeping oil & gas as reserves reduces production and storage costs tied to excess, unprofitable output.

• Market Stability: Removing unprofitable production allows commodity markets to find the marginal cost, establishing fair prices for all production.

• Reserves Valuations: Market prices accurately reflect the value of producers petroleum reserves. Expanding the volumes of proven recoverable reserves and fulfilling officers and directors fiduciary duty to safeguard assets. 

• Innovation Opportunities: While properties are shut in, producers can innovatively explore ways to increase production volumes, reduce costs, or expand reserves. To return the property to profitable production.

• Replacement Value: The market price must reflect the current market’s costs of exploration and development. That is the cost of the volume of energy produced today. 

• Production Discipline: Using profitability as the criterion for production decisions is the only fair and reasonable method. 

• Innovation as a Foundation: Higher commodity prices finance greater innovative activity. 

It's important to note that the Preliminary Specification's service providers will offer standard and objective methods of accounting and process management. This means any producer identifying a property as unprofitable will recognize that shutting it in is the most effective, profitable remedy, based on the standard and objective industry-wide assessments of the service providers.

Benefits of the Decentralized Production Model

The decentralized production model supplies the financial resources necessary for a prosperous industry to self-regulate as independent businesses. It helps determine the current replacement cost of oil & gas, with price-makers only introducing new production when it is profitable. The traditional method of capital discipline has proven to be a blunt and ineffective tool, often leading to the intentional destruction of productive capacity.

By adopting our decentralized production model and reorganizing the industry through our Cloud Administration & Accounting for Oil & Gas software and services:

• Overhead Costs Align with Profitability: When production is only produced when profitable, overhead becomes variable based on profitable production. If a property is shut in, overhead costs are not incurred.

• Cost Recovery: All overhead costs are recovered in the current period through commodity sales pricing.

• Indirect Cost Control: Producers gain the ability to indirectly control their overhead expenses.

This approach not only enhances profitability but ensures the industry operates sustainably, benefiting both producers and consumers in the long term.

A Culture of Performance

Today’s Oil & Gas Culture

North American oil & gas producers have balance sheets bloated with capital assets that are not recognized on a timely or accurate basis. As a result, their income statements reflect only a small portion of the capital costs incurred during exploration and production, leaving investors deceived as to the producer's performance. Although officers and directors may report profits, these figures essentially represent the gross margins of the producer firms. The majority of actual overhead and capital costs associated with properties are transferred to the income statement as depletion across several decades. The repeatedly stated corporate objectives have been to "build balance sheets" and "put cash in the ground," with overhead expenses capitalized, therefore remaining on the balance sheet indefinitely.

This process makes producers appear spectacularly effective in their operations. Their assets continue to grow as long as they spend money sourced from banks and investors. Reported profits remain high, regardless of actual engineering or geotechnical success. However, in terms of producing real value, investors have learned—particularly since the late 1970s—that oil & gas has been a lost cause.

Having high asset values on the balance sheet provides little value to anyone. People, Ideas & Objects describe these costs as the unrecognized capital cost of past production, which accurately defines the subsidy consumers have received from oil & gas investors. In a capital-intensive industry, effective deployment of capital is crucial for producers. When every producer capitalizes the majority spent each year, assessing the effectiveness of their capital deployment becomes challenging. According to officers and directors, one should evaluate the firm based on the life of its capital assets or reserve life index—often around ten years. However, waiting a decade to assess management capabilities over that period is impractical. Moreover, assets at the ten-year mark often remain on the balance sheet much longer, with many capital costs permanently stranded in abandoned properties.

The Performance Culture of People, Ideas & Objects

When we’ve implemented the Preliminary Specification through People, Ideas & Objects, our user community and their service providers. Producers accounting will change to instill a culture of performance throughout the industry. This change will be orchestrated through the competitive nature of the producers seeking to provide the most profitable means of oil & gas operations to their shareholders. With the decentralized production model enabling the price maker strategy for all oil & gas properties. Producers will be able to shut-in those properties that are unable to produce a profit in a low commodity price environment. During times of high prices they’ll be able to bring the previously shut-in production back on to meet consumers demand. 

Or alternatively they will be able to apply their innovations to increase their deliverability or reduce their costs and return the property back to profitable production. The determination of what the costs of that property will include is the capital costs on the 30 month accelerated depletion schedule in comparison to what the officers and directors have implemented. This will bring the costs per barrel much higher and into the territory of what it actually costs for exploration and production in North America. Requiring higher commodity prices for the producers to meet the criteria of profitably producing any property and therefore fulfilling the actual, as defined “swing producer” role in the global market. Providing the cash resources necessary to expand the deliverability or replace production at the current cost of exploration and production. 

Another key implication of this change is that the determination of which producer is performing and those that are not will be evident. Although producers will be reporting profitability irrespective of the percentage of their production profile. If they have 50% of their properties shut-in due to the inability to produce profits, then they’ll be reflecting they’re performance in terms of return on investment and return on capital employed as poor. However, they remain profitable on their production. Today, based on a producer's financial statements, assessing which producers are performing and which are not is next to impossible. 

Oil & gas is a mature industry. The officers and directors continue to consider that it is other people's money that they need in order to fund their operations and “build balance sheets.” This is inconsistent with reality. Oil & gas is a primary industry that should be providing the investment community with a return on the invested capital from the annual profits earned. Instead the officers and directors let the assets sit on the balance sheets for eternity and never let these costs flow to the income statement. This subsidizes the consumers of oil & gas by having the investors pay to park the capital costs on the balance sheets in some misguided business objective. Never allowing the capital costs of a capital intensive industry to pass to the consumer in the commodity price being realized. The commodity prices never adjust to the real costs of exploration and production in the industry where, uniquely in oil & gas, the costs escalate with each incremental barrel of oil equivalent produced. This being the result of the greater difficulty in producing each incremental barrel.

Understanding the significant role and value that oil & gas has in society is not being considered. It is reasonable to ask what right do we have to squander these resources from future generations? We should act responsibly and ensure that we can account profitably for the production of these commodities everywhere and always. And ensure that we pass a viable and prosperous, greater oil & gas economic system on to the next generation. Both of these issues are raised as a result of the officers and directors mismanagement. Who when asked to account for these actions will as they did in the past, lie. Recall those times when producers who were profitable at $70 were suddenly able to be profitable at $55 prices, then at $40 and $30. Miraculous I know and a feature previously unknown about historical accounting. Officers and directors have this achievement covered with “recycle costs.” Which are nothing but the cost estimates they receive from what they can beat out of the depressed service industry “if” they should happen to drill or frac a well in the depressed commodity price environment. The discount is printed right there on the drilling firm's “Estimate!”

Under the changes from People, Ideas & Objects methodology the makeup of a producer's balance sheet will change. From having a dominant position in terms of fixed assets, low and zero cash balances with negative working capital positions. To have high values of liquid investments, positive cash and working capital with much smaller amounts of property, plant and equipment. They will be financially much healthier. They will be able to dividend out large portions of their earnings back to the investment community. Pay down debt. Fund their own capital expenditure programs. And maybe best of all they’ll be more dynamic with the financial flexibility to act in the most profitable manner. All as a result of finally realizing the real cost of oil & gas exploration and production!

It will be the recognition of depletion of the capital expenditures in the 2 1/2 to 3 years that will dictate North America's oil & gas prices. Properties that carry the higher overall costs of exploration and production per barrel, due to their large balances of capital, will be depleting these balances to each barrel of oil equivalent produced. If we are realizing all of the properties capital costs in the first 2 ½ to 3 years of production from the property. Under People, Ideas & Objects price maker strategy it will be these properties that have to meet the criteria of being profitable and determined if they are produced or shut-in first in a low commodity price environment. Those properties that have exhausted their capital cost balances will be able to produce large profits no matter what the oil & gas price is in the marketplace. 

