Reconstructing Oil & Gas:
Enabling Engineers and Geologists
to be
This Century's Pioneers and Lead the Industry's Future
Empowering Dynamic, Innovative, Accountable and Profitable Producers Through People, Ideas & Objects
By
Paul Cox
People, Ideas & Objects
paul.cox@people-ideas-objects.com
X @piobiz
January 20, 2025
Periods of profound economic transformation like the one we’re entering are exceedingly rare. We are transitioning toward new economic models that promise performance trajectories of unprecedented scope and scale. This shift extends beyond technology and bioengineering—affecting every sector of the economy—and will be felt most acutely in North America.
Participation in this new environment is voluntary, but the pent-up energy poised to emerge is unlike anything we’ve ever witnessed. As historian Victor Davis Hanson notes, progress is not linear but cyclical. In oil & gas, our initial task is to organize ourselves—a prerequisite for any ambitious effort. Yet, in the 21st century, the very nature of organization must differ significantly from past models. People, Ideas & Objects have proven that current producer officers and directors can not and will not ever change. That “organizations don’t change, people do” is now tested as a theory and implemented in oil & gas.
Serendipity, spontaneous order, and creative destruction of earlier eras have diminished. The frameworks that once fueled economic growth have been stifled by software, which tends to preserve existing conditions in metaphorical concrete. This effect is particularly strong in ERP software, which often conveniently and comfortably cements the status quo. This inertia has benefited a small, self-interested group in oil & gas for decades. Going forward, we must ensure that ERP software supports continuous, iterative change in response to market demands. That principle is at the core of People, Ideas & Objects, our user community and their service provider organizations through our Preliminary Specification, delivered via our Cloud Administration & Accounting for Oil & Gas software and service.
The oil & gas industry has a legacy of pioneers who overcame formidable challenges to accomplish the seemingly impossible. That spirit of innovation and resilience can—and must—be rekindled. New leadership must rebuild the industry around the business model defined by our Preliminary Specification, ensuring producers achieve dynamic, innovative, accountable, and profitable operations everywhere and always. They must also re-engage with the investment community through a steadfast commitment to rebuilding the industry culture to preserve the resource, profitability and performance.
People, Ideas & Objects have repeatedly stated the industry's collective present value is negative. It consumes cash in order to function. Cash was provided by investors who were never told they were the “mark” in the room. When an industry is collectively worth a negative value, there is no better time to put your efforts in. However, what People, Ideas & Objects et al offer is only the “business side” of the oil & gas equation—an element that has been missing in the past. Equally important are the new business models that engineers and geologists will develop to create new oil & gas value and advance the industry’s scientific frontier. How will the next generation of producers generate profits by combining their unique land & asset bases and their earth science & engineering capacities & capabilities, and what we identify as the third source of their competitive advantage, Intellectual Property? In this new economy, success depends on what you can contribute, not whom you know. Controversial @ARKinvest CEO @CathieDWood believes innovations valuation will grow at 40% per year from $13 trillion today to $200 trillion by 2030.
An economic surge is sweeping across the United States, bringing an endless array of opportunities and complexities—perhaps greater than any previous era. Rising domestic energy needs call for a new generation of producers who embody a pioneering spirit. Yet much of the industry’s current leadership seems oblivious, lacking vision, a coherent plan, and even basic awareness of the issues at hand. Instead, they cling to the dismal comfort of “muddling through.”
Signs of declining natural gas deliverability may well reflect the consequences of leaders stepping away from oil & gas to chase unrelated “clean energy” pursuits. Such unauthorized abdication of responsibility could ultimately drive prices higher than necessary. It’s unlikely that those who have caused extensive damage to date—leading to further difficulties—will be left in control to be rewarded financially for such negligence and misrepresentation. Opportunities for a disintermediated oil & gas industry have never been greater.
Today’s two white papers present People, Ideas & Objects leadership strategy for delivering the administrative, accounting, and operational framework essential to a reimagined oil & gas sector. Our goal is to give North American oil & gas producers the most profitable means of oil & gas operations, everywhere and always.
Over the years, the oil & gas industry has shown us what not to do. Profitability remains the only dependable source of the substantial financial resources that producers need to flourish. It is also the largest stream of funding available to the primary target of this paper, engineers and geologists. Rather than “muddling through,” engineers and geologists must develop more lucrative operational business models—models that will drive profitability and ensure long-term industry viability.
Put simply, to unlock the full potential of North American oil & gas and maintain top-tier quality, engineers and geologists must step up to address industry issues, production deliverability, and profitability. They will be measured by their bottom line in the competitive environment of North American capital markets—standing toe-to-toe with companies like Tesla, Apple, and NVIDIA. Their success will help North America sustain its position as the world’s foremost economy throughout this century. Today both labor and intelligence are dependent on abundant, reliable, profitable and affordable energy. We already know what doesn’t work; it’s now up to engineers and geologists to leverage challenging conditions and abundant opportunities to shape the industry according to their vision—and ultimately, earn real profits. The only source of real value.
People, Ideas & Objects’ Preliminary Specification, together with our user community and their service providers, offers a standardized and objective framework for engineers and geologists to measure their performance. In this context, quality—reflected in competitive results, profitability, accountability, and integrity—is the ultimate benchmark for industry leadership success.
This paper explores how the Preliminary Specification’s 14 modules, 3 markets and 7 Organizational Constructs will be applied. These elements enable our decentralized production model, the core driver of our value proposition. We outline additional tangible and intangible benefits of our approach. And, we emphasize that the Preliminary Specification is built on Oracle Cloud ERP—a Tier 1 ERP solution from Oracle.
After reading this paper, engineers and geologists should ask themselves: Have People, Ideas & Objects captured a system, community, and methodology that empowers them to participate in rebuilding North American oil & gas? Where participation is defined as leading a new oil & gas producer with these tools and communities? And through active participation and interaction with People, Ideas & Objects user community. Ensures they’ll continue with the support, capabilities and capacities to provide the objective and standard business perspective necessary to compete in the North American capital markets? Where profitability earns not only integrity with investors, but independence for the producer to pursue its goals.
If the answer to that question is yes, then the next step is clear: Read, then ask, what are we waiting for.
People, Ideas & Objects are developing Enterprise Resource Planning (ERP) software tailored to the unique needs of the oil & gas industry. At their core, these systems involve accounting and administrative functions used across a firm. In our view, due to factors extending beyond our competitors’ efforts, the oil & gas sector has been poorly served by existing ERP solutions. This shortfall is particularly evident among engineers and geologists, many of whom remain unaware of the value that effective ERP systems can bring to their work. This gap in understanding is reflected in several pressing industry challenges: a lack of investor support, the significant decline of service industry capacities and capabilities, and concerns around oil & gas deliverability in North America.
We assert that if engineers and geologists had been equipped with appropriate business information and decision-making tools—focusing on genuine profitability—many of these issues could have been avoided. Profit is the sole source of real value. A profitable industry would not be grappling with such fundamental problems as oil & gas is today.
Our overall hypothesis stems from the introduction of computers in the 1960s. At that time, the question was how these new machines could best be utilized. Accounting emerged as the most logical starting point, followed by tax, regulatory, and SEC requirements. Soon, the corporation’s focus shifted toward the “business of the corporation” itself. Meanwhile, operations were left with only basic financial information about their properties, creating a division within oil & gas firms: one side handled corporate matters, while the other dealt with operational activities. Over time, this division has grown so vast that neither side can effectively communicate or understand the other.
To address this issue, People, Ideas & Objects employs the Joint Operating Committee as the key Organizational Construct within the Preliminary Specification—one of seven Organizational Constructs, which also include specialization and the division of labor, sharing of non-rival costs, markets, Intellectual Property, innovation, and Information Technology. Together, these constructs form a culture of resource preservation, performance and profitability that equips industry participants with the tools required to ensure that producers become dynamic, innovative, accountable, and profitable.
As these issues within the oil & gas sector have matured, we are now turning our attention to engineers and geologists. These professionals understand what needs to be done over the next 25 years: ensuring and maintaining profitable energy independence for North America. At People, Ideas & Objects, we view this not as an option, but as a necessity—a critical pillar of North America’s political and economic strength for the rest of this century. This perspective reflects the scope and urgency of the challenges confronting the oil & gas industry.
If engineers and geologists are being called upon to confront today’s challenges, it’s clear that the current North American oil & gas framework—shaped by decades of mismanagement—is woefully inadequate. Officers and directors have squandered one of the greatest endowments of wealth, shale, over two decades, leaving behind an industry in disarray. Their leadership, uncertain about shale’s commercial viability and alternating between fleeting commitments to clean energy and shale development, has failed to offer any meaningful vision. Instead, they continue to “muddle through,” resisting any decisive changes that are urgently needed.
People, Ideas & Objects are augmenting our marketing efforts to reach engineers and geologists directly. Through the Preliminary Specification, our user community and their service provider organizations, we aim to demonstrate the business opportunities available to these professionals and show them what their work will look like when our system is fully operational. Will their future be bogged down in outdated accounting practices and rigid oversight, or will accounting and administration function as valuable resources that help clarify what’s financially viable and what’s not? Our goal is to enable meaningful leadership participation from both operations and business perspectives—allowing oil & gas to finally compete effectively in the dynamic North American capital markets.
People, Ideas & Objects’ marketing strategy is straightforward: sever the remaining ties between the current, ineffective officers and directors and the core expertise of the industry. We recognize that past leadership has been at the root of the industry’s problems. We anticipate a transition to new leadership built upon the vision of the Preliminary Specification, leaving behind the remnants of these “consolidated” producers. Our user community is essential in developing and supporting the ERP software grounded in this vision, but the involvement of engineers and geologists is equally crucial. They must now define their needs and identify the financial information required to thrive as key stakeholders in a reimagined and reconstructed oil & gas sector—one in which they lead and work alongside our user community, who hold the power to enact organizational change, based on the vision contained within the Preliminary Specification.
We expect that the rebuilt North American oil & gas industry will coalesce around new producers emerging from today’s pool of engineers and geologists. This is the opportunity to shape a dynamic, innovative, accountable and profitable future—one that acknowledges the past but is no longer hindered by it or any constraint.
The issue of leadership in the oil & gas industry compels us to examine the current competitive landscape. Today’s North American oil & gas sector has reached a point where it has drained its value across the entire continent. When investor cash was flowing in, producers could maintain the illusion of viability. Without that investor support, it’s clear that previously built value has been consumed—along with all the capital from subsequent investors. Over the past four decades, producers never made a profit. In the last decade, they turned on the service industry, destroying its value. As a result, North American oil & gas reserves, which require capital to produce, now lack both the capabilities to be exploited and any path to profitability. This is the state of the industry’s competitiveness in 2024—no different from the preceding four decades. The difference now is that the tide has gone out, revealing that everyone’s been “swimming naked.”
Leadership has failed spectacularly. Running a business into the ground at the scale seen in today’s oil & gas industry takes a certain kind of talent. The façade persists because oil & gas, as a capital-intensive industry, generates just enough cash flow to keep the gears turning—nothing more. Turning this situation around demands new thinking and new methods. Continuing as before will only replicate the dismal performance we see now.
Other industries demonstrate how business model innovation can eliminate old, entrenched players. Startups become innovators who approach an industry with a clean slate. They carry no legacy baggage, only a commitment to a newly devised business model focused on value creation.
In oil & gas, a recent example of business model innovation can be seen in the LNG sector. Some entrepreneurs noticed producers were selling natural gas at Henry Hub prices, which was then liquefied and shipped overseas to markets paying up to $50.00. While producers watched natural gas prices deteriorate dramatically—from a 6:1 oil-to-gas price ratio in 2009 to as low as 50:1 in early 2024—these private LNG exporters built a simple, contract-driven business around global LNG arbitrage and amassed over $90 billion in value in just a few years. The producers, meanwhile, remained oblivious, investing in massive LNG infrastructure projects without recognizing the immediate opportunity.
Sabel and his partner are majority owners of the privately held company, which JP Morgan Chase credit analysts in July estimated was worth around $90 billion at the time.
A potential near-term scenario may see existing producer firms resorting to desperate measures—frequent divestitures, property swaps, and similar transactions—that appear erratic and uncontrolled. Ironically, those who end up holding the net gain in oil & gas assets may actually be the losers. The values assigned to these transactions, rooted in the cash flow value of the reserves rather than their true earning potential, will be unsustainable. Without the ability to manage these assets profitably investors will remain disinterested. The losers will then be forced to offload their holdings at subsequent fire-sale prices, while the “smart money,” whomever that may be, departs with profits reaped from selling properties at peak valuations.