This approach introduces a fundamentally different capital discipline, where deployed capital must meet profitability requirements immediately before production begins. It brings a new appreciation for where value truly lies within the firm—not in the largest asset balances, but in identifying the best-performing properties and replicating that success across others. Typically, the capital investments made over the past three years dictate the actual costs of production. Consequently, oil & gas prices will need to reach higher thresholds to justify bringing recent production online or adding incremental barrels. Given the price-making nature of oil & gas commodities and their unique supply and demand elasticity, the industry must realize higher prices under the People, Ideas & Objects accounting methodology and decentralized production model. Otherwise, producers will continue to erode their corporate profitability by operating unprofitable properties.

To emphasize this point, consider a conventional property that has been operational for decades. If it achieves the same commodity prices required by shale properties, its profits will be substantial. However, what is the replacement cost of the barrel of oil produced from this property? Financing the replacement barrel will not match the cost structures or drilling methods of decades past—it will be significantly more expensive. This increased cost must be borne by the consumer, as no one else will be misled into providing the necessary funds. Therefore, revenue from all production sources must be sufficient to fund the replacement of that barrel in today's cost and operating environment.

The SEC and public accounting firms define the methods for writing down capital assets, setting the limits of reasonableness according to Generally Accepted Accounting Principles (GAAP). Their role is to establish these boundaries and ensure that producer firms do not exceed the independently evaluated reserves valuation. However, officers and directors have treated these limits as standards or even targets for asset valuation. This practice is unreasonable, especially when producers consistently push the SEC's ceiling test to its allowable limits every fiscal year across all firms. Bloated balance sheets offer no real value to anyone. Notably, the most competitive producers would have fully depleted their property, plant, and equipment accounts—zero being the lower limit permitted by the SEC.

People, Ideas & Objects service providers—the sub-industry we are creating to replace producer firms' administrative and accounting resources—will offer North American producers a Cloud Administration & Accounting for Oil & Gas software and service. They will employ a much more aggressive 24 to 30 month schedule for realizing capital assets in pricing calculations. This approach ensures that oil & gas prices reflect the true cost of the commodity in the competitive North American capital markets. Producers will be able to establish the necessary prices to recover their costs through our decentralized production model. Investors can then confidently invest in oil & gas producers, knowing that their investments will be returned along with an annual profit. The investors evaluation focus will shift toward the producers' ability to explore and produce effectively and competitively from engineering and geotechnical perspectives.

Just as earnings and assets are overstated in the oil & gas industry, we believe the same applies to cash flow. Analyzing a producer firm's capital expenditures reveals that not all capital spending is dedicated to increasing the firm's production profile. The reality of oil & gas is the ever-present decline curve, particularly pronounced in shale formations. We should scrutinize producers' capital expenditures more critically to distinguish between dollars spent on maintaining the production profile and those invested in expanding it.

The core issue lies in the practice of capitalizing virtually all expenditures. If capital expenditures are used merely to maintain the production profile, why shouldn't they be considered operating costs? Treating them as such would substantially reduce operating cash flows in the current period, providing a more accurate reflection of the firm's activities and value. This change would immediately impact the company's market capitalization, given that cash flow is the current metric for valuation. Reduced cash flows would better represent the industry's state, compelling producers to seek increased revenues through higher prices and improved profitability to enhance their cash flow evaluations, or, be evaluated on their dividend record.

Under People, Ideas & Objects Preliminary Specification, a producer would report higher cash flow volumes than what has been seen over the past decades. The motivation for a dynamic, innovative, accountable, and profitable producer would be to realize the full value of their petroleum reserves. This contrasts sharply with the past four decades, where increasing producer value often meant excessive spending and capitalization of costs. It's imperative to evaluate producers based on equitable cash flow measures rather than inflated management figures. In competitive capital markets like those in North America, producers should compete on fair and transparent terms.

As it stands, oil & gas accounting practices are skewed toward overvaluation. Assets, cash flow, and earnings are all affected by industry policies that inflate these figures. This culture has led producers to believe they are productive and contributing members of society when, in reality, they have been financially destructive. Only after four decades of such accounting treatments has the extent of the industry's decline become apparent. The value embedded within the entire North American producing infrastructure is essentially negative, as it has become a cash flow drain resulting in catastrophic losses. Producers are consuming value rather than creating it.

To reverse this trend, the only viable strategy is to increase producers' revenues to record commodity price levels over a sustained period and maintain genuinely profitable operations everywhere and always. These enhanced revenues would help remediate past destruction and finance rebuilding efforts across the broader oil & gas economy and importantly the service industry they abused. Investors and bankers, who have invested in good faith, now find themselves owning an industry that drains their resources and has effectively subsidized consumers' energy needs for the past four decades. The magnitude of this consumer subsidy is accurately reflected in the balances of property, plant, and equipment on producers' balance sheets.

The future capital demands of the industry far exceed what capital markets are willing or even capable to provide. The only solution is to operate oil & gas producers as genuinely profitable businesses, as envisioned by the Preliminary Specification, our user community, and service providers. Officers and directors have demonstrated a lack of understanding of sound business principles and an unwillingness to learn or listen, making it unreasonable to expect improvement under their continued administration.

Oil & gas is inherently a capital-intensive business. Historically, capital was raised, spent, and left on the firm's balance sheet indefinitely. The idea of repeatedly turning capital into cash for reinvestment was seldom considered. Instead, producers relied on raising new funds annually, adding to a growing pile of assets depleted over decades, if not centuries, as petroleum reserves remained unextracted. To remain competitive in North American capital markets, producers must accelerate the turnover of these resources. Recognizing that most capital expenditures serve to maintain the production profile—and recording these expenditures as operational costs—would return that capital to cash within the current fiscal quarter.

Having established that our methodology for accounting for capital costs differs from the status quo, it's important to reiterate the value proposition we offer. By providing oil & gas producers with the most profitable means of oil & gas operation everywhere and always—through the decentralized production model and the accounting methods discussed—we can generate an additional $5.7 trillion in profits over what current officers and directors might achieve in the next 25 years. Accounting for the industry's capital costs within commodity prices allows us to repeatedly reuse the industry's cash resources to fund necessary capital expenditures, thereby providing a return on investment to investors.

Considering the industry is expected to spend between $20 to $40 trillion over the next 25 years, People, Ideas & Objects and our partners offer, at a minimum, an aggregate of $25.7 to $45.7 trillion more value to the broader oil & gas economy than traditional approaches. This contrasts sharply with the current expectation that the investment community will shoulder these capital needs without a clear path to profitability.

Sharing Producers Infrastructure and Costs

Cloud Administration & Accounting for Oil & Gas 

One of the most valuable innovations to emerge from the Information Technology industry in the past decade is the drive to share costs. Technologies such as cloud computing, the development of Artificial Intelligence, and the widespread acceptance of object-based software development aim to reduce expenses for consumers by sharing resource infrastructure and associated costs across the entire customer base. This same principle has been applied throughout our Preliminary Specification to realize substantial value generation and savings for producers. When combined with automation, specialization, and the division of labor, sharing becomes one of the most potent business tools for effecting change and developing significant long-term value.

Professor Paul M. Romer introduced the concept of "non-rival" costs in his October 1990 paper, "Endogenous Technological Change," a contribution that earned him the Nobel Prize in 2018. In a December 2001 article in Reason Magazine, Professor Romer described his New Growth Theory as comprising People, Ideas, and Things. Embracing this concept comprehensively in our Preliminary Specification and throughout our organization, we named our initiative People, Ideas & Objects, reflecting our focus as object-based software developers.