At this point, a significant opening emerges for startup and small producers—an opportunity we will likely look back on as one of the industry’s greatest turning points. If the rebuilt sector can manage assets according to investor expectations, fully aligned with the competitive standards of the North American capital markets, these smaller producers can thrive.
Why is this opportunity arising? One key factor is that many engineers and geologists, seeing far better prospects in the revitalized industry, will leave their current employers, exacerbating acute staffing shortages within the old guard producers. Demand for their expertise can be met through new contractual arrangements, benefiting the agile startup and small producers ready to enter the market.
A new approach to the industry challenges and opportunities is of interest to the investment community. However, on the condition that the past failures have been effectively dealt with and a reliable and tangible integrity has been reestablished in oil & gas. Establishing integrity with investors will hinge on the following:
The ability to compete on earnings within North American capital markets.
Demonstrating a commitment to accountability and performance through a new organizational model that incorporates the Preliminary Specification.
Employing new, innovative business models aimed at generating genuine profitability.
Assembling a team—supported by a suitable structure and organization—dedicated to this new approach and based on a unique business model of how the producer earns profit.
As the reader may now appreciate, oil & gas has long been a wasteland of futile inactivity and destruction. The officers and directors who held the authority, responsibility and resources to change course failed to do so, dismissing the Preliminary Specification and refusing to invest in their own firm’s profitability. This occurred during a period when investors were withholding funds due to a lack of earnings, accountability, and transparency.
A Kingdom that has once been destroyed can never come again into being.
Sun Tzu
For example, in new business development conventional production may be the source of added value. An overlooked area believed to be exhausted may be purchased and rehabilitated quickly and cheaply. Innovatively returning production deliverability at very low cost in a world where commodity prices are defined by the high costs of production of heavy oil and shale.
Despite this past mismanagement, the North American oil & gas sector is not doomed to inefficiency and loss. Shale has been neglected: managed effectively it will drive the economy forward. It remains a primary industry capable of generating competitive earnings in the North American capital markets. The industry’s troubled legacy and failed strategies can now serve as resources—lessons from past mistakes, undervalued properties waiting for new owners, and consulting opportunities drawn from the remnants of old business ideas.
In the 21st century, Intellectual Property is a critical element of any firm’s competitive advantage. People, Ideas & Objects has emphasized that owning the oil & gas asset alone is no longer sufficient; one must also have access to the ERP software that makes the asset profitable. The Preliminary Specification provides the foundational Intellectual Property and business model that sets us apart. Each new producer will need to cultivate their own revised business model, securing the rights to operate it and ensuring no one else can claim those earnings. Whether that is a new AI algorithm or method is the beginning. For startups and small producers, establishing Intellectual Property ownership, a new business model and integrating them into their strategic approach is essential.
“Muddle through” has been the default policy for four decades, buoyed by the sheer scale of oil & gas revenues. Yet these revenues will pale in comparison to what must be earned in the future to remain competitive. Productivity must rapidly advance, alongside clear recognition that revenues represent more than just the producers’ contribution. The service industry and all vendors cannot be sacrificed with every minor downturn. They are an integral extension of the producer firm. The first order of business should be to eliminate the boom/bust cycle and stabilize the sector. Achieving this is among the core objectives of the Preliminary Specification.
This paper presents our perspective on what the oil & gas sector must do to thrive during what is unquestionably the most challenging period in its history. Overcoming these difficulties will require ingenuity, dedication, and the collective efforts of all stakeholders. It demands new organizational models, methods, and technologies—underpinned by the Internet rather than the traditional, hierarchical structures that have failed so clearly. Future leaders in oil & gas will need robust accounting, systems, and administrative support. These will be provided through the Preliminary Specification, our user community and their service provider organizations—all delivered via our Cloud Administration & Accounting for Oil & Gas software and services. This suite is essential for enabling tomorrow’s leadership to guide the industry forward and re-enter North American capital markets profitably and successfully. Investors withdrew because of a lack of profitability, transparency, and accountability; embracing People, Ideas & Objects is the first step toward restoring the industry's integrity and credibility.
Just as the music industry was revolutionized through disintermediation—offering consumers improved choices—the oil & gas sector will undergo a similar transformation through the implementation of the Preliminary Specification. Our user community brings deep administrative and accounting expertise, and our developers excel in ERP systems development. What we now require is the involvement of engineers and geologists, ensuring the industry is rebuilt around their needs, vision and revised business models. Together, we can restore the industry's integrity and meet the demands of this monumental task.
We stand at the dawn of a new era, one charged with entrepreneurial “animal spirits” unleashed by shifting political and economic forces. This new environment is far more dynamic and innovative than anything previously imagined. It falls to the future leaders of the oil & gas industry—its engineers and geologists—to adopt the Preliminary Specification, make it their own, and embrace the accountability and profitability it ensures. By doing so, they will demonstrate that the past failures of consolidated officers and directors were merely an anomaly, and that oil & gas can, once again, become the robust, investor-friendly industry it was always meant to be.
North American oil & gas is confronting its greatest challenge yet. The responsibility for addressing it now falls to the engineers and geologists who recognize that overcoming these difficulties is critical. They must form a new oil & gas industry, taking the reins from “muddle through” officers and directors. Their task will be rebuilding exploration, development, operational, and service industry capacities and capabilities—mending the damage caused by leaders who, despite having the authority, responsibility, and resources, did nothing for decades.
This is a leadership issue. Who will revive the legacy and fortitude of the industry’s past builders and pioneers to tackle the immense obstacles we face? North American consumers need affordable and profitably produced oil & gas—independently sourced, reliable, secure, supported by a resilient and financially healthy industry. For anyone questioning why profitability is so important to the vision of People, Ideas & Objects and oil & gas, consider the past 40 years of financial underperformance: a time in which shale was neglected, misused, squandered, and effectively destroyed. It is now time to manage our most vital resource with economic discipline. Steve Jobs instilled in Apple that profitability was a necessity. Apple doesn’t seek to provide 90% of the smart phones, only to earn 90% of the industry's profits. Profits are the means in which to keep Apple in the business.
It’s important to clarify how People, Ideas & Objects views profitability and why it’s so significant for oil & gas. We see unprofitable production as synonymous with overproduction. Regardless of energy independence goals, all production must be profitable. Even when production volumes are down, operators may continue with unprofitable production. This overproduction has repeatedly triggered collapses in commodity prices, long-term price depressions, and even negative pricing over the past four decades, dating back to the original, overproduction related July 1986 oil price collapse.
In markets where products exhibit Price Maker characteristics, profitability represents the only financial resource robust enough to handle the consequences facing oil & gas and to support a far-reaching industry rebuild.
The first step in establishing a revitalized oil & gas industry would be securing financing. Yet, overturning every stone yields little more than a few dimes. Investors have stepped back, demanding just one thing: profits—no more, no less. The industry’s competitive structure is weak, having been built around a never-ending cycle of investor money pouring in and lavish spending out, decade after decade. But spending is not a competitive advantage. If all production is brought online and officers and directors claim every well is profitable—thanks to specious accounting—then those controlling the spending will seem “successful.” Yet the real measure of success is sustainable, “real” profitability.
Engineers and geologists often presume they determine a project’s profitability. While that’s partly true, it must occur within a commercial environment. What was competitive yesterday might not be tomorrow—that isn’t a reason to abandon efforts and chase the next trendy basin. Instead, accurate, factual, and historical financial performance data should guide decisions about keeping properties profitable. With effective financial tools, innovative steps can be analysed to determine if they’ll deliver the financial gains producers need. No assumptions and no more guessing. Such information has long been lacking for various reasons discussed throughout this paper. People, Ideas & Objects firmly believes that no oil & gas should be produced in North America unless it meets a “real” profitability threshold—one that aligns with capital market expectations for performance across industries.
The producer with the lowest balance of property, plant and equipment (PP&E) would reflect the most competitive stance. A smaller PP&E balance indicates capital costs have been retired through prudent management and extensive profitability. Financial statements should measure performance—not emulate value. Under the SEC rules established in the late 1970s, oil & gas’ culture pivoted toward using financial statements to represent value, presumably in alignment with a producer’s reserves. Yet a fundamental principle of accounting is that an organization’s performance is measured within its financial statements.
The ceiling test—imposed by the SEC—ensures that historical asset values do not exceed actual reserves value, keeping producers connected to commercial viability. In principle, a producer failing to develop or market hydrocarbons effectively would fail the test. However, the industry has treated the ceiling test not as a limit, but as a target to be met annually, leading to distorted financial performance metrics. And a competitive chase to the bottom.
The industry stands at a crossroads. Engineers and geologists—the future leadership—must assert a new mandate of profitability, accountability, and transparency. They must adopt the business-side considerations that People, Ideas & Objects highlights, ensuring each decision aligns with genuine profit generation. By grounding their work in real financial performance, the next iteration of oil & gas leadership can restore investor confidence, rebuild a more durable industry, and uphold North America’s energy security for generations to come. Money or value can only be generated through profitability, governments and investors only reallocate it to meet their needs.
There was never a genuine competitive framework for producers to measure their own performance. Glance at any producer’s quarterly statements and—aside from the occasional ceiling test admission that invested capital is unrecoverable—producers seldom report losses. When oil prices decline from $100 to $30, costs inexplicably “adjust,” allowing producers to then claim profitability at $80, $60, $50, or even $35. Yet capital expenditures are fixed; real costs do not behave that way. The bulk of historical asset costs (often over 90% of the firms) have already been spent, and these quoted replacement “recycle” costs are simply what “might occur today.” Try to discern which producer excels or fails from their financial statements, and you’ll find only homogenized, incoherent data that obscures performance.
Investors are insisting these poor accounting and financial reporting practices stop. Before they invest again, they want reliable numbers and leadership they can trust. After an entire decade's time we are not moving in that direction. A solid demonstration of genuine profitability—championed by leaders committed to transparency—is the only long-term path to generating the funds necessary and to winning back investor confidence.
Another matter was the unauthorized shift to clean energy undertaken by many producer officers and directors. Although most have walked back or denied these pursuits, this unilateral use of shareholder funds for unrelated industries is, in the eyes of investors, a profound violation of trust. Investors are unwilling to allow the same individuals to remain in charge, only to repeat this behavior. For decades producers used clean energy competitiveness as the reason oil & gas prices needed to be low. So that solar and wind never gained any competitive footing. What changed? And on whose authority were these decisions made?
In truth, there will never be an adequate amount of investor money to solve today’s oil & gas challenges. Profits remain the sole reliable and abundant source of financial resources: if oil & gas would become genuinely profitable, they will generate all the capital the industry needs. Profits are the only form of value creation. Profits are large enough to sustain and revitalize a primary industry on the scale of oil & gas. Achieving this is the responsibility of new industry leadership. People, Ideas & Objects offers the only viable solution through our Preliminary Specification, our user community and service provider organizations—via Cloud Administration & Accounting for Oil & Gas built on Oracle Cloud ERP, a Tier 1 ERP platform. Committing to such an undertaking would send a clear message to investors that the new leadership is serious about accurate, competitive, and transparent financial reporting.
Furthermore, investors are not babysitters. Prove to them that real profits can be generated, and two outcomes will follow:
They will invest more than is prudent to accept.
Profitability will fund operations, sparing producer insiders and their investors from chronic equity dilution.
Over the long term, profitability is what will drive North American oil & gas for the remainder of this century, as it is the only capital source significant enough to meet the industry’s challenges.
People, Ideas & Objects explains in the “Decentralized Production Model” section of this paper how Cloud Administration & Accounting for Oil & Gas can ensure all production is profitable. It paints a vision of a reorganized industry driven by dynamic, innovative, accountable, and profitable operations. Sharing a credible strategy—free from the failures of the past—can entice investors. Not instantly, but showing sustained commitment to building and adhering to a profitable model will draw them back. Reclaiming integrity will be a hard fought battle.
Current officers and directors have lost all credibility with investors; no one trusts or believes them anymore. While they cling to “muddle through,” given enough time… the market remains unconvinced. A leadership vacuum exists—one with extraordinary and consequential impacts on our economy and way of life. Oil & gas investors understand the business; they see the opportunities and want to participate. Their “animal spirits” are reawakened too, but they will not engage with existing producers or leadership—save for a few rare exceptions.
How can new industry leadership in oil & gas convince investors that they are fully committed to dynamic, innovative, accountable, and profitable operations—where the preservation of reserves, performance, and profitability define their organizational culture? The options are limited, yet include:
Spend the next 25 years demonstrating to investors, through consistent and exceptional financial results, that they’ve been reformed.