Currently, each producer is involved in developing and maintaining their own administrative and accounting infrastructure. None of these costs would be considered part of a producer's distinct competitive advantage, yet regulatory requirements demand ever-larger infrastructures to accommodate them. These costs are not unique to each producer; companies often reside in the same office building or across the street from one another, and their administrative and accounting processes vary only slightly—even compared to those in neighboring states. In the current state of oil & gas organizations and industry, these non-rival costs are neither shared nor shareable.

We have established that producers claim their overhead costs to be 1 to 2% of their revenues in their financial statements, yet they each report hundreds of millions of dollars in savings as a result of layoffs. These arguments are specious and do not align with personal experience in the oil & gas industry. Depending on commodity prices, overhead costs likely range from 10 to 20% of revenue. Producers focused exclusively on non-operated properties can reduce their overhead burden to lower percentages; however, this business strategy only works for startups and small producers.

The Preliminary Specification has established seven Organizational Constructs, one of which is Professor Romer's concept of non-rival costs. We propose reorganizing the administrative and accounting resources of the industry to exploit these principles of sharing resources, infrastructure, and Information Technology through our Cloud Administration & Accounting for Oil & Gas software and service. By restructuring the producer firm to consist only of C-level executives, engineering and geotechnical resources, legal, and other necessary staff, we reposition administrative and accounting resources into the People, Ideas & Objects, our user communities service provider organizations. There, they will manage specific processes on behalf of the entire industry.

This division of labor allows these service providers to focus on their competitive advantages:

• Quality

• Automation

• Innovation

• Leadership

• Internet of Things (IoT) 

• Integration and Implementation

• Issue Identification and Resolution

• Creativity and Collaboration

• Research and Design

• Planning and Critical Thinking

• Negotiation and Compromise

• Financing

• Observation, Reasoning, and Judgment

By concentrating on the human characteristics we excel at—attributes that cannot be replaced by computers—we enhance efficiency and effectiveness. Computers will handle storage and processing, allowing people to focus on tasks that require uniquely human skills.

Sharing these resources through the Cloud Administration & Accounting for Oil & Gas software and service enables producers and the industry to realize significant cost savings. This approach is the key enabler of the price-maker strategy mentioned in the decentralized production model section, where producers' overhead costs are transformed into variable costs based on production.

Additionally, our user community members are the exclusive resource from whom our software developers are licensed to seek input. Developers cannot access anything outside of what our user community provides, ensuring that producers know exactly whom to consult to resolve any issues. Our user community members will be the ones on the ground operating service providers, actively involved in servicing and delivering our software to the oil & gas industry. In this capacity, they can apply these competitive advantages and continue to provide the most profitable means of oil & gas operations—everywhere and always.

Earth Science & Engineering Resources

Our competitive advantage in providing oil & gas producers with the most profitable means of operations—everywhere and always—centers on the efficient and effective employment of earth science & engineering resources within the producer firm. We contrast our approach with the standard corporate business model currently employed by officers and directors. While there are many facets to this component of our competitive advantage, all contribute to profitability through innovation, specialization, and the division of labor. We highlight the application of Professor Paul Romer's concept of non-rival costs within the Preliminary Specification.

Innovation is a key Organizational Construct in the Preliminary Specification. We focus on the Research & Capabilities and Knowledge & Learning modules to manage processes centered on the development, documentation, and deployment of capacities and capabilities within the producer firm. These modules facilitate market availability, sourcing, research, and development of earth science & engineering capabilities, channeling them into the Joint Operating Committees from each of the working interest participants for ultimate deployment.

From an innovation standpoint, we utilize the Work Order system. This tool enables innovative producers to participate in and sponsor working groups to research and study various earth science & engineering concepts alongside like-minded producers. Designed to eliminate bureaucratic hurdles and the inherent difficulty in managing accounting and administrative logistics for these ad hoc groups, the Work Order provides an interface that allows users to allocate their overhead and AFE (Authorization for Expenditure) budgets to studies consistent with the nature of the opportunities. An innovative industry will demand orders of magnitude increase in these activities.

Addressing the challenging issue of resource constraints, specialization and division of labor concerning producer firms' earth science & engineering resources are crucial. Over the next few decades, demand for these resources will outstrip supply due to retirements and insufficient new recruits, and the never ending increase in demand from each incremental barrel of oil. The industry must resolve this problem.

The Preliminary Specification leverages specialization and division of labor in combination with the sharing nature of these resources, enabled by the key Organizational Construct of the Joint Operating Committee. One significant difficulty in the oil & gas industry is what People, Ideas & Objects call the hoarding issue. Each producer builds capabilities and capacities within their firm to handle any and all contingencies at any time. This hoarding leads to unused and unusable surplus capacity across the industry. As each producer attempts to provide all necessary capabilities on a just-in-time basis, critical resources become unnecessarily constrained.

Our solution is the Pooling of technical resources. Each member of the Joint Operating Committee commits their technical resources—based on their unique specialized capabilities—to the property, for a fee. Any deficiencies are supplemented by outside technical service providers or other producers who offer additional earth science & engineering capabilities for a fee, organized through our Work Order system to manage charging, billing, and payment. The fee charged by the engineer or geologist is derivative of the Revenue Per Employee calculations People, Ideas & Objects prepare across the industry.

Another aspect of the division of labor applies to routine geology and engineering tasks. Much of this work can be outsourced to newly formed technical service providers specializing in specific services for the industry. Organized around common or generic processes or skills that can be highly specialized with increased scope and scale, this approach allows each producer firm to focus on a specific high-level technical specialization. This forms the basis of a second revenue stream and expands their science and technology resources for enhanced innovation.

It is reasonable to assume the industry will turn to specialization and division of labor to address resource restrictions. However, if producers continue hoarding resources to resolve shortfalls, the result will be counterproductive. Prior to Professor Romer's non-rival cost concept, specialization and division of labor were the only effective tools since Adam Smith's The Wealth of Nations in 1776. Without incorporating our Pooling concept, the expanded scope and scale of producers' earth science & engineering capabilities—driven by market demands for enhanced specialization—will likely lead to chronic unprofitability due to the enlarged scope of specializations required to cover all of a producer's operational demands.

In a few years, having each producer conduct all earth science & engineering in-house for all their properties will seem antiquated—a business model from the dark ages. Decentralized business models are eliminating centralization through efficiencies across industries. The Preliminary Specification offers the only reasonable solution to the current and impending resource limitations.

Future challenges include the need for expanded productive capacity to achieve energy independence and increased effort for each successive barrel of oil produced. Earth science & engineering capabilities form a critical part of the innovative oil & gas producer's competitive advantage, alongside their land & asset base. The Preliminary Specification enables firms to focus resources on specialized research and development of knowledge, skills, experience, and ideas, deploying these assets in their properties.

This approach positions a profitable oil & gas firm appropriately and represents another component of how People, Ideas & Objects provides producers with the most profitable means of oil & gas operations—everywhere and always.

Oracle Cloud ERP

Recently, Oracle has adopted a new focus and direction within their firm. While they continue to invest in their existing technologies and future developments, they are charting a different path—a business model that builds value through the use of their technologies. By partnering with other service providers to deliver products within Oracle Cloud ERP, they are moving in the same direction as People, Ideas & Objects, our user community, and our service provider organizations in the oil & gas industry. Oracle Cloud ERP provides this through its emphasis on generic business process management.

When we utilize Oracle Cloud ERP for the development of the Preliminary Specification, we are presented with a comprehensive system tailored specifically for our needs. The generic business functionality and process management are optimally handled through their Tier 1 ERP product. We then define the specific attributes required to establish the features, functionality, and process management necessary for the unique aspects of the North American oil & gas industry and Preliminary Specification. This results in a seamless, highly integrated product that enables dynamic, innovative, accountable, and profitable oil & gas producers to achieve the most profitable means of oil & gas operations. Building upon the Preliminary Specifications developments, we provide the necessary components for the industry to maintain a permanent ERP software development capacity and capability, keeping producers up to date with Oracle and People, Ideas & Objects quarterly system updates.

Oracle's new direction is best illustrated by an example frequently referenced in our discussions. In partnership with J.P. Morgan Chase, Oracle developed a feature within Oracle Cloud ERP where employees using a J.P. Morgan Chase credit card can select their specific corporate asset or project to be charged. Oracle then applies the firm's policies and procedures to validate the charge, pays J.P. Morgan Chase, and either charges the employee if the expense is invalid or accepts the charge to the selected account.

Much like how People, Ideas & Objects proposes building value through sharing infrastructure and costs within the oil & gas industry, Oracle provides a service that eliminates expense reporting for businesses using Oracle Cloud ERP. This adds incremental value for oil & gas producers beyond the reductions in overhead and technical resource infrastructure costs noted in the Preliminary Specification, among many others. We believe that, over time, the attributes Oracle offers through these generic business developments will be as substantial in cost reductions and time savings as those provided by People, Ideas & Objects. Importantly, Oracle includes these features at no additional cost to customers—it's part of the service charges for Oracle Cloud ERP and the other technologies we'll utilize.

These are the competitive advantages that Oracle brings to the marketplace. Expense reports are often frustrating and time-consuming, requiring effort from those who prepare, review, approve, and process them. Across a large producer, all these costs can be offset by the minimal incremental cost of computer processing time. Oracle recovers the development costs of these features through its installed base of Oracle Cloud ERP customers—an installed base that could potentially expand significantly.

Oracle Cloud ERP introduced a quarterly upgrade schedule that fosters iterative, innovative development. Similarly, the Java Programming Language shifted to a six-month release schedule in September 2017. Since then, the pace of innovation and new features has been remarkably rapid and robust. Java has benefited immensely from this enhanced release cadence while maintaining reverse compatibility—a process where features are introduced over time with input from their Java user community. Oracle Cloud ERP operates on this quarterly release schedule, dividing its customer base into three groups. Lessons learned from implementing upgrades in Group A during the first month can be applied to Group B in the second month and then to Group C in the third month of the quarter. People, Ideas & Objects is committed to following the same release schedule when the Preliminary Specification is launched.

The broader implication of these developments raises an important question: Has Oracle eliminated the legacy ERP system? Will future ERP systems evolve continuously to meet business needs over time, eliminating the need for periodic evaluations every decade to determine the best path forward for the firm? Oracle's actions—iterative developments over quarterly periods and feature-rich enhancements focused on generating business value—address such questions. These initiatives align fully with what People, Ideas & Objects aims to provide to North American oil & gas producers through the establishment of our user community as one of our three competitive advantages and a permanent software development capability.

By adopting Oracle's innovative approach and integrating it with the Preliminary Specification, we are positioned to deliver unparalleled value and efficiency to the most dynamic, innovative, accountable and profitable oil & gas operations. Our collaboration ensures that producers have access to cutting-edge technology and continuous improvements, enabling them to operate more profitably and adapt swiftly to changing market demands.

The Service Industry as a Partner

An essential component of People, Ideas & Objects' competitive advantage in providing oil & gas producers with the most profitable means of operations—everywhere and always—is achieving lower costs associated with field work for exploration or development. This includes field operations on producing properties covered by a workover or Authorization for Expenditure (AFE).

Oil & gas producers have long complained about the high costs of field operations. I have previously written about the accusations made by producers toward the service industry, discussing how the situation has evolved and what needs to be done to correct it. There is a consensus that a more productive environment needs to be developed between the service industry and producers. I have placed the onus on producers to initiate the process of building capabilities for a more dynamic and innovative service industry. This is the position of People, Ideas & Objects at the time of the original publication of the Preliminary Specification in August 2012, and remains so today.

However, since that time, we have observed the opposite outcome: producer officers and directors have seemingly sought to destroy the service industry—an industry upon which they are mutually dependent. If their actions were motivated by any other reason, it is difficult to imagine what that might have been, given the comprehensive and extensive damage inflicted.

Currently, operational field capacity has fallen to below 30% of its previous levels, and no efforts are being made to address this decline. The faith, trust, and goodwill that the service industry once had with producers have evaporated, making them reluctant to offer their services to oil & gas producers. Much of this issue stems from the attitudes of producer officers and directors toward the oil & gas industry as a primary industry.

Despite the significant damage inflicted on the broader oil & gas economy, revenues from the primary industry continue to some extent, ensuring that officers and directors remain compensated. Any declines in commodity prices—subject to price-maker economic principles—are within the producers' management domain to handle. However, when substantial declines occur, the financial repercussions are passed on to the service industry. This has led to a consistent pattern where the service industry becomes the scapegoat for the consequences of producers' actions or inactions, as illustrated by the following examples:

• Drastic Reduction in Field Activities: Producers initiate damage by scaling back field activity levels to as little as 25% of their previous levels.

• Exploitation through Demanded Discounts: Recognizing the service industry's instinct for survival, producers exploited them by demanding 50% discounts. As a result, field operators saw their revenues reduced to as little as 12.5% of prior levels.

• Extended Payment Terms without Prior Notice: When producers lacked capital sources, they effectively used the service industry to fund their field activities by paying them on an 18-month accounts payable basis. Changes in payment policies were communicated only after the work was completed.

• Liquidation of Assets for Survival: Financially desperate due to the long-term impacts of producers' actions, the service industry was forced to sell equipment like horsepower units and even dismantle equipment for scrap metal to survive financially. This led to a significant reduction in the industry's capacity.

• Loss of Skilled Field Staff: Field staff, frustrated by the producers' boom/bust mentality, have been displaced for years and have sought more stable employment elsewhere.

• Negative Impact on Producers' Functionality: Limited capacity from a diminished service industry is neither innovative, dynamic, nor beneficial for producer firms. It poses a serious detriment to their ability to function effectively.

In any era, it is crucial to recognize that the service industry provides producers with the geographical and technical diversity needed to operate anywhere in North America. Producers must acknowledge this fact. As of 2023, the destruction of the service industry's capacities and capabilities is comprehensive and complete. Furthermore, the capital structures of the service industry are unsupported due to the treatment they’ve received.

Therefore, producers will need to intentionally rebuild the service industry, essentially through philanthropic contributions. They broke the industry; they must rebuild it, as no one else will volunteer for such expected sacrifice and risky capital investment. The belief is that if producers have a stake in the service industry, they might respect it more and reconsider before repeating past destructive actions. This rebuilding process will commence by developing the Preliminary Specification and implementing its changes to initiate the necessary overall industrial revitalization.

Within the Resource Marketplace and Research & Capabilities modules, there are various interfaces that provide access to the service industry. These collaborative interfaces are designed to address a systemic issue throughout the oil & gas sector: the manner in which producers handle ideas developed by others. Producers often ignore these ideas or use them without respecting the rightful owners, which is counterproductive to their own best interests.

After decades of such behavior, individuals and companies have come to understand that investing time and effort to develop new ideas is not worthwhile because the oil & gas industry tends to share these innovations with competitors without proper recognition or compensation. Consequently, innovators are no longer willing to sacrifice their capital or invest the time and effort necessary to develop new ideas. As a result, no new ideas are entering the service industry at a critical time when the need for advancements in oil & gas science are becoming paramount.

By fostering a more collaborative and respectful relationship with the service industry, producers can help rebuild trust and encourage innovation. Implementing the changes outlined in the Preliminary Specification is a necessary step toward revitalizing the industry and ensuring that it remains dynamic, innovative, and profitable—everywhere and always.