Build and implement People, Ideas & Objects’ user community and service provider organizations’ Cloud Administration & Accounting for Oil & Gas software and service. In doing so, rebuild the industry under new leadership and establish profitable organizations from the outset.
Why would option (2) satisfy investors that change is genuine? Another way of asking this is: Why focus on investors at all? What difference does their support make for a producer or the industry as a whole? How does having investors back the capital structures of oil & gas producers affect outcomes, and should their involvement be a concern?
The next four graphs are marked with three vertical lines in the years 2015, 2018, and 2020. Each date represents a critical juncture where events should have prompted action by officers and directors: (Please see Appendix I for these graphs.)
2015: Investors withdrew their support industry-wide.
2018: The service industry realized producers were not paying on a reasonable schedule.
2020: The onset of COVID-19 and its global impact on the economy and energy markets.
Which of these events had the greatest influence on the industry’s current state?
The first graph highlights global and U.S. capital expenditures, illustrating the substantial cost escalation ushered in by shale development in the 21st century. It also shows the dramatic downturns in 2015, 2018, and 2020. Additionally, consider the mid-1980s, when capital expenditures were supported by natural gas prices equivalent to $10.00 today. At that time, performance showed investors what was achievable. Now, investors see such historical anomalies and question the quality of current producers’ earnings.
See Graph 1 “Field of Restraint” in Appendix I
The EIA graph below illustrates how these key dates influenced the reduction of U.S. drilling activity. People, Ideas & Objects suggests that the most detrimental factor affecting a producer’s activity level is whether investors actively support their capital structure. This notion is partially confirmed by the decline in activity during the 2008 financial crisis.
Regarding the service industry, an 80% drop in producer activity triggers a corresponding revenue collapse. Faced with significant overcapacity, service providers are forced to accept steep discounts of 50% or more on their day rates—potentially translating to a 90% reduction in their revenues at times. Adding a global pandemic into the mix only exacerbates the situation, leaving the service industry—whose customers have long failed to pay on time—to struggle for survival. This led to drastic measures, such as cannibalizing equipment for parts. Attrition continuously reduces fleet numbers, with even basic maintenance seen as wasted money. Then today, the service industry must endure an “industrial rationalization” prompted by producer consolidations.
Producers should consider how they would respond if a similar scenario played out in their own world, absent the steady stream of oil & gas revenues. Would they be willing to reinvest in rebuilding a recently constructed rig that was cut up for scrap, only to face challenging conditions imposed by customers who fail to appreciate their role in the success of producer operations?
If I were a producer, I wouldn’t wait much longer to let the service industry reflect on this alone. Perhaps producers, having broken the system, should now take the initiative to fix it.
See Appendix I for Graph 2 EIA’s Rig Count
The third graph supports my broader thesis of how we reached our current predicament. In the late 1970s, the SEC mandated Full Cost Accounting for all oil & gas producers listed on U.S. exchanges. This accounting standard fostered a cultural shift, making “spending” the only competitive advantage of North American producers. Overcapitalizing property, plant, and equipment in oil & gas artificially inflates reported profitability. This inflated profitability attracts excessive investor interest, leading to overinvestment. Ultimately, overinvestment results in overproduction of commodities that function under the economic dynamics of “price makers.”
In 1986, global overproduction of oil triggered a significant price collapse—a devastating downturn that persisted until the early 2000s. During the 1990s, the service industry introduced coiled tubing and spherical packers, innovations that producers cautiously but eventually applied to shale formations, igniting a second wave of industry development.
Today, we are confronted with a level of damage to North American oil & gas that is critically dangerous to our economy, politics, and overall prosperity. The consequences are severe, and the path forward demands careful consideration and transformative change.
See Graph 3 in Appendix 1 “U.S. worker in oil & gas extraction.”
In a capital-intensive industry, one would expect that products predominantly reflect capital costs. Ideally, these costs would be passed on to consumers in a timely and accurate manner, aligned with the reasonable returns that capital markets demand. However, in the oil & gas sector, capital is often stored on balance sheets for decades, artificially emulating a producer’s value. Consumers rarely see these costs, as investors effectively subsidize them on behalf of energy users. The magnitude of this subsidy is clearly documented in the producers’ property, plant, and equipment accounts.
What happens in practice is that producers capitalize most of their overhead expenses. Even routine costs, such as reception services, office supplies, and phone bills—normally considered overhead expenses—are treated as “capital” in oil & gas. Since these are recurring monthly overheads, they should logically be included in the commodity price each month. Instead, they are capitalized and depleted over decades, just like all other capital costs. As a result, the cash needed for overhead each month must come from elsewhere.
This approach has developed to the point where competitiveness was drained from industry. Investors acted as a subsidy and performance was not objective. Capacities and capabilities throughout the North American oil & gas economy are severely diminished which is now contributing to the decline in shale gas deliverability. Not only have production levels plateaued, but some formations are beginning to show reduced output. For the industry’s new leadership, today’s challenge is especially daunting. What level of drilling activity is required to regain the upward trajectory seen from 2015 to 2020? Will 2,000 rigs suffice? And if so, where will they come from, and who will run them?
Training new personnel to drill 10,000-foot wells with 10-mile laterals, and to perform complex, high-pressure fracing operations successfully, is no small feat—especially when those who once possessed such expertise have long since moved on to other industries. Will a high salary lure them back? Or will they wait to see if others are actually getting a second paycheck before committing?
See Graph 4 in Appendix 1 EIA’s “Monthly U.S. dry shale natural gas production by formation.”
The central question remains: which event proved most detrimental in shaping the industry’s current state? In a capital-intensive field like oil & gas, capital availability is the decisive success factor. Without investor support for producers’ capital structures—and amid a cultural inability to generate genuine profits—financial resources erode. This leads to declining industrial capacity, diminishing capabilities, a widespread loss of confidence in leadership, and now falling oil & gas deliverability. Issues and their progress that People, Ideas & Objects identified and resolved in the Preliminary Specification.
Simultaneously, we face economic and political challenges more severe than anything seen in the past three decades. As we enter a global era where energy abundance equates to economic strength, the industry stands diminished, unprepared, and largely unaware of the scope and implications of the damage they’ve done. Producers, incapable of earning authentic profits, lack both the understanding and the cultural framework to achieve profitability. Leadership has been proven to be incapable, but also have abdicated their responsibilities, authority and action to a strategy of “muddle through.”
No oil & gas producer will achieve sustained profitability in a North American basin without adopting the People, Ideas & Objects Preliminary Specification. While oil & gas is fundamentally a science-based industry, it is not a mere science project. Commercial considerations are indispensable. For too long, the industry has operated under the mistaken belief that scientific advancement alone is enough, neglecting the critical role of sound business practices in delivering profitable results.
Professionals in these scientific domains must acknowledge that business concerns are paramount to effective decision-making. The success of scientific endeavors ultimately depends on their alignment with robust business models that emphasize profitability and efficiency. Without this integration, both scientific progress and the business opportunities it creates will continue to erode, leading to stagnation and decline.
Under current leadership and traditional models, the industry has failed on all fronts, resulting in widespread inefficiencies, financial, capacity and capabilities losses. This is a call for a fundamental transformation in how the sector operates. To reverse the downward trajectory, the oil & gas industry must be rebuilt on a foundation that seamlessly blends scientific expertise with strategic business acumen. The Preliminary Specification of People, Ideas & Objects provides the essential framework for this transformation. Offering a blueprint that aligns scientific innovation with business objectives, it enables producers to become more dynamic, innovative, accountable, and profitable.
Embracing this specification is not optional—it is essential for any producer striving to thrive in today’s challenging economic environment. It enhances decision-making, optimizes resource utilization, and cultivates a culture where scientific and business excellence go hand in hand.
In conclusion, the path to profitability and sustainability in the North American oil & gas industry lies in recognizing that it is a science-based business requiring disciplined business strategies. Adopting the People, Ideas & Objects Preliminary Specification is a critical step toward achieving this aim, ensuring not only the industry’s survival but its prosperity in the years ahead.
How are People, Ideas & Objects able to claim profitability everywhere and always? How could accounting be capable of turning a property profitable? It probably isn’t accounting, more putting the oil & gas operation into a business context. Something that has been missing from the industry for several decades for a variety of reasons that are not material to the discussion here. Cost control is a necessary element of any and all businesses. However, it is not a business model and it should not be used to the detriment of the secondary and tertiary industries. More needs to be done from the point of view of managing the enterprise to ensure that it may continue profitably and productively into the future.
People, Ideas & Objects decentralized production model is one of the more material aspects of how we ensure that all oil & gas in North America is produced profitably, everywhere and always. Within it we have our “price maker” strategy that follows the price maker economic principle. Definitions of Price Maker and Price Taker from Investopedia.
A price maker is an entity that has the power to influence the price it charges because the good it produces does not have perfect substitutes.
Price makers are usually monopolies or producers of goods or services that differ in some way from their competition.
The price maker will increase output only if its marginal revenue is greater than its marginal cost.
Price makers can essentially keep prices artificially high without worrying about price competition from another provider.
Conversely,
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.
Due to market competition, most producers are also price takers.
Unlike price takers, price makers are those with enough market and pricing power to dictate prices.
People, Ideas & Objects interpretation of these economic principles and why the price maker strategy is valid. Oil & gas are unique commodities without substitutes.
Elon Musk can not use a hydro dam for his rockets.
Wind energy is a poor lubricant for a vehicle's crankcase.
Solar chemistry is in its infancy.
Internal combustion engines are inefficient on wood or coal, etc.
Under the price maker definition another attribute that should be considered is the incremental barrel produced. The effect of small changes in production have a material impact on price. Overproduction has been chronic and systemic in North America for over four decades. Leading to chronically depressed, collapsed and at times negative prices. Such as the first oil price crash in 1986. Production discipline does not exist and everything is produced in an attempt to “make it up on volume.” People, Ideas & Objects define overproduction as unprofitable production. Oil & gas producers are businesses, why would they be systematically producing unprofitable products?
It may be argued they were reported as profitable throughout the past four decades. However, were they? When the SEC dictated the use of Full Cost Accounting and its associated Ceiling Test in the late 1970s. It defined the outer limit of what a producer could report as their property, plant and equipment accounts value. Stating it could not exceed the reserves value of the producer. Since that time, producers have learned to capitalize most costs in order to “build balance sheets” and “put cash in the ground” as their corporate objectives. These are distortions of the SEC requirements and turn the property, plant and equipment account into what is best described as “the unrealized capital costs of past production.” A profitable producer would have retired their property, plant and equipment account as evidence of their profitability and innovativeness. Capital intensive industries would inherently contain large components of capital in the costs that are passed to the consumers. This has not happened in oil & gas.
When capital costs are not recognized on a timely and accurate basis, or are over reported, they have an equal amount of overreported profitability. That profitability attracts excess interest from investors and overinvestment in the capacity of the industry leads ultimately to overproduction or unprofitable production. The amount of overproduction incurred by officers and directors of the producer firms today is tragic. We see the impact of overproduction when OPEC+ removes 1% of the world's oil production and the price responds by increasing 6%. The inverse is the response as well. So why would this policy be adopted by the new oil & gas producers in North America?
The Preliminary Specification will provide actual, factual and detailed financial statements based on the performance criteria of the capital markets. These are prepared monthly for each Joint Operating Committee and are detailed with depletion calculations and actual overhead. If a property should fall into a situation where it is unprofitable. The Joint Operating Committee, the operational decision making framework of the industry, will take the detailed, actual, factual accounting information, considering a property's unique makeup, into their decision of whether or not to shut-in the property or continue production. The logic behind our price maker strategy 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 and establishing production discipline.
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 real cost of the volume of energy produced today.
Production Discipline: Using profitability as the criteria for production discipline is the only fair and reasonable method.
Innovation as a Foundation: Higher commodity prices finance greater innovative activity. Providing the financial resources to fund future approaches to industry challenges.
It's important to note that the Preliminary Specification's service providers will offer standard and objective methods of accounting and process management that considers a property's unique makeup. 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 our user communities service providers. Producers will know that the property they’re about to shut-in was evaluated based on the same standard and objective method of all other North American properties evaluations, considering those property's unique makeup.
Today’s oil & gas producers are unable to produce the type of financial statements needed to support a more dynamic, innovative, accountable and profitable operating model. Their accounting systems are configured to uphold a high-throughput production approach, where substantial overhead costs are offset by maximizing production volumes. This reliance on continual full production is the primary reason the industry’s methods have remained unchanged since the July 1986 oil price collapse. Proving that any attempt to retrofit the current, outdated model to address today’s challenges is simply not feasible.
The treatment of overhead is critical to our argument. When a property is shut-in, it results in a null operation—no profit is earned, but no loss is incurred either. By using the Preliminary Specification, along with our user community and their service providers through the Cloud Administration & Accounting for Oil & Gas software and services, all overheads become variable based on profitable production, actual and replace the overhead allowances used today. This configuration creates a unique situation for the producer firm.
Consider a generic cloud computing account that remains unused for six months—what is the cost? The same principle applies when a property is shut-in under the Preliminary Specification's price maker strategy. People, Ideas & Objects, through the development of the Cloud Administration & Accounting for Oil & Gas software and services, have converted all producer and Joint Operating Committee costs into variable costs—variable based on profitable production. Including overhead. Therefore, any shut-in production incurs a null operation. A producer can scale up and down their production profile and remain profitable at any level.
In addition to sharing the costs of infrastructure, capacities, and capabilities of accounting and administration for oil & gas under one industry-standard and objective solution, we achieve significant cost reductions. This is due to eliminating the need for each producer to maintain their own individual Information Technology, accounting, and administrative capacities and capabilities that every other producer in North America redundantly builds today. There are dramatically heightened levels of specialization and division of labor available to our user community service providers, leading to significant productivity enhancements in accounting and administrative roles. This potentially increases the quality of work completed, particularly in supporting the business, while reducing overall overhead costs.
There are a number of specific issues that are addressed in the implementation of the Preliminary Specification for the small and startup oil & gas producers. An area of the industry that otherwise has been considered extinct. Without the startup and small producer firms the industry will not proceed with these challenges in front of them. These firms will be critical in establishing a new culture of preservation of the reserves, performance and profitability. However, the issues that we seek to resolve are:
Reestablish access to capital.
Public producers demand incremental, uncovered overhead of several million dollars per year.
People, Ideas & Objects use Oracle Cloud ERP as the base for our system.
Access to Capital
Access to capital will be a necessity for the industry to meet the challenge that stands before it. Decisions of a number of criteria need to be made constantly in order to rebuild the industry in the appropriate direction. The free market system operates on basic principles and those are what the investors apply effectively. Their participation in a project will determine its outcome more than any other criteria. This will be as long as they are satisfied the investments they make are able to perform competitively in the North American marketplace. The issue in oil & gas overall with respect to capital is the assessment of that performance and accountability have not been adequate. Intelligent capital is available for the seeding of the industry redevelopment. However, there must be a competitive discipline adhered to. Deviation from those principles will have investors apply the type of discipline we’ve seen them administer since 2015. Effective business models of the new producers will drive capital availability.
Overhead of Public Firms
People, Ideas & Objects Preliminary Specification, our user community and service providers are configured to ensure that competitive business discipline is adhered to. The accountability, transparency and reliability of the financial statements published must be of the highest integrity and continue throughout the duration of the organization. Understand that although all of the properties that a producer owns are producing and are legitimately profitable, it does not necessarily mean the producer is profitable too. The demand for new engineering and geological business models must be developed to resolve these. There are many aspects of the business that will need to be addressed. What the Preliminary Specification provides is an objective, standard and accountable implementation of the business principles that have been discussed in this paper and the Preliminary Specification at large. It will be a standard, objective and competitive measurement of what a producer must attain.
Adherence to these principles will therefore be a necessity in order to proceed with any form of capital contribution to the new oil & gas industry. What is stated in terms of the Leadership discussion of this paper will also be necessary.
Performance in terms of the overhead necessary for a public company is an issue. We detailed the overhead and its treatment above. What also needs to be noted is the Modular Description regarding the Work Order. Revenues generated from augmenting other producers and Joint Operating Committees engineering and geologist capacities and capabilities will allow a startup producer to move to a more mature footing before needing to address the capital markets.
Oracle Cloud ERP
Attaining the level of accountability necessary has been a specific request of the investment community. That a tier 1 ERP system be implemented. Oracle and SAP are the two providers of these classes of systems. Oracle Cloud ERP is unquestionably the most comprehensively most capable and therefore difficult business application available. How do we expect to implement that within the oil & gas startup and small producers?
Our user communities service providers are a reallocation of the accounting and administrative resources of the producer firms today. They are the people that are doing the work for the industry. They are familiar with the industry requirements and our user community will be defining what is the new culture of the producers this paper is directed towards. Our user community is directing the development with the producers' assistance and input. They are also part of the Cloud Administration & Accounting for Oil & Gas software and service. Only what accounting and administrative resources that are needed within the month are billed to the producer or Joint Operating Committee by any of the service providers. These costs are variable in nature and are for the costs incurred and charged by each of the service providers based on the engineered software process they manage. If none of the services are incurred, none of the costs are billed. Other than a CFO and a small handful of consultants for tax etc., the extent of accounting and administrative resources necessary at startup or small producers are seen as limited, as will be any sector of the industry.
The capital markets will not return without a proven commitment to transparency, accountability and profitability as a minimum. The Preliminary Specification is that choice for the small and startup producer, as it is with all sectors of the industry. The capital markets want nothing to do with the past. They know and understand oil & gas and want to participate in the challenging future of the industry. However, they will only do so if they see a commitment from engineers and geologists, as has been displayed by People, Ideas & Objects, our user community and service providers, towards a new culture that includes accountability and profitability as foundational elements.
The Detrimental Nature of Losses
Losses on production occur in the oil & gas industry as commonly and casually as the air we breathe. It’s astonishing how readily commodity price declines—whether short-term collapses, prolonged price depressions, or even negative pricing—are accepted without fully considering their implications. By adhering to People, Ideas & Objects’ definition of “real” profitability, consider an example: shale gas might cost $10.00 per MCF (including royalty), yet sell at $3.50 per MCF. That’s a loss of $6.50 per MCF. What would it take to offset such a loss?
From our perspective, these losses represent a material drain on the producer’s cash and, more importantly, a deterioration of the firm’s asset value. The volume of petroleum reserves is relatively fixed, but their financial impact varies dramatically between a $3.50 and an $11.00 environment (the latter equating to cost plus a 10% profit margin). Nonetheless, reserves have been produced at a $6.50 loss which will be reflected ultimately in the capital markets’ assessment of the company. To recover from a $6.50 loss on one MCF produced today, will require 6.5 MCF of the future $11.00 profitable production. Just to break even on the loss of one volume produced today.
This is irrational and unsustainable. While some might argue that natural gas is merely a byproduct of oil production, particularly in areas like the Permian, People, Ideas & Objects has calculated $4.58 trillion in revenue losses (an increase of $480 billion for 2024 alone) in the century thus far, making it clear that this is no mere byproduct. Natural gas management demands urgent attention. Negative pricing magnifies the problem: a producer paying $1.00 per MCF to get rid of production now faces an $11.00 total cost per MCF and an equal loss, requiring 11 MCF of future, profitable production volumes to offset the loss incurred on just one MCF paid for today.
The industry’s prevailing mindset is that today’s losses will be recouped when the next boom inevitably arrives. While there’s no definitive evidence to dispute this assumption, it remains fundamentally irrational. Existing producers must consider whether a future “cash flow nirvana” truly awaits them. If so, will observers on the sidelines tolerate the same officers and directors continuing to oversee the industry, or will this sudden influx of capital become the catalyst for their removal? It’s worth noting that failure rarely prompts legal action—but once substantial money is at stake, the scrutiny, and potential legal consequences all increase dramatically.
In early January 2025 the EIA reported the consequences of officers and directors inaction and inability to manage the business.
In 2024, the U.S. benchmark Henry Hub natural gas spot price averaged $2.21 per million British thermal units (MMBtu), the lowest average annual price in inflation-adjusted dollars ever reported. The annual average Henry Hub natural gas spot price in 2024 decreased by 16% from its 2023 average and 68% from its 2022 average, the largest two-year decline on record. The monthly average Henry Hub spot natural gas price in 2024 ranged from $3.25/MMBtu in January to an all-time low of $1.51/MMBtu in March, reflecting a narrower $1.74/MMBtu range of monthly prices across the year than the average range of $2.32/MMBtu over the prior five years.
The Henry Hub natural gas price set numerous daily and monthly low-price records in 2024. On an inflation-adjusted basis, average monthly prices in February, March, April, and August were the four lowest ever recorded, and the four lowest daily prices ever recorded also occurred during 2024.
Surplus Capacity
Among the most costly forms of overhead is surplus capacity. The expense of maintaining idle capacity severely hampers any firm’s performance, even if the costs don’t show up as direct overhead. They emerge in the burden of carrying capital invested in unproductive assets—costs that surface in reduced returns on investment and capital.
Recognizing these costs—and the fact that maintaining spare capacity under a decentralized production model is essential for sustaining market prices—is crucial. Ensuring stable market prices carries far more weight for the producer’s performance. Yet, the production discipline provided by People, Ideas & Objects’ decentralized production model also encourages heightened capital discipline. Companies must avoid the surplus capacity style of overhead, perhaps by retaining cash and ensuring each capital expenditure is profitable within the fiscal year it’s completed. This approach necessitates a much stricter capital discipline among oil & gas producers, ensuring profitability and long-term sustainability.
It is due to the late 1970s SEC’s implementation of Full Cost and Ceiling Test regulations that People, Ideas & Objects are able to claim our preposterous Value Proposition. It falls within the region of $25.7 to $45.7 trillion over the next 25 years. These are composed of two elements.
Incremental profitability as a result of using the Preliminary Specification generates $5.7 trillion over 25 years.
The application of capital costs is different from the status quo. Providing $20 to $40 trillion in funding, incremental value and most of all cash to the dynamic, innovative, accountable and profitable oil & gas producers.
In terms of proving the $5.7 trillion in incremental profitability. In 2024 People, Ideas & Objects were able to calculate some of the damage realized by producer officers and directors in their administration of the industry this century. We took the natural gas prices realized from 2000 to 2024 compared them to the actual price of oil on a 6:1 basis. Applied the differential to the volume of conventional and unconventional natural gas produced in North America to determine the amount of revenue, and importantly other than royalties the profitability, that was lost as a result of the loss of the standard 6:1 heating value basis of natural gas pricing. The amount of revenue losses since 2007 was $4.6 trillion. This compares to the amount of actual revenues realized of $3.253 trillion for the same period.
It is during 2024 that we saw the price of natural gas extend to as low as 50:1. This is disqualifying of any group of officers and directors. Yet “muddle through” is all we can expect to hear from this leadership. What was particularly dire about the determination of the losses was the reason for them. A chronic and systemic disregard towards the business. For example, in October of 2023 People, Ideas & Objects determined that none of the natural gas sales for LNG export were being made based on the free-on-board price. The point of sale was at the LNG facilities at Henry Hub prices.
What was occurring therefore was “others” and we do not know who. Purchased gas at Henry Hub at 50:1 prices at times. Liquified and shipped it to the Netherlands or Korea / Japan at a cost of around $8.00. Then sold that gas into those markets at prices that at times reached as high as $50.00. What producers were not conducting in their transactions was what should have been understood as basic business. A lack of basic business fundamentals has left the North American producers out of the best opportunity to rehabilitate the natural gas prices through the development of LNG export markets. This isn’t foolish or comical, it is something far worse.
Subsequent to the publication of our results we saw a rash of producers sign contracts with LNG facilities to process their gas and ship it free-on-board to foreign markets in an attempt to realize the high net back prices of foreign markets. However, they found they were locked out of the current facilities contracts. They were also locked out of the LNG facilities under construction. They had to sign for LNG facilities that were unapproved by the regulator and in some cases had not even been approved by the investment group that proposed them. The rush of producers to sign LNG contracts precipitated the then President of the United States to declare that no more LNG approvals would come from his administration.
People, Ideas & Objects felt we may have another opportunity to market the Preliminary Specification to remedy these issues, we began outreach in 2024. However, we encountered the same obstinance and resistance that has become all too familiar within the industry. Although we ceased these activities in August, we now see an opportunity to pursue this work with the inauguration of President Trump and the ensuing economic optimism. It should also be noted that the EIA's report stated that 2024's natural gas price was the lowest ever recorded.
We now have a change in the political leadership in the United States. One that has ignited the animal spirits in the business community and opened an era of what I think may become the most entrepreneurial period in the country's history. Oil & gas will not only benefit as a result of these changes, it is necessary for this entrepreneurial focus to be released and applied to oil & gas in terms of its rebuilding and recovery. Cloud Administration & Accounting for Oil & Gas software and services will be a cornerstone of this reconstruction.