It's important to acknowledge that innovation in the oil & gas sector is largely driven by the service industry. Advancements such as horizontal drilling with coiled tubing providers and fracking for shale wells—initially developed by companies like Packers Plus—endured long periods of lack of support and respect from producers before gaining acceptance. While officers and directors often claim to be innovative, we must question this assertion: Would an innovative industry have only six prosperous years out of the past 38? Or is "muddling through," as they have consistently claimed, their true strategy?

Adding to this problem, producers are unwilling to hire anyone for field operations who doesn't meet a certain size and scope deemed "capable" of handling the job. This means all the business goes to larger firms in the service industry, stifling new competition and hindering the development of fresh ideas. Is it any wonder that producers complain about the costs associated with field operations? In 2023, the producers' "deer in the headlights" look speaks volumes. The prevailing sentiment in the service industry is that since producers broke it, they should fix it. Even if new investment returns to the service industry, it won't be for at least a decade. The capital structures of these firms have been damaged far more severely than those of oil & gas producers. It will be incumbent upon producers to rebuild this industry—upon which they are wholly dependent—brick by brick, using their own resources to restore the capabilities and capacities they so carelessly destroyed.

Enterprise Resource Planning (ERP) system providers have faced similar treatment from producers over the past decades, although this occurred earlier. This mistreatment can be attributed to the increased financial accountability that ERP software imposes on the actions of officers and directors. When ERP software defines and supports organizational processes, unaccountable methods employed by today's oil & gas officers and directors are reflected in the ERP systems they use. The lack of activity in this ERP market since Oracle's exit in 2000 and IBM's in 2005, coinciding with the industry's financial decline and associated personal compensation benefits to these officers and directors, is unlikely to be a mere coincidence.

As of early 2023, several producers are actively implementing ERP systems. However, the ability for producers to enact meaningful change has been thoroughly tested over the past decades while People, Ideas & Objects has been developing and promoting the Preliminary Specification. Producers seem incapable of recognizing issues even in the face of devastating destruction. Their plans and objectives remain unchanged, lacking an understanding of why a producer needs to earn profits or how to achieve them—concepts foreign due to an overriding culture that will dictate any future ERP system developments. Details about what these "new" systems will entail would be interesting to review if they existed. Don't even ask about a value proposition. With each producer independently developing ERP systems simply because it's "the thing to do," the overall costs across the industry will be unnecessary. After many decades of these producers' antics, they expect yet another chance to get it right without accepting any responsibility for their past highly destructive actions.

For People, Ideas & Objects to claim that we provide the most profitable means of oil & gas operations, we must demonstrate that the costs associated with field operations would be lower in an environment where the Preliminary Specification is implemented. Gaining respect from oil & gas producers for the ideas of others in the service industries is all that's required to transform the current situation into a dynamic and innovative service industry—apart from funding the rebuilding costs, which is a separate issue.

The Preliminary Specification includes various interfaces and modules dedicated to initiating, sponsoring, and supporting ideas. These are essential for fostering innovation in both the oil & gas and service industries. When drilling a well in a shale formation can cost $10 to $15 million, the opportunities for innovation are significant. Today, however, no one is motivated to pursue them because producers do not respect the ownership of ideas. As a result, everyone just collects their paycheck and moves on. The oil & gas industry is reaping what it has sown.

Professor Giovanni Dosi notes that investments in innovation are driven by the pursuit of profits. This reasoning applies here: innovation can reduce the time, effort, and costs of field operations by finding better methods in a competitive environment. Dosi states in "Sources, Procedures and Microeconomic Effects of Innovation":

In the most general terms, private profit-seeking agents will plausibly allocate resources to the exploration and development of new products and new techniques of production if they know, or believe in, the existence of some sort of yet unexploited scientific and technical opportunities; if they expect that there will be a market for their new products and processes; and finally, if they expect some economic benefit, net of the incurred costs, deriving from the innovations. (p. 1120)

Producers need to create a profitable environment for the service industry. As the primary industry receiving 100% of the proceeds from oil & gas, they must understand that a share of those proceeds is earned by secondary industries like the service sector, upon which they are wholly dependent. Treating the service industry like parasites and cutting their funding during downturns does not foster the partnership necessary for producers to continue receiving all revenues.

Establishing a profitable oil & gas industry—everywhere and always—would greatly help stabilize the revenues of both the service industry and the producers themselves, eliminating the boom-and-bust mentality that shouldn't exist in a modern 21st-century industry. This stability would enable better staffing and development strategies. Without the service industry sharing in the success of a dynamic, innovative, accountable, and profitable oil & gas industry, neither sector can stand alone successfully in the 21st century without the other.

Innovation for Profits

An essential component of our competitive advantage in providing dynamic, innovative, accountable, and profitable oil & gas operations—everywhere and always—is our focus on innovation as a means to enhance profitability. Emphasizing innovation for profit, particularly from a scientific standpoint, is the successful and necessary perspective for 21st-century oil & gas producers. As Professor Giovanni Dosi suggests, private enterprises are likely to invest in exploring and developing new products and production techniques if they believe untapped scientific and technical opportunities exist, anticipate a market for their innovations, and expect economic benefits that outweigh the costs.

People, Ideas & Objects Preliminary Specification is designed to capture the "what," "how," and "why" of innovation within the ERP software we are developing for forward-thinking producers. Throughout the modules, we have researched and incorporated principles of innovation as one of the seven Organizational Constructs in this ERP system. Our research draws significantly from Professor Dosi's seminal paper, "The Sources, Procedures, and Microeconomic Effects of Innovation" (1988), where we learned fundamental aspects necessary for oil & gas producers to focus on innovation. In our Preliminary Research Report (2004), we established that innovation can be distilled into a defined and replicable process. If such a process is not supported by the organization, we must question why oil & gas producers are not as innovative as companies like Tesla, NVIDIA, and Apple consistently are.

While we define these processes within the Preliminary Specification—which outlines and supports the producer organization, Joint Operating Committee, and service industry—it does not guarantee that all users of the software will become innovative. There will inevitably be leaders and laggards. Currently, it's challenging to assess which producer firms in North America have effectively and commercially exploited scientific and engineering advancements, as financial statements often homogenize performance, reflecting only the size of the producer without clear indicators of innovation or success.

Highlighting some of Professor Dosi's key points on innovation, he discusses the sources of innovation opportunities and the role of markets in allocating resources for exploring these opportunities.

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation. p. 1121.

and

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between:

Capabilities and stimuli generated with each firm and within the industry of which they compete.

Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc. p. 1121.

Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.) p. 1121.

Reviewing these factors reveals an opportunity to build an innovative framework within the oil & gas industry that defines and supports its advancement. Adopting People, Ideas & Objects perspective, which advocates for creative destruction and rebuilding the industry on a profitable, innovative foundation, is the approach we champion. The processes of innovation are embedded within the very DNA of the Preliminary Specification. Our software, user community, and service providers are designed to identify and support these processes, thereby enhancing the innovativeness and profitability of oil & gas producers.

Expecting the current industry culture to make these necessary changes and seize this innovative opportunity has proven impossible by 2024. Although producers have previously claimed to be innovative, they have relied on questionable strategies such as "building balance sheets" and "putting cash in the ground" as their primary approaches. Since the publication of the Preliminary Specification in August 2012, we have observed no significant changes in any aspect of the industry.

The Preliminary Specification introduces two major, high-level innovation processes that build upon the innovative foundation we are creating. This foundation, supported by our defined ERP software development capabilities and our user community at People, Ideas & Objects, includes numerous other processes and will serve as the source of many more in the future.

These two major processes collaborate to manage innovation within producer organizations. By separating these processes from regular operations where they can be isolated, tested, developed, and determined the makeup of a successful implementation. Recognizing that few innovations succeed on the first attempt, this approach allows methods to be refined before rolling them out to relevant parts of the organization. This strategy reduces the costs associated with everyone in the organization conducting repetitive, uncoordinated experiments each year, thereby preserving organizational knowledge and learning.

Our approach ensures that science and technology are appropriately applied, and if further research is necessary, it is undertaken methodically. Controlling this process is fundamental to rapidly developing producers based on well-conceived concepts, rather than relying on press releases that merely claim innovativeness. The second major process of innovation involves a more ad-hoc approach that reduces the formality and constraints of the first process. What can clearly be seen as a necessity. From our second prominent research source, Professor Richard Langlois paper “Innovation Process and Industrial Districts."

While it is possible to conceive of a firm that is so hermetic in its use of knowledge that all stages of innovation, including the combination of old and new knowledge, rely exclusively on internal sources, in practice most innovations involving products or processes of even modest complexity entail combining knowledge that derives, directly or indirectly, from several sources. Knowledge generation, therefore, must be accompanied by effective mechanisms for knowledge diffusion and for "indigenizing" knowledge originally developed in other contexts and for other purposes so that it meets a new need. p. 1.

It is incumbent upon the industry at large to pursue serendipity, spontaneity, and creative destruction throughout the oil & gas sector and its service industries. Working groups managed through our Work Order system are integral to this process. In the second innovation process outlined in the Preliminary Specification, opportunities arise that necessitate a defined compliance and governance framework to ensure proper authority is exercised. This ensures that any promising innovations can be developed through the first, controlled process toward successful implementation.

Within the firm, further direction is available to conclude whether experiments have been successfully documented and are ready for wider deployment. Alternatively, if experiments have failed or been abandoned, they are documented as part of the firm's knowledge base to prevent redundant efforts and to build upon prior attempts when revisiting theories.

Where will innovative oil & gas producers focus their energies? Naturally, on their inventory of shut-in properties. Here, they have the opportunity to increase reserves, reduce costs, or enhance deliverability—ultimately returning properties to profitable production. This serves as a strong incentive for dynamic, innovative, accountable, and profitable oil & gas producers to pursue innovation.

People, Ideas & Objects et al’s Value Proposition

What if ERP software in oil & gas was no longer seen as an overhead cost but as the business opportunity it is? Which is the perspective that oil & gas producers need to adopt to move their organizations on to a higher performance trajectory. There will be no further development of any organization in any industry without software, and most particularly ERP software, defining and supporting an organization's capability to improve its performance. Otherwise we will continue to have the paradox in oil & gas where only the status quo is satisfied with the status quo. Therefore, only the status quo will ever be delivered at the tragic costs which oil & gas has realized.

People, Ideas & Objects Revenue Model provides for the lowest cost of an ERP system in the industry. Distributing software development costs across the industry based on the producer's production profile, plus an element of profit as our fee structure. The industry will only pay for the one-time costs of ERP software development. A fundamentally more efficient value proposition than our competitors. Or each producer incurring costs individually. Our user community will implement Cloud Administration & Accounting for Oil & Gas software and services in their service provider organizations. Expanding on the substantial cost savings and associated benefits of the cloud computing paradigm. 

Where the substantial fixed costs of building administrative and accounting capabilities and capacities within each and every producer organization are seen as a redundant, unshared, unshareable and costly exercise. One in which we believe a producer's overall overhead costs are their secondary reason for the lack of profitability. Turning these non-competitive attributes of the producer firms into the variable overhead costs of People, Ideas & Objects, our user communities and their service provider organizations, who manage a specific process and bill the Joint Operating Committee directly. Turning administrative and accounting capabilities, capacities and costs variable, based on profitability. Overhead of the producer firm and Joint Operating Committees will therefore only be incurred during profitable production, which the Preliminary Specification makes profitable, everywhere and always. 

Our Cloud Administration & Accounting for Oil & Gas software and service provides these services to all sectors of the oil & gas industry. From this morning's startup to Exxon and Shell. All producers need production discipline when the commodity produced is subject to price maker characteristics. Having the service providers provide our software and their services to all producers so that they can function at the same administrative and accounting capacity and capability. Through this standard and objective means across North America, all producers can interact more effectively. Reducing the heavy and disproportionate burden of overhead that startup and small producers have to carry to maintain the capabilities to function in oil & gas would allow all producers to compete based on their engineering and geological expertise.

People, Ideas & Objects provide this as we are not focused on traditional software company concerns. As a cloud computing, administration and accounting provider we are oriented and focused on the changing business of dynamic, innovative, accountable and profitable oil & gas, and the associated service industries. This highlights the different motivations of the software developer over the long term. In the People, Ideas & Objects case, we are providing permanent software development capabilities. We generate industry wide, shared revenues based on industry changes producers communicate through our user community. Our motivation is based on continuous improvement of the software. 

In the traditional software vendor’s case they are motivated by their code and customer base. The larger their code base, the more difficult it is to change, which coincidentally does not generate revenue. And the larger the customer base the more costly the changes to each customer. Coincidentally, these changes to customer software do not generate revenues.This paradoxically leads to an increased overhead burden due to their age and size as a product and firm. Traditional software developers have a contrast and conflict in the dynamic nature of the software itself in terms of its cost to the industry and developer motivation. In addition People, Ideas & Objects uses Oracle Cloud ERP which is the first Java-based ERP system. Therefore People, Ideas & Objects will be the first object oriented ERP system available in the North American oil & gas industry. Providing additional cost benefits over traditional procedural programming languages.

It’s not enough to own the oil & gas assets. Without access to ERP software in the form of the Preliminary Specification there is abundant evidence now that North American oil & gas assets will never be profitable. Regardless of the price of the commodity the officers and directors have failed to act in anyone's interest other than their own. Chronic overproduction continues with evidence in early 2023 of natural gas prices well below $2.00. The level of destruction they’ve authored is unequaled in business history. We should note that this occurred while our alternative was offered to mitigate these damages. The faith, trust and goodwill built in prior generations has been destroyed and the industry remains in the hands of those who operate in such bad faith? 

Now that there’s money on the table in the form of higher oil prices, actions need to be taken to deal with these individuals and their past destructive actions. We witnessed the foolish abandonment of oil & gas by officers and directors. Where they stated that shale would never be commercial and moved into clean energy. This trend is now reversed, what changed their minds? Why would they now act against what they stated were their 2021 and 2022 investors' demands? The disingenuousness of these people's allegations of their investors' clean energy demands is captured in this flip-flop alone. The fact is investors want profits everywhere and always. That is all and will reward those who perform. Making up specious stories while they took oil & gas revenues with them, without authority, was the final straw. With management of this quality it's fair to ask what’s in store for 2024 and 2025? At best we can hope for continued non-performance.

Innovation and profitability have been the focus of People, Ideas & Objects since the beginning of this initiative to resolve oil & gas issues. A result of accounting anomalies caused by the 1970s SEC changes and deliberate misinterpretation by the producer officers and directors. For example, the ceiling test is the SEC’s outer limit of acceptability, not a target to be achieved annually. Where subsequent cultural changes throughout oil & gas led to such ridiculous notions as “building balance sheets'' and “putting cash in the ground.” The fault lies with the officers and directors as we’ve identified since People, Ideas & Objects restarted in August 2003. CEOs, CFOs, COOs, Directors and other officers are responsible. They control the resources necessary to deal with the issue. They have had the authority to do so and have avoided responsibility and accountability for their actions. They’ve run out of excuses, blaming others and viable scapegoats. They may not have run out, but what they say is seen as such. 

A brief example of their record to clarify their culpability. Each of these specific events is generally known and can be easily verified. 

• Investors suspended support for producers' capital structures in 2015 due to poor performance. Producers have not raised further capital since. 