When the standard, objective, detailed and complete financial statements for each Joint Operating Committee are provided. Producers will be able to determine which of their properties are profitable and those that are not. If they should fall into the category of unprofitable production they can then shut that property in and achieve the following benefits of our decentralized production model. The logic behind our method highlights its effectiveness: (I’m repeating the benefits of the decentralized production model from the prior section.)
Maximized Profitability: Producers maximize profits when losses from unprofitable properties no longer dilute the gains from profitable ones. It’s common sense to limit one's losses. Why pour more water into a leaky bucket?
Strategic Reserve Management: Holding reserves until they can be produced profitably means avoiding the 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. Eliminating industries' boom / bust cycle.
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 unprofitable 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 realized market price of oil & gas must reflect the current market’s costs of exploration and development. That is the cost of a replacement volume of energy produced today.
Production Discipline: Using profitability as the criterion for production decisions is the only fair and reasonable method of production discipline.
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. That all production has been assessed on the same basis, considering its unique makeup, and therefore 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.
The decentralized production model supplies the much needed production discipline that generates the financial resources necessary for a prosperous industry. It helps determine the current replacement cost of oil & gas, with economic 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 is variable based on profitable production. If a property is shut in, overhead costs are not incurred and the property incurs a null operation.
Cost Recovery: All overhead costs incurred are recovered in the current period through commodity sales pricing. Cash used for overhead is then returned in the commodity sales.
Indirect Cost Control: Producers gain the ability to indirectly control their overhead expenses. Overhead is a variable cost.
This approach not only enhances profitability but ensures the industry operates sustainably, benefiting both producers and consumers in the long term.
Beyond the tangible aspects of our value proposition, there are several elements that are intangible or even unquantifiable but play a crucial role in enhancing the performance and competitiveness of oil & gas producers. While these are detailed extensively on our wiki, we summarize them here.
Tangible Benefits
The most material component of our Preliminary Specification is the emphasis on profitability through decentralized production. By highlighting the source of profitability inherent in decentralized operations, we provide a concrete and measurable benefit to producers.
Intangible Benefits
A significant area of enhanced value lies in capital management. Our Financial Resource Marketplace is structured to offer improved methods for managing producers' capital. As the pace of business accelerates, the demand for capital and its efficient deployment becomes increasingly critical. The Preliminary Specification seeks to equip producers with the capacity and capabilities to turn over their capital more quickly, necessitating new accounting and administrative approaches and tools.
Unquantifiable Benefits
Since 1767, specialization and division of labor have been the sources of all value generation—a fact that is both unquantifiable and unquestionable. However, modern ERP systems often cement organizations into a state of permanent stasis, satisfying only the status quo. The oil & gas industry needs to leverage specialization and division of labor to enhance its competitive productivity, moving to a higher trajectory to break free from the "muddle through" culture of poor performance.
People, Ideas & Objects and our user community provide a permanent ERP software development capacity and capability. This ensures that the oil & gas industry does not lapse into a period where only the status quo is maintained, allowing for continuous innovation and adaptability.
Building on these principles, we incorporate Professor Paul Romer's theory of Endogenous Technical Change, specifically the sharing of non-rival costs. When applied to the accounting and administrative resources in oil & gas, this approach yields productivity gains beyond those achieved through specialization and division of labor alone.
Establishing Intellectual Property as the foundation of scientific advancement in oil & gas is both a necessity and a legal requirement. Historically, this has not been properly addressed, and it is incorrect to continue this oversight. Without Intellectual Property protection, individuals and organizations cannot be expected to undertake the hard work necessary to solve the industry's challenges, as others might use their hard-earned value without compensation. Intellectual Property rights organize innovation within the industry by clarifying who is doing what, thereby eliminating the "me-too" price competition that undermines initiative and innovation. Intellectual Property will be a foundation of the new oil & gas producers business models in the Preliminary Specification.
Lastly, consider the value of using the Joint Operating Committee throughout the oil & gas organization. By aligning all frameworks within the Joint Operating Committee, we can eliminate the difficulties that arise between the current conflict between business and operational aspects of producers. This alignment allows for a more seamless operation that is in line with the commercial expectations of capital markets, enhancing efficiency and profitability.
By focusing on these tangible, intangible, and unquantifiable benefits, we aim to provide a comprehensive value proposition that supports dynamic, innovative, accountable, and profitable operations within the oil & gas industry.
People, Ideas & Objects, together with Cloud Administration & Accounting for Oil & Gas, offers a new business model for the oil & gas industry—one that addresses its core business functions today and into the foreseeable future. To realize this vision, engineering and geological leaders must step forward, implement the proposed model, and build their own strategies for achieving dynamic, innovative, accountable, and profitable oil & gas operations in a reconstructed industry. As in other disintermediated sectors, engineers and geologists must design a profitable business model understanding that the foundations of accounting and administration will be applied as we have described.
Rebuilding the industry has become imperative. The sector has failed, resists change because it cannot change, and its leadership has little motivation to do so. Current performance standards are deemed unacceptable by investors, and the service industry finds North American producers unappealing. After four decades of cultural decay—caused by the disconnect between business and operational aspects in oil & gas—it’s time to acknowledge the benefits of confronting these failures and optimally reconfiguring the industry.
No one advocates discarding everything outright. However, if existing structures no longer function—and crucial players like investors and the service industry have distanced themselves—continuing with the old framework impedes progress, raises frustration, and jeopardizes our goals. Steve Jobs never asked record store managers about their views on iTunes; we similarly won’t rely on entrenched perspectives that perpetuate the status quo.
From a broader perspective, progress is cyclical, not linear. Entering at the onset of a major industry cycle is when opportunities abound. Having a solid foundation—like that presented here—gives today’s engineers and geologists the chance to act on their ideas and reap corresponding business rewards.
The challenges facing North American oil & gas today are not only unprecedented in scale but also exceptionally complex. How we address these issues will determine not only how effectively we solve them, but who will undertake that work and how they will proceed. The critical question is whether the pursuit of North American energy independence can be achieved in a manner that provides consumers with abundant, profitably produced, affordable, secure, and reliable oil & gas. Or will the industry’s failings continue to undermine the continent’s competitive economic performance? People, Ideas & Objects believes it’s reasonable to pose these questions as we move forward.
What we know intuitively is that the current oil & gas producers are incapable of delivering the needed results. For decades, their organizational methods have generated little to no value and only destruction. They remain locked in old structures, unable or unwilling to confront the difficult questions required for genuine change. One of these vital but ignored topics is Intellectual Property—how it’s developed, managed, implemented, and most importantly, who owns it. Here, Intellectual Property refers specifically to the engineering and geological knowledge critical to the industry. According to U.S. law, while ideas can’t be owned, their expressed form can be copyrighted. The Preliminary Specification’s Intellectual Property construct outlines precisely how it will be integrated into the industry’s future operations.
If we leave the task of addressing today’s challenges to current leadership—those who wasted the immense value of shale resources in just two decades—what outcomes can we realistically expect? Isn’t the first logical step to recognize that we need a better organizational model to address our issues and opportunities? In the modern world, organizations are shaped, supported, and constrained by the ERP software they use. Without evolving that software, the industry cannot become more competitive. The motivations of those who will solve the hardest problems—engineers and geologists who have historically broken through “impossible” barriers—must be considered. They need a structure that recognizes their efforts, encourages innovation, and rewards the fruits of their labor.
A dynamic, innovative, accountable, and profitable oil & gas producer holds several competitive advantages: its land & asset base, its earth science & engineering capacities & capabilities, and, as People, Ideas & Objects emphasizes, the Intellectual Property it develops and owns. Right now, much of the critical engineering and geological knowledge isn’t formally published—it may be recorded somewhere, but it’s never been brought into the public domain through actual publication. This lack of formal ownership has allowed existing producers to freely access that knowledge. However, to solve today’s complex issues, the old norms will no longer suffice.
Addressing industry problems may take years, involve multiple collaborators, and require iterative validation of primary and secondary research. Such work must be published, reviewed, and built upon publicly, building a legacy of Intellectual Property development. The author who publishes gains the copyright and, with it, a legal monopoly on the expression of those ideas. Only when the industry’s scientific and technical knowledge is integrated into a dynamic environment of publicly recognized Intellectual Property will we see the required motivation and effort. If an individual invests years or decades into an innovation that yields commercial value in oil & gas, they are constitutionally entitled to own that Intellectual Property and profit from it. Only under these conditions will today’s and tomorrow’s difficulties be tackled by those with that incentive to do so.
At present, many potential innovators know their efforts would be disregarded by producers who share knowledge indiscriminately, benefiting those who invest nothing. As a result, no progress will be made until the framework provided by the Preliminary Specification’s Resource Marketplace, Research & Capabilities, and Knowledge & Learning modules is implemented. These modules create an environment where oil & gas’s scientific and technological foundation is truly valued, protected, and capable of driving the industry toward a future of genuine, sustainable prosperity. Until then self publishing is available and recommended.
The approach to Intellectual Property in the oil & gas sector applies similarly to the service industry. Historically, when service providers develop an innovation and attempt to commercialize it, they face two unappealing options:
Hold on to their Intellectual Property and risk earning nothing as demand fails to materialize, essentially starving financially.
Release their Intellectual Property without compensation, allowing competitors who contributed nothing to reap the benefits.
As the field capacities and capabilities of oil & gas producers approach a critical low point, the future of the service industry now depends on the producers themselves. Do they truly want a functioning service sector? If so, they must begin respecting the service industry’s Intellectual Property—an imperative detail within the Intellectual Property Organizational Construct of the Preliminary Specification.
One foundational element in rebuilding the service industry lies in recognizing and upholding Intellectual Property rights. These laws are well-established across North America, and as law-abiding market participants, producers must start acknowledging the service industry’s Intellectual Property. Since producers have neither direct monetary nor commercial stakes in these specific areas of innovation, they should sponsor and support the service industry with seed and development funding. They should also back any promising initiatives with whatever resources they can provide. The status-quo producers broke the service industry, they’ll need to fix it.
Within the Preliminary Specification, two key areas create demand for the engineering and geological expertise of startup and small producers. The principle of "learning by doing" generates tacit knowledge that can’t be captured in writing. However, any explicit knowledge recorded by an individual earns them a copyright, which, when combined with complementary service offerings, enables the startup and small producers to establish a second source of revenue through service contracts that deploy their tacit knowledge.
By tapping into our Cloud Administration & Accounting for Oil & Gas—which delivers a comprehensive range of oil & gas capabilities on-demand at low variable costs—these startups can launch with profitable operations from the outset.
Moreover, our Work Order system allows engineers and geologists to be contracted by Joint Operating Committees that need additional technical support. They can be billed and paid directly through this platform. The demand for their expertise arises by eliminating the traditional “operator” designation and replacing it with the “pooling” concept developed by People, Ideas & Objects. This solution addresses the expected shortfall of engineering and geoscience professionals by enabling experts with specific Intellectual Property and tacit knowledge to fill the technical gaps among specialized working interest partners.
For more details on these concepts, please review the corresponding sections of the Preliminary Specification.
Operating a profitable business in the oil & gas industry requires a radically different approach than what has prevailed for decades. Once, cities like Houston stood at the center of the global industry; this is no longer the case. Oil & gas, as a primary industry, sits atop the economic chain, with service and tertiary sectors depending on producers’ revenues. However, producers often view these supporting industries as burdensome—a serious misconception. The professionals in these sectors work tirelessly and are instrumental in generating oil & gas revenues. Without their expertise and effort, such revenues would never materialize, and the service industry would have no way to earn income.
It is time for producers to collaborate and cooperate with those doing the heavy lifting. These partners deserve recognition and respect for their vital contributions. People, Ideas & Objects have spent decades pursuing greater profitability for oil & gas producers, yet we have been met with disregard. Producers must step down from their lofty positions and engage with their partners to address the real challenges at hand. The service industry and vendors are not adversaries, but essential collaborators. After decades of resistance, it is clear that organizations themselves do not change—only the people within them do.
If producers struggle to accept criticism regarding their chronic lack of profits, they must understand why this situation persists. Investors withdrew their support a decade ago, citing similar concerns, and yet officers and directors have taken no meaningful action. This inaction is untenable. In a truly profitable industry, there would be no shortage of capital. Producers would generate more revenue than needed for reinvestment and easily pay dividends to investors. A healthy service industry would nurture stable, financially robust markets, offering a wealth of innovations to help producers meet both current and future needs.