• Investors define specifically what they expect to see in terms of changes and these include the producer's use of a Tier 1 ERP provider. Of which Oracle Cloud ERP is the global leader in. Accountability being the issue. Investors list does not include clean energy.

• Banks then began scaling back lines of credit and debt. Property sales provided cash for some capital programs until the collapse of property market values. Property market values were reestablished during “consolidation” when shares were exchanged at prior inflated property values, not the market values producers created by overselling.

• Officers and directors argued that the Preliminary Specification could not be implemented in 2017. Unworkable due to "shutting in any oil & gas production would damage the formations.” 

• Producers began using the service industry to fund their capital programs by extending accounts payable policies for up to 18 months. This resulted in breaking the faith, trust or goodwill in the service industry. Subsequently SLB and Haliburton announced they were exiting North America. In the past producers would never work with anyone of limited size or scale. Creating for themselves an additional impediment today when nothing is offered.

• On July 4, 2019 People, Ideas & Objects published our White Paper "Profitable North American Energy Independence -- Through the Commercialization of Shale". Receiving broad exposure and distribution.

• Our White Paper was rejected by the producers who had done nothing about their organizations after many years of investors' demands for action. 

• Within nine months of the producer's rejection of our White Paper, oil prices reached negative $40 range and they were forced to shut-in production. 25% of global production was shut-in due to COVID. 

• Upon resuming global production no producer reported any damage caused from being shut-in.

• Once oil prices recovered, officers and directors declared that shale would never be commercial. 

• In 2021 they announced they were beginning the transition of their organization towards the clean energy industry. 

• Late 2022 / 2023 producers began renouncing clean energy as non-viable. Returning to their previously declared uncommercial shale frontier. 

• Through their visionary leadership, officers and directors have determined that consolidation will generate profitability. By concentrating power into fewer hands, they are countering the organizational efficiencies of the Internet, disintermediation, and decentralization—factors that have provided businesses and consumers with greater value across all industries.

In late 2023, People, Ideas & Objects began publishing what we identified as the producers' most significant calamity to date. It was realized that some officers and directors may have been unaware of basic terms like "free on board" and "netback pricing," leading to a loss of control over the developing global liquefied natural gas (LNG) market in both the short and long term.

Producers were selling their natural gas at the Henry Hub price, while other purchasers would buy the gas, invest approximately $8.00 to liquefy and ship it to foreign markets, and then realize prices up to 500% higher than their costs. These substantial margins were potentially available to North American producers, but they did not capitalize on them due to a lack of engagement with these rudimentary business practices.

Subsequently, producers upon learning of their mistakes, rushed to secure LNG capacity and managed to obtain some space in projects that were still awaiting regulatory approval, investment, and commercial agreements, with operations beginning as late as 2030. This sudden rush prompted the White House to suspend all further LNG facility approvals, temporarily halting the producers' plans.

Taking this opportunity, we assessed the total value lost in terms of natural gas prices since the advent of shale gas development. By comparing the actual prices realized to the traditional natural gas pricing based on a 6:1 ratio to oil prices, we noted that the value of these revenue and profit losses from 2000 to 2023 totaled $4.1 trillion. The revenues actually realized amounted to $3.2 trillion. Additionally, the cost of gas produced and effectively paid for by producers for consumers to burn remains undetermined. (See the graph at the bottom of this page.) When monetary losses of this magnitude occur officers and directors claiming that natural gas is a byproduct is a fallacy. 

We consider this a comprehensive failure that warrants significant attention, especially in light of the transition toward clean energy initiatives that were implemented without full authorization and may not have aligned with shareholders' expectations. On the basis that “shale would never be commercial.” To which we add, “in their hands.”

This is the quality and style of leadership that has and is now responsible for our economies' energy supply. A responsibility they’re unwilling to recognize much like their inability to comprehend the need to earn “real” profits these past four decades.

Profitable Production Rights

People, Ideas & Objects have been presented with a funding paradox since we began. Our software development funding needs to be sourced from the oil & gas industry itself. Otherwise, the industry won’t respect it, or commit to it, and only look for alternatives when the opportunity arises. Only when they have some skin in the game can we begin to rebuild the broader oil & gas economy brick by brick, and stick by stick. In order to achieve this we’ve had to seek out those that have the authority and responsibility to decide which ERP provider to use. The producers, officers and directors. 

In early 2023 we believe for many of the reasons stated above it is the officers and directors that have self selected and proven beyond any doubt that they are incapable of effective management. Therefore we have developed an alternative means of generating People, Ideas & Objects revenues which indirectly involves oil & gas production profitability and commercial operations.

Profitable Production Rights and Flexible Profitable Production Rights allow participants to participate in both the oil & gas and Information Technology industries simultaneously. Based on the value propositions identified in this Preamble and available through development of the Preliminary Specification, leveraging these to their benefit. The rights holder gets exclusive access to Cloud Administration & Accounting for Oil & Gas software and services. This facility is built from the proceeds of Profitable Production Rights. People, Ideas & Objects have claimed that it’s not enough to own the oil & gas asset, it’s also necessary to have access to the software that makes the oil & gas asset profitable. As of today we believe the Preliminary Specification and the Cloud Administration & Accounting for Oil & Gas software and service is the only way a producer can operate profitably. Therefore without a Profitable Production License there will be no other means to access these services to process one barrel of oil equivalent production. Oil & gas producers will need to acquire or license one Profitable Production Right for each barrel produced. These rights are detailed in their own section of the Preliminary Specification wiki.

Our User Community 

People, Ideas & Objects cannot adequately express our commitment to user community-based software development. It is the only method of developing quality software. We began developing our user community in 2014 and have been active since that time. It was in 2014s first quarter that we established three fundamental principles that grant them the power and control to undertake the role they need to fill. A role in which they need to assert the means and methods of the dynamic, innovative, accountable and profitable oil & gas producer, industry and service industry must be rebuilt successfully. Without this they’ll only be “blind sleepwalking agents of whomever feeds them.” Our three principles are as follows. (Review of our November 2024 and early 2025 White Papers roughly entitled “Our User Communities Performance Policies,” “Hyper Specializations Impacts and Consequences for Our User Communities Service Provider Organizations” and “How Do Elon Musk's Organizations Consistently Outperform Peers on Every Performance Criteria” reflect the communities current state of affairs.) 

• Only our user community is licensed to make changes and prepare derivative works to any underlying Intellectual Property of the Preliminary Specification. Producer input can therefore be focused and filtered through them.

• People, Ideas & Objects licensed developers can look only to our user community members for input. Our developers are blind, deaf and dumb towards everyone else.

• Our user community members have their own budget. They are independent business people. Not "blind sleepwalking agents of whomever feeds them."

Producers today employ formidable cultural methods and will stand against any attempt to replace them. Even if they could be convinced it would be in their long-term interests to proceed with these developments they would enforce compromises that would delay and obstruct. Most importantly they’d dilute the effectiveness of what is needed to resolve industry issues. In terms of delay, the time necessary would be double to triple the time we would incur in a direct rebuild. At that point what would we have accomplished? 

Our user community members are compensated for their time spent developing the Preliminary Specification software. This compensation is detailed in this wiki under “User Community.” It is their Intellectual Property that People, Ideas & Objects are purchasing from them. Once that IP is aggregated as one holistic industry wide basis of understanding it is then in turn, through our license agreement available throughout our user community to use as they need. Furthermore, this eliminates any IP trolls that might otherwise attempt to establish their credentials with Preliminary Specification-based or derivative IP. 

Our user community is licensed to own and operate a service provider organization that will manage one of the individual processes on behalf of the entire North American producer population. As the owner of a service provider our user community members will be able to see, hands on, the issues and opportunities involved in their process. They will have the People, Ideas & Objects software development team available to develop solutions based on the members' needs. 