Times have changed in oil & gas, but producers have not. They continue to cling to outdated methods that belong to the last century. We can all see where this is headed. The solution lies in the regeneration of the North American oil & gas sector through the emergence of new producers, guided by a new generation of highly motivated leadership.
The Preliminary Specification developed by People, Ideas & Objects features seven Organizational Constructs that define, support, and constrain producer firms. By embedding these constructs in Cloud Administration & Accounting for Oil & Gas software and services, we enable users to understand the behavior and requirements of both producers and the broader industry. This approach provides professionals with a clear sense of “what,” “how,” and “why” they can leverage People, Ideas & Objects, our user community and their service provider organizations to create value throughout the industry, thereby establishing a culture of preservation, performance, and profitability in a reconfigured oil & gas environment.
In a decentralized setting, transferring operations away from bureaucratic structures should not imply diminished control. ERP software—and increasingly, the Internet—serve as the key means by which organizations can function and achieve performance levels exceeding today’s norms. Our seven Organizational Constructs act both as preservation of the reserves, profitability and performance enablers and control mechanisms, offering new leadership a foundational understanding and culture over their operations.
The first organizational construct in People, Ideas & Objects’ value proposition is the Joint Operating Committee. This serves as the key construct for a dynamic, innovative, accountable, and profitable oil & gas producer, representing the industry’s legal, financial, operational decision-making, cultural, communication, innovation, and strategic framework.
By aligning a producer firm’s compliance and governance frameworks with the Joint Operating Committees seven frameworks producers can significantly boost their organizational speed, innovativeness, and accountability. In keeping with our theme of “what, how, and why,” here are some of the advantages:
Cultural Alignment: Aligning administrative and accounting methods to the exploration, development, and operations use of the Joint Operating Committees cultural principles.
Opportunity for Change: By structuring around the Joint Operating Committee, the industry moves back to a more natural flow of business, driven by the seven frameworks of the Joint Operating Committee.
Enhanced Accountability: Research shows that when compliance and governance align with operational decision-making, accountability follows.
Professor Richard N. Langlois was a major influence on our research for the Preliminary Specification. His work in Industrial Economics and the Economics of Innovation discusses the “rights assignment problem” or the “agency issue,” cited in his working paper, "The Austrian Theory of the Firm: Retrospect and Prospect."
The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). pp. 8 - 9.
Selecting markets for acquiring capacities & capabilities aligns with a producer firm’s competitive advantages, namely its land & asset base, along with the coordination of market-wide earth science & engineering expertise. Given the geographical and technical diversity of producers’ needs, this market-based approach becomes both practical and essential.
Without ERP software designed to ensure profitability everywhere and always, there is no clear way in which to guide today’s society toward profitable outcomes. Serendipity, spontaneous order, and creative destruction have been stifled by enterprise systems that entrench bureaucracies instead of fostering innovation. Any change to an organization’s structure must be reflected in its ERP software; otherwise, the organization will revert to its existing configuration.
People, Ideas & Objects not only provides the Preliminary Specification and user community but also establishes a permanent ERP software development capability—acknowledging that constant adaptation will be a defining characteristic for the oil & gas industry’s future.
Adam Smith’s seminal work, The Wealth of Nations (1776), introduced the concepts of specialization and division of labor as fundamental drivers of economic growth and value creation. His research in a pin factory, where machinery, specialization and division of labor combined to boost productivity by a factor of 240, shows that static ERP systems oppose the very principles of economic development. If oil & gas is to thrive, its organizational models must align with Smith’s insights on specialization and the division of labor—supported by an ERP solution that champions continuous improvement and profitability.
Groundbreaking research appeared in Professor Paul Romer’s 1990 paper, “Endogenous Technical Change,” and was subsequently discussed in a December 2001 Reason Magazine article where Professor Romer summarized his theory as people, ideas, and things. These concepts inspired People, Ideas & Objects—notably because our development process is rooted in object-oriented principles. In 2018, Professor Romer received the Nobel Prize in Economics for what is now known as new growth theory.
New Growth Theory addresses principles akin to the sharing economy, in which cloud computing offers a strikingly lower cost structure compared to traditional alternatives. People, Ideas & Objects applies these ideas to oil & gas operations. For instance, our user community’s service providers will administer a single, industry-wide administrative and accounting process—eliminating the need for every producer to build and maintain largely identical resources. Sharing these capacities across the industry will introduce a level of cost control that current organizational models simply cannot offer. Moreover, these shared resources can further boost efficiency by expanding farther on specialization and division of labor.
Looking ahead, Phase III of our development process will introduce additional enhancements through automation of the standardized business processes we create. This fusion of converting all the producer's costs to variable costs, cloud computing, collective resources, and ongoing automation forms the core of the People, Ideas & Objects approach to revitalizing the oil & gas sector.
Addressing the profound challenges facing oil & gas demands considerable time, cost, and energy. Those who rise to meet these difficulties should be safeguarded by the legal system—yet the industry’s officers and directors have historically treated Intellectual Property as a free-for-all.
The same issues arise within oil & gas engineering, geology, and the service sectors. In the Preliminary Specification, the use of Intellectual Property as an Organizational Construct brings distinct advantages. By publishing and expressing the underlying ideas, the associated hard work is protected under law. Building on existing insights enhances the industry’s collective depth of knowledge, and financial support can be secured using Intellectual Property as leverage.
From both an industry-wide and individual standpoint, this approach delivers high efficiency. By organizing Intellectual Property, it prevents the endless “me-too” pop-up competitors driven only by price, thereby reducing duplication of effort. If someone discovers a promising development, the industry can rally behind it with appropriate resources and market-oriented strategies—rather than destroying value by reinventing the wheel and undercuting genuine innovation.
Contrary to the common belief that innovation is a matter of chance or luck, it is, in fact, an Organizational Construct. For instance, Apple’s culture was forged around the principle of creating “insanely great products,” which continues to shape its innovative drive today. Similarly, Elon Musk did not aspire to build a bureaucracy, and the organizations he leads reflect that approach—offering him unwavering support for rapid development and deployment. When would NASA even consider re-using or catching a rocket? In stark contrast, many North American producers have been conditioned to simply “muddle through.” Their chances of creating anything genuinely transformative diminishes further when they fail to acknowledge that they haven’t turned a “real” profit in more than four decades.
Within the Preliminary Specification, various modules detail processes designed to foster an innovative culture. Without these specific requirements, true innovation is hard to achieve. Declaring everyone in an organization as “innovative” is a recipe for chaos—efforts become unfocused, duplicated, or repeated without learning from past failures. Instead, effective innovation requires a disciplined approach, where the organization remains focused, dedicated, and in control of the processes that ensure all innovation efforts are efficiently recorded, assessed, and, if needed, repurposed. Recognizing that failure is frequent in innovation is key: a failed attempt often confirms that a particular solution or direction is not viable, freeing teams to try alternative approaches rather than abandoning the project entirely.
These principles of innovation are embedded throughout the Preliminary Specification’s modules, building a culture of structured innovation for producer firms. Here, innovation is leveraged to drive profitability, not pursued aimlessly. People, Ideas & Objects has conducted extensive research on these concepts, heavily referencing primary sources such as Professor Richard N. Langlois (Schumpeter Prize in 2006) and Professor Giovanni Dosi (Schumpeter Prize in 2024)—both winners of the Schumpeter Prize. It was Joseph Schumpeter who coined the term “creative destruction” in the 1940s, reinforcing the notion that innovation, while often disruptive, is also an essential component of long-term economic and organizational growth.
The Preliminary Specification introduces three key “market” modules—Resource, Petroleum Lease, and Financial Marketplace modules. Each module creates a marketplace where producers can conduct business in the areas most critical to their operations. Mirroring the three primary markets that producers engage with, these modules facilitate day-to-day interactions alongside service industry partners and other stakeholders. Designed to support contractual agreements, transaction processing, and various capabilities provided by Oracle Cloud ERP—as well as other Preliminary Specification modules—these marketplaces significantly enhance operational efficiency. Moreover, People, Ideas & Objects, through our Cloud Administration & Accounting for Oil & Gas, our user community and their service provider organizations enable producers to tap into their competitive strategies within the broader oil & gas economy.
From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard N. Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.
The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21.
And
If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21.
And
Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17.
We believe that startup and small producers would concur that markets offer the preferred route to rebuilding capacities and capabilities in oil & gas. Attempting to establish such infrastructures internally for each producer would exclude them from numerous opportunities across the industry.
Within the three marketplace modules of the Preliminary Specification—Resource, Financial, and Petroleum Lease—producers can navigate dynamic markets, form agreements, execute transactions, and manage their operations through a dedicated ERP framework. These modules empower producers to interact effectively within the industry, harnessing shared resources and expertise to strengthen their competitive stance.
People, Ideas & Objects asserts that Information Technology (IT) has reached a new level of maturity, fulfilling promises that have been on the horizon for decades. This evolution has given rise to an entirely new class of software that only a few years ago would have been unimaginable. We view the Preliminary Specification as part of this emerging category. Until recently, business models for advanced applications—like ChatGPT—seemed unattainable. Today, the cost-sharing of Artificial Intelligence (AI) technology across a broad user base is a prime example of this shift. Paying as little as $15 per month offers access to powerful tools that were out of reach to anyone a short time ago.
Just as software shapes and constrains organizations, hardware exerts a similar influence. The impact of smartphones on when and where work can be done highlights this effect. Even more significantly, Information Technology has spurred the development of innovative business models that eliminate layers of bureaucracy and streamline administrative overhead. Tasks that once demanded significant time and resources are now simplified, allowing individuals to focus on more productive, value-generating activities.
The challenge today’s producers face is adapting to these changes. Officers and directors may downplay People, Ideas & Objects’ Preliminary Specification, arguing that its scope exceeds the realistic possibilities of current Information Technology. But if we cannot address these issues and opportunities under the collective budget afforded by an industry-wide approach, it’s fair to question how individual producers could independently build such comprehensive solutions—particularly without infringing on our or others’ intellectual property and with their budgets.
Business model innovation becomes feasible through the Preliminary Specification’s modules and Organizational Constructs. Our user community and service provider organizations are essential for enabling dynamic, innovative, accountable, and profitable startups and small producers in North America—or any producer configuration, for that matter. They adapt “just in time” to evolving business models, ensuring the industry can respond effectively to the rising demand for innovation and new oil & gas operational methods. Ensuring the producer remains competitive in North American capital markets and accountable to their investors.
"Culture and performance move together."
—Safra Catz, CEO of Oracle
People, Ideas & Objects contends that the damage and deterioration in the oil & gas industry are profound. The flawed practice of relying exclusively on external financing to “build balance sheets” was exposed by investors in 2015. As a result, producers lost investor funding and stumbled forward, depending solely on cash flow from marginal and underperforming assets. Over the past four decades, with no requirement to show real performance, the industry became increasingly unproductive and uncompetitive. Since 2015, nothing has changed except a rapid downward spiral, as producers continued to believe investors would eventually “rush back in.” A culture of inaction and carelessness has permeated the minds of officers and directors with a persistence to these principles that is truly remarkable.
Defining a new culture is thus imperative. It provides a reference point where individuals can understand how the Preliminary Specification supports North American producer firms, clarifying the roles, opportunities, and challenges faced by both individual participants and the industry as a whole. The “muddle through” culture of the past has produced negative and depressed commodity prices, ongoing losses, and chronic cash shortfalls that producers erroneously expected investors to resolve. If producers truly want more cash, they must create profitable operations and cultivate for themselves ample financial resources. The current industry issue is that “muddling through” implies no understanding of where profitability originates, how to achieve it, what it entails, or why it matters. Officers and directors have formed organizations that lack the ability to adapt or self-reflect—”muddle through” is their only strategy.
It may sound as though surpassing these officers and directors and capitalizing on their mistakes is straightforward—and, in some respects, it is. But that is not our primary challenge. Our real challenge lies in cleaning up the damage they’ve caused and devising profitable approaches in the form of engineering and geological business models to propel the industry forward in the limited time we have. This will be the truly demanding part, yet it also represents the most rewarding, thrilling, and potentially lucrative endeavor. When it takes cash to produce the oil & gas reserves. Then the industry is worth nothing as its present value is negative. What a great time to start, nothing but upside.
Organizations have two primary options for acquiring capacities and capabilities: through markets or within their own organizational structures. The trade-offs and benefits between these two approaches have been central to economic studies since Professor Ronald Coase's seminal November 1937 paper, "The Nature of the Firm." For a more comprehensive understanding of his work, please refer to the bibliography.
People, Ideas & Objects have chosen to use markets as the means to rebuild the oil & gas industry. Reliance on the existing infrastructure of oil & gas producers has failed to acknowledge and address the pressing issues facing the industry. Consequently, it would be challenging for these producers to move at the necessary speed to implement the required changes. By purposefully rebuilding markets—particularly the service industry—we can achieve transformation more rapidly, effectively, and in alignment with the needs of new oil & gas producers.
Specifically, there is a necessity for robust, dynamic markets where innovation and agility are recognized and rewarded. Entrepreneurs and problem solvers should be embraced by producers and encouraged to meet consumers' demands for energy that is affordable, independent, secure, and reliable. Achieving this vision requires that all producers recognize and respect Intellectual Property as defined in the U.S. Constitution.
To address this, we identified the key marketplaces within the oil & gas industry that technology needs to replicate:
The Financial Marketplace: A platform for accessing and managing financial resources.
The Resource Marketplace: A marketplace for people, vendors, and the service industry.
The Petroleum Lease Marketplace: Facilitating the exchange and management of Petroleum & Natural Gas leases.
We will develop these three modules within the People, Ideas & Objects Preliminary Specification to replicate these markets. Backed by our user community and software development capabilities, these marketplaces can evolve alongside the industry, ensuring that the applications remain relevant and effective as the markets themselves develop and demand.
The objective of the Petroleum Lease Marketplace module is to virtually replicate the physical oil & gas marketplace, starting with petroleum leases.
In replicating the physical marketplace, the petroleum lease serves as the foundational document and common denominator for all activity and ownership within the industry. Any physical oil & gas assets are linked to a lease, agreement, rights, or concession granting holders the privileges of ownership, lease, or rental. These are the items available in a marketplace—they are bought, sold, bargained for, and traded. They are also the assets for which people are recruited to provide services. A marketplace is a dynamic and evolving hub of commercial activity, and this is the aim we seek to emulate in the Petroleum Lease Marketplace module.
When we examine the types of work conducted within the Petroleum Lease Marketplace, we observe a large group of administrators operating across various departments within a producer firm. Whether in the Land or Legal departments, Production or Exploration Administration, or Accounting, all these groups have a vested interest in the information, personnel, assets, documents, processes, and functionalities contained within the Petroleum Lease Marketplace.
These groups are concerned with the information and data within the module—its accuracy, accessibility, and usage by those within their firm and within the Joint Operating Committees in which their firm holds interests. Much of this data will mirror that of their partners' data. A significant portion of the data is generated cooperatively and collaboratively through these partnerships, as well as with the involvement of regulatory bodies.
For instance, documents such as Authorizations for Expenditure (AFEs), mail ballots, and agreements are generated through interactions among participants in the Joint Operating Committee. How much of this data and information could be centralized within the Joint Operating Committee, with interfaces to each firm? This is a question that requires significant research during software development. To answer it, we need to consider whom the Land, Legal, Production and Exploration Administration, and Accounting staff actually work for. The implications are significant. In the Preliminary Specification, these resources are reorganized into service providers owned and operated by our user community members.
One of the greatest opportunities in developing this system is to address specialization and division of labor during Phase I, followed by further automation in Phase III of our development. This involves reorganizing people's work across the industry, focusing on the Joint Operating Committee while specializing their tasks. By applying these specialized skills across the entire industry, a geographical region, or another classification, we can increase the oil & gas industry's productivity and achieve cost savings. For example, an individual might work on a process billed to 1,000 Joint Operating Committees representing 200 companies. By doing so, the industry's profitability is materially enhanced by making these costs variable, based on profitable production, ensuring the industry realizes People, Ideas & Objects' $25.7 to $45.7 trillion value proposition.
In our research, Professor Langlois noted that the expansion of the division of labor and further specialization occurred through "gap-filling"—tasks that weren't being done before but could or should be done now. While adding a person to perform these tasks might seem straightforward, we must consider our user community and software development capabilities to support that person in their new role. As I've suggested before, we should consider these administrative positions from the perspective that these individuals work for a process on behalf of the industry, rather than for any one company or Joint Operating Committee. Software defines and supports the organization; therefore, changing the organization and its performance demands that the software change first.
Employing the marketplace metaphor in the modules that make up the People, Ideas & Objects Preliminary Specification was deemed necessary. Previous discussions of exchanges and web services never quite captured the reality of what was possible. I believe exchanges are technological solutions addressing non-existent business problems, whereas the marketplace is a business reality—a reality we can emulate by building a virtual, technical environment. This represents a different approach to building these systems.
People, Ideas & Objects, along with our user community and their service provider organizations, will provide our Cloud Administration & Accounting for Oil & Gas software and services. Based on the integration of the Preliminary Specification within Oracle Cloud ERP Tier 1 solution, we offer North American producers with the most profitable means of oil & gas operations—everywhere and always. We suggest that owning an oil & gas asset is no longer sufficient; access to the Preliminary Specification is now essential to ensure a producer's assets remain profitable under all circumstances.
Adam Smith wrote in The Wealth of Nations that "political economy" is based on three key attributes. First is the Economizer Argument, which states that each person seeks the most efficient use of their resources. Second is the Local Knowledge Argument, holding that individuals are best suited to make decisions regarding themselves and their resources. Third is the Invisible Hand Argument, where self-interest motivates individuals, forming the invisible hand of the market. In The Theory of Moral Sentiments, Smith introduces the three "P's"—person, property, and promise—which provides individuals with the means to pursue their interests by appealing to the interests of others. Through this exchange, we build value for society with our efforts.
Oil & gas is a primary industry. Its revenues are generated through ongoing sales of oil & gas production. Its interests are captured in the service industry and all of the subsequent tiers of supporting industries that service and supply oil & gas. It is from this perspective that the Resource Marketplace module of the Preliminary Specification is undertaken.
In the 1990s, Professor Paul Romer formulated theories that became known as New Growth Theory, for which he was awarded the Nobel Prize in Economics in 2018. Professor Romer shifted the focus of economic growth from traditional investments in transportation, communication, and capital markets—which appeared to have waned in effectiveness due to their maturity—to new areas. His New Growth Theory emphasizes People, Ideas, and Things as the three areas where investments yield the greatest growth. This introduces the conceptual model of non-rival costs inherent in the Preliminary Specification.
Our Cloud Administration & Accounting for Oil & Gas enables the sharing of non-competitive areas of a producer's overhead infrastructure, substantially reducing the industry's aggregate overhead costs. Romer suggested concepts like standardizing the size of coffee cup lids to eliminate unnecessary incremental costs as an example of this principle. On January 1, 2006, we named this initiative People, Ideas & Objects, reflecting our adoption of these principles throughout our modules and organizations, and highlighting that we are database developers using object-based, Java Programming Language.
The Resource Marketplace module embodies these broader economic principles. We have chosen to leverage the invisible hand of the market and the Internet to disintermediate the centralized control of producer firms that have, which in our view, failed to meet the needs of investors and other stakeholders, and now risk jeopardizing customers' access to affordable, reliable, and abundant energy.
Service and other industries provide producers with operational scale, geographical diversity, and technological skill to undertake field operations. Although they are employed exclusively by oil & gas producers, they are often undervalued and mistreated, having been serially and chronically neglected for decades. These industries have fundamentally broken down, with their capacities and capabilities diminished beyond what is commonly realized. Like the producer firms, they have seen their capital structures decimated.
From this perspective, the Resource Marketplace module recognizes that the challenges faced by the service and related industries were caused by past producer firms. Therefore, we have adopted the stance that "producers broke it; producers need to fix it," meaning that financial resources from the primary industry's revenue should be allocated to rebuild these industries. There is no alternative source. Rebuilding these markets according to the vision of the Preliminary Specification is necessary because the destruction and dismantling of the oil & gas industry by its own officers and directors has been comprehensive and complete. When producers have rebuilt the service industry, they will come to respect and value the service industry.
Capital-intensive industries like oil & gas have been significantly impacted by financial crises. Two major factors causing substantial management turbulence are capital structures and commodity demand, with the COVID-19 pandemic further aggravating these challenges. Various issues that officers and directors have left unaddressed are now creating serious difficulties in conducting normal operations. The "muddle through" approach assumes that economic performance will eventually return to normal, over time. However, higher interest rates bring increased expectations of performance, the possibility of a recession, and no guarantee that commodity prices will rise. Producers have limited ability to address underlying changes in the business model because they are entrenched in a model that requires constant full-capacity production. Unlike oil, natural gas prices have undergone a second, fundamental, and structural repricing due to their collapse in the first half of 2023.
The Preliminary Specification aims to provide producers and Joint Operating Committees with an innovative and profitable business model. The Financial Marketplace module offers a means to effectively manage capital structures.
In the Financial Marketplace module, a primary consideration is the presence of competing interests and motivations within the investing community and the industry. With different strategies being deployed by various partners within a Joint Operating Committee, it's understandable that financing a project can be challenging. The module proposes that instead of each company securing funding from separate bankers—each taking a working interest share claim against the firm—a single bank or consortium of banks would fund the Joint Operating Committee on behalf of all partners. This approach aligns bank financing with the legal, financial, operational decision-making, cultural, communication, strategic, innovation, Compliance & Governance frameworks of innovative Joint Operating Committees.
Achieving this alignment today may be a worthwhile objective or opportunity. Despite the financial difficulties the oil & gas industry has faced since the 2008 crisis, the attributes of the Financial Marketplace module remain applicable. Why is that? At least until 2030, capital demand is expected to remain high while supply stays tight. The most competitive producers will generate their own capital by passing the costs of capital on to consumers, thereby generating cash through genuinely profitable operations—a reasonable approach in a capital-intensive industry. The purpose of this module is to demonstrate that dynamic, innovative, accountable, and profitable oil & gas producers and Joint Operating Committees can make their capital structures more efficient than what could be achieved with any other ERP system, ensuring they remain competitive in North American capital markets.
There are many other attributes of the Financial Marketplace module that are minor in their impact. They can be reviewed within the Preliminary Specification with all modules.
This category of modules provides a method for addressing the unique challenges associated with leveraging the Joint Operating Committee as the key Organizational Construct. Due to retirements and a limited influx of new talent, People, Ideas & Objects determined that augmenting the capacities and capabilities of engineers and geologists in the oil & gas industry was essential. Furthermore, the demands of specialization and the division of labor—strategies used to increase overall capacity—reinforce this necessity. If producers attempt to maintain "operator" status solely through in-house resources, the resulting economics would push them beyond commercial viability.
To overcome these challenges, we introduced the “pooling” concept, where each Joint Operating Committee member contributes their own specialized engineering and geological capabilities. Any shortfalls can then be addressed through the Resource Marketplace. Establishing these engineering and geological capacities as a premier competitive advantage creates a secondary revenue stream for producers—a stable foundation that start-ups and small producers can rely on.
Within this framework, the Research & Capabilities and Knowledge & Learning modules work together to prepare and present the explicit knowledge held by producers. These modules enable producers to combine their highly specialized explicit knowledge with the tacit knowledge embedded in their producer firms capabilities, capacities and resources. The result is that these combined capabilities can be deployed to any specific Joint Operating Committee. Through this approach, each participant can pool their unique specialized capabilities and resources for mutual benefit.
Our May 2004 Preliminary Research Report was titled "Plurality Should Not Be Assumed Without Necessity," referencing Occam’s Razor. This principle asserts that the simplest explanation is usually the correct one—a valuable perspective when considering the Joint Operating Committee as the primary Organizational Construct for a dynamic, innovative, accountable, and profitable oil & gas producer.
However, the report also delved deeper into Occam’s Razor, citing Knoop & Valor (1997):
"It's not what you know you don't know that hurts you. It's what you don't know you don't know that will. It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than bringing about a new order of things."
By granting full operational decision rights to the Joint Operating Committees, we harness the collective knowledge generated by the participating producer firms. This knowledge, developed through the Research & Capabilities modules, forms the backbone of the Knowledge & Learning module.
While the Knowledge & Learning module focuses on the Joint Operating Committee, it shares many attributes with the Research & Capabilities module. In fact, it relies on the capabilities established in Research & Capabilities as its foundational data set. The primary goal is to transfer a producer’s accumulated knowledge directly to the Joint Operating Committee, where decision-making authority resides—thereby increasing accountability within producer organizations.