Conclusion

Accountability Avoidance

In the past five to ten years, People, Ideas & Objects has come to understand why we have been unsuccessful in delivering our value proposition to the oil & gas market. It has become evident that our market failure in February 1997, Oracle's exit from the market in 2000, and IBM's departure in 2005 are indicative of a broader issue within the industry. Specifically, there appears to be a reluctance among some officers and directors of oil & gas producers to fully embrace accountability for their actions. This reluctance has led to the maintenance of outdated accounting systems that may obscure operational activities.

We want to clarify that we do not hold our competitors responsible for this situation. Often operating with limited budgets and tasked with maintaining aging systems, they have performed admirably under challenging circumstances. Their choices were constrained, leaving them to either work within these limitations or risk becoming obsolete.

The same holds true for professionals involved in accounting and administration within the oil & gas sector. They are dedicated individuals striving to do their best with what we estimate to be only 35–40% of the necessary budget. Officers and directors are aware that the quality of output reflects the level of investment, and it seems that insufficient funding may contribute to a lack of transparency in certain organizational activities.

We must ask ourselves: if these officers and directors were more transparent in their activities, how might the industry's trajectory have differed? Would investors have felt betrayed and withdrawn their support in 2015? The service industry has suffered significantly due to what could be characterized as reckless or indifferent treatment, leading to a diminished capacity and willingness to participate. Many careers have been adversely affected, and shale—once considered one of the greatest endowments of value—has not realized its full potential and is often viewed retrospectively as uncommercial or an unprofitable venture.

These challenges appear to stem from a desire to avoid accountability. Over generations, business models have shifted—from skepticism about the commercial viability of shale to a focus on clean energy, and now to consolidation. In each case, there seems to be a pattern of not fully addressing significant failures or remediating them and consolidating power in ways that may impede future transparency.

Throughout this period, organizations like People, Ideas & Objects, along with companies like Oracle and IBM, recognized the industry's need for improved ERP systems. Despite our efforts and those of our peers, the industry has not adopted these solutions. In hindsight, emphasizing accountability as a key feature may not have aligned us with the prevailing attitudes within the industry at the time.

People, Ideas & Objects, along with our user community and their service provider organizations, have outlined a viable and profitable vision for rebuilding the oil & gas economy in North America. We are acutely aware of the challenges that have occurred and anticipate further developments in the coming years. Unfortunately, producer firms are facing significant difficulties, and it appears these outcomes may, in part, be a result of decisions made at the leadership level.

Oil & Gas’ Future

In conclusion to the Preamble, we discussed the costs and consequences of the officers' and directors' actions over these past decades. Their mismanagement has resulted in six detrimental and consequential outcomes. How much have these outcomes cost over the past few decades? Is it futile to cry over spilled milk from the past? Do these instances constitute "sunk costs" or “opportunity costs?” No organization should ever consider “sunk costs” in their decision making. The assumption is that these events will never happen again and are one-off events. If this were the case I would agree that the Preliminary Specification would be unnecessary and overkill. What we have however are a handful of issues that have culturally manifested themselves into existential issues that have drained the industry of any and all value and are challenging its viability in continuing to deliver to its customers. A customer with no alternatives which lives in the most sophisticated society known to man and depends on oil & gas to function. 

Overproduction continues, low natural gas prices in the $2.00 range are not discussed by those responsible because they are not seen as a problem. What is the cost? If North America was producing natural gas on October 1, 2024 and selling it at $2.67 we may assume that was an unprofitable price. However I don’t think we know what the costs are. It certainly isn’t profitable when most capital costs of a capital intensive industry are only used to build bigger balance sheets. These are not just opportunity costs, they are the difference between a profitable operation, everywhere and always. In direct comparison to the damage and destruction we've seen in the greater oil & gas economy throughout North America.

If the actual costs of natural gas are approximately $10.00 per unit, as People, Ideas & Objects believes, then the current loss of $7.33 incurred on each unit would need to be recovered to maintain the reserves' lifetime profitability. This poses a significant challenge because achieving 10% profitability at a price of $11.00 per unit would require producing and selling 7.33 units of gas just to offset the losses being incurred today.

During 2023 People, Ideas & Objects calculated the differential in terms of the natural gas price realized against the price of oil on the traditional 6:1 heating value basis to the prices realized. The factor expanded to at times as high as 50:1. These results were quantified as 764 TCF of shale gas produced unprofitably. Resulting in the loss of industry revenues and profitability of $4.1 trillion. Industry realized $3.2 trillion in that period and we ask what were the producers' costs of financing their customers' purchases of their product. (See graph at bottom.)

To remedy these repeated commodity price collapses and chronically depressed prices in both oil & gas. Our Preliminary Specification includes the decentralized production model and price maker strategy. And the contrast in 2023 could not be more dramatic. OPEC+ on April 3, 2023 announced a more than one million barrels per day production cut, approximately 1% of global supply. And oil prices responded with a 6% price increase. These are classic economic definitions of price maker characteristics for products without substitutes. Our solution has been resisted by officers and directors for almost 15 years. It should be clear that foreign producers will be involved in what’s in their long-term interests. This is profitable operations everywhere and always, as we suggest and provide to North American producers. 

Action is Demanded

Producer officers and directors hold a fiduciary responsibility to their shareholders to act in good faith and with the reasonable care expected of responsible individuals, ensuring that their decisions serve the best interests of the corporation and its shareholders. However, several factors suggest that this responsibility has not been fully met:

• Inaction on Industry Challenges: There has been a lack of decisive action to address the issues and opportunities present in the North American oil & gas industry over the past decades. A systemic policy of "muddling through" has been adopted instead of implementing effective solutions.

• Unaddressed Shareholder Demands: Shareholders' calls for improved performance have not been adequately addressed. This inaction has led some investors to suspend their participation nearly a decade ago—a situation that underscores the need for responsive leadership.

• Resistance to Remedial Solutions: Potential solutions like the Preliminary Specification have been overlooked or dismissed. Despite being aware of this alternative since at least August 2012, there has been a tendency to spread skepticism about its viability rather than engaging constructively.

• Impact on the Service Industry: The capacities and capabilities of the service sector have diminished, potentially jeopardizing the continent's energy independence. This decline highlights the consequences of not supporting vital industry segments.

• Underutilization of Shale Resources: The immense value of shale-based oil & gas resources has not been fully realized, representing a significant opportunity cost for the industry and its stakeholders.

Recent research from the Fraser Institute indicates that the economies of Alberta and Texas have not performed as expected since 2010. Out of sixty states and provinces, Alberta ranked as the 13th best performer in 2010 but fell to 51st in 2022. Incomes for Albertans actually decreased by CA$1,525 (2017 dollars) over the twelve-year period. Source

Additional concerns include:

• Challenges in Maintaining Production Volumes: Producers are struggling to maintain production levels. Internal work-in-progress inventories of drilling capacities and capabilities have been reduced over the past decade due to attrition and layoffs.

• Chronic Underperformance: Decades of competitive underperformance without sufficient shareholder support suggest that many enterprises are not achieving their commercial objectives.

• Decline in U.S. Shale Gas Production: U.S. shale gas appears to be entering a decline. People, Ideas & Objects estimates that approximately 3,000 rigs are needed to halt the decline and resume increasing production, whereas current service industry capacity is about 587 rigs.

• Erosion of Trust and Goodwill: Ongoing challenges have led to diminished opportunity, motivation, trust, faith, and goodwill within the industry. Meeting demands will be difficult.

As John Stuart Mill wrote in “On Liberty”:

A person may cause evil to others not only by his actions but by his inaction, and in either case he is justly accountable to them for their injury.