The Research & Capabilities module would be organized according to criteria such as geologic zones, geographic regions, operational types, vendor pools, and other relevant factors. This organization ensures that the Joint Operating Committee can accurately identify and incorporate the pertinent capabilities into the Knowledge & Learning module. Additional sorting methods, like geographic segmentation, help ensure that all vendors operating within a specific area are referenced appropriately. Crucially, this process does not involve sharing information asynchronously outside the Joint Operating Committee; vendors and others contribute data strictly for the Joint Operating Committee’s use.
Typically, each Joint Operating Committee concentrates on one or two geologic zones, specific production facilities, and particular production outputs. What sets the Knowledge & Learning module apart is its ability to aggregate information from multiple producers participating in a single Joint Operating Committee. Producers with capabilities listed in their Research & Capabilities modules will have those applicable skills—related to geological zones, production facilities, production composition, and more—integrated and selected to populate the Knowledge & Learning module for that committee.
People, Ideas & Objects adopts a different approach to accounting in the oil & gas industry. The Preliminary Specification reorganizes the accounting and administrative resources of producers into service providers owned and operated by our user community. This community will manage processes and ensure that the Preliminary Specification remains consistent with industry needs and requirements. Their service providers will specialize and divide labor based on specific skills and tasks, ensuring both process management and technical excellence are maintained on behalf of the industry. These services are provided through our proposed Cloud Administration & Accounting for Oil & Gas software and services.
Each Joint Operating Committee will receive comprehensive financial statements based on the SEC's reporting requirements for North American capital markets. This will provide clarity on the capital markets' expectations for genuine profitability. In competitive industries, real returns are generated over months, whereas in oil & gas, it may take years and even decades. Capital markets have deemed this unacceptable, given that they have competitive choices—based on equivalent SEC requirements—that offer far greater returns than what producers have been able or willing to provide. Investors assess producer firms on this measure of competitiveness and will continue to do so.
The Preliminary Specifications property-by-property perspective introduces an entirely new basis for evaluating each property in which a producer has an interest. Applying SEC reporting requirements, consider this exaggerated example: If a producer drills ten wells to prove the presence of hydrocarbons but only one well is deemed commercially viable and produces, the SEC allows the capitalization of the costs of all ten wells. Therefore, the performance reporting for that Joint Operating Committee needs to account for the property with all ten wells. It must perform competitively in the commercial market with the excessive burden of those capital costs.
I agree that this accounting requirement seems unreasonable. However, the issue arises from the SEC reporting requirement or its interpretation by producers. Methods like full cost or successful efforts distort the accounting performance by overreporting the firm's assets and the profitability of the one producing well. In reality, neither may be as profitable as reported. This misleading reporting has led investors to misinterpret the producer's performance, representing their profits were competitive with other industries when, in fact, their competitiveness was lost in the late 1980s and has deteriorated since. Investors have recognized this and have expressed their unwillingness to accept it any longer. Producers need to address investors' expectations. The property-by-property reporting in the Preliminary Specification is the beginning of that acceptance by producers. Operating an oil & gas producer is challenging, without question. However, operating a profitable producer in the North American capital markets will distinguish the leading engineers and geologists from today’s laggards.
Within the Preliminary Specification, there are two modules dedicated solely to accounting. The Partnership Accounting module focuses on reporting for Joint Operating Committees in which a producer has an interest. It handles the consolidation of these properties at the producer level and manages reporting of the producer's activities. One of its key outputs is the SEC-based financial statements we mentioned. These statements are unique to each producer, reflecting their specific financial situation, and may differ significantly from one partner in the Joint Operating Committee to another—for instance, if a party joined through an acquisition.
While reporting based on regulatory requirements is a significant function of this module, it is just one aspect. The Partnership Accounting module is a comprehensive accounting tool that works in conjunction with the Accounting Voucher to meet the reporting needs of both the Joint Operating Committee and the producer firm. For users seeking accounting information, the Partnership Accounting module serves as an ideal starting point.
The primary purpose of this module is to manage the reporting of these entities effectively. For example, when selecting a property's SEC-based financial statement, it will adhere to the specific criteria imposed by the SEC for that period. These reports provide standardized, objective criteria, considering a property's unique makeup, that support appropriate decision-making across the industry. Consequently, when a producer is faced with the decision to shut-in production, considering a property's unique makeup, they will understand that all producers have been evaluated using the same standard and objective measures of profitability. Recognizing that shutting in the Joint Operating Committee is in their best interest, decision-makers can align their criteria with those used by investors. This alignment ensures that producers' interests are directly connected with their investors', emphasizing profitability as the firm's primary objective.
Accounting will follow the methods prescribed by the Preliminary Specification. Actual overhead incurred through service providers, when incurred, is charged directly to the Joint Operating Committee in the current month. As a result, when these accounts are cleared, producers record their share of overhead as an operating expense rather than a capital cost. This approach means the total cost of exploring and producing a barrel of oil is passed on to the consumer, capturing all costs at the point of sale. The producer then receives all the cash for these costs in the subsequent month, instead of waiting decades for capital costs including overhead to be fully depleted.
This example of handling overhead highlights some of the significant differences between the Preliminary Specification and current industry methods. Retaining excessive levels of property, plant, and equipment on the balance sheet is counterproductive in a capital-intensive industry—especially when that capital represents capitalized overhead. When producers face working capital difficulties, such practices are also counter to their best interests. Product costs in a capital intensive industry would be mostly capital in nature.
Earlier in this summary, we discussed how Markets serve as an organizational construct within the Preliminary Specification. When combined with our key organizational construct—the Joint Operating Committee—and the influence of Information Technology as an Organization Construct through cloud computing and the Internet, we introduce additional dynamics considered in developing the Accounting Voucher. This combination forms a dynamic in the Preliminary Specification that aligns with how oil & gas exploration, production, and operations have functioned for decades. The Accounting Voucher module by People, Ideas & Objects introduces concepts that address the unique nature of this industry.
By eliminating the "operator" status, we have opened up the Accounting Voucher authorization process to accept charges from individual Joint Operating Committee working interest partners. This means they are able to incur costs on their behalf, charge the Joint Operating Committee for the gross amount, and reconcile their share through the clearing / equalization process each month. All capital and operating costs are subject to approval based on the monthly budgets and any open Authorizations for Expenditure (AFEs). Authorization to make these charges is limited to individuals designated to represent the producer's interest in the Joint Operating Committee.
Managing the producer and Joint Operating Committee in this manner enhances efficiency. Otherwise, we would be involved in a cumbersome process that replicates today's paper shuffling, multiplied by the number of producers listed as working interest partners in the Joint Operating Committee. Other elements of the Accounting Voucher module are detailed in the Preliminary Specification. While they may be more technical from an accounting perspective and perhaps of less interest to the engineering and geological audience of this paper, they are essential components of the module.
With the Preliminary Specifications Blockchain module People, Ideas & Objects will provide a technical solution to our user community, their service provider organizations, the engineers and geologists that use this software. In times when an immutable database is needed Oracle has developed a blockchain table. This is a hybrid solution as it does not involve an actual blockchain such as Ethereum or others. Oracle has created a specific table within their database that is a Blockchain table. The difference between it and any other table within the Oracle Database is that it is stripped of any DDL or DML other than the INPUT command. Therefore emulating the immutable characteristics that Blockchain technologies provide.
Review of the Blockchain module specification will provide a better understanding of how this technology provides some of the opportunities in oil & gas accounting and administration. Any data that needs to be immutable and recorded is able to be amended only through subsequent INPUT’s that augment the original data. Operations are then able to determine the information the user needs. DELETE, DROP and other SQL DDL operations are unable to be performed.
The oil & gas industry is heavily burdened with regulations and requirements. Ensuring Compliance & Governance in decisions to uphold governance and accountability within an organization is a challenging task. Coupled with the demand for swift performance and quick project turnaround times, producers operate in an increasingly difficult environment.
Ineffective communication of changes can further impact performance. So, how can a producer's engineers and geologists maintain compliance and governance concerning financial and administrative regulations? People, Ideas & Objects believes the solution lies in the specialization and division of labor for administrative and accounting tasks through our user community's service provider organizations. As highlighted by Professor Richard Langlois in his book "The Corporation and the Twentieth Century: The History of American Business Enterprise" (p. 458 of 903, Kindle version), specialization enhances efficiency and effectiveness.
When our user community members focus exclusively on specific regulations—such as the Texas Railroad Commission's royalty reporting requirements—they apply these regulations across the oil & gas industry based on each producer's unique situation and the proper interpretation and implementation of the rules. Our user community members own and operate their service provider organizations, hire the necessary personnel for day-to-day operations, have exclusive access to our software developers, and are the only ones authorized to make changes to the Preliminary Specification ERP software.
As a result, when performance reports for a property are generated based on SEC regulations (as discussed in the Partnership Accounting section above), engineers and geologists can clearly understand how these business regulations and capital market interpretations affect the performance of that specific property. This insight enables them to make informed decisions on how to improve their financial performance in North American capital markets by understanding the impact of business regulations and requirements on their work. This approach applies to other regulated areas within the accounting and administrative domains of oil & gas producers as well.
To integrate operational activities with informed business decision-making, People, Ideas & Objects developed the Business Operations Management module. This module consolidates data and insights from the other modules of the Preliminary Specification, presenting them in a format that enables engineers and geologists to incorporate business considerations—specifically those aligned with a competitive oil & gas producer operating in North American capital markets—and optimize the firm’s individual and unique Joint Operating Committees for maximum effectiveness.
How can a producer firm focus on innovatively producing profitable oil & gas? The Preliminary Specification relieves them of non-competitive administrative and accounting tasks, allowing them to apply the necessary business understanding and perspective. Supported by our user community and their service provider organizations, producers no longer need to build and maintain isolated accounting and administrative capacities to meet those aspects of their business. Engineering, geology, and operations in exploration and development are their domains of expertise. Their success is based on deploying distinct competitive advantages from their land & asset base and coordinating the market's earth science & engineering capabilities & capacities within a profitable business context.
The Business Operations Management module serves as a centralized console for operational engineers and geologists to access the business information they need from the Preliminary Specification. It provides actual, factual, and detailed accounting and administrative information relevant to their areas of concern. This module helps them understand, in a business context, where and why a property's performance meets or falls short of capital market and financial expectations. It is the point where analysis and insights can be applied to determine the business performance implications of any prospective and past changes and where they can confirm that the property operates as intended.
North American oil & gas producers are in a state of organizational collapse, which is catastrophic for all concerned. With internal and field capacities severely diminished, producers are incapable of maintaining their activity levels, assets, and productive deliverability over the mid to long term. Their capital structures have been unsupported for almost a decade. The accelerated decline curves of shale production have placed the North American economy and society in a situation where the status quo is incapable of even recognizing these difficulties. The long-term consequences of their inaction could be detrimental to the most powerful economy ever known, especially if it becomes dependent on foreign sources of oil & gas. The opportunity to mitigate this is through the active disintermediation and rebuilding of the industry by developing the Preliminary Specification. This is accomplished by our user community's service providers through People, Ideas & Objects' Cloud Administration & Accounting for Oil & Gas software and services.
We see this as the future of enterprise software. The dynamic nature of business cannot be managed through a generic configuration conceived decades ago and left unmodified. Assuming that software alone can manage the enterprise is inherently dangerous; nothing of complexity or significance works that way. People, Ideas & Objects offers a comprehensive software and service solution that provides a permanent capability for North American producers. This represents the current level of advancement in the software industry and fulfills its longstanding promise. Officers and directors may assume such solutions will be available at the flip of a switch. However, this does not imply that producers can continue to define the terms of a Service Level Agreement and then sit back and criticize any deficiencies. It is too late to settle for outdated, failed processes in a world where software dominates the workplace. Owning the oil & gas asset is no longer sufficient; access to the ERP software and services of People, Ideas & Objects' Cloud Administration & Accounting for Oil & Gas, which makes the assets profitable, is also necessary. Success requires an all-hands-on-deck commitment from everyone involved, including Oracle Cloud ERP, People, Ideas & Objects, our user community, and their service provider organizations, for the development, implementation, service, and support of the Preliminary Specification. Dynamic, innovative, accountable, and profitable producers, along with the service industry, will all need to actively participate and not rely on outdated predefined Service Level Agreements.
With the Preliminary Specification, we seek a transformation in the profitability, performance, and culture of producer organizations and Joint Operating Committees, as detailed throughout. These entities will need to undergo a transformation far more radical than what the status quo culture can comprehend. This transformation will occur through the efforts of producer engineers and geologists utilizing the Business Operations Management module. Through this module, they will be able to reduce process and activity timelines and consistently raise performance criteria and expectations throughout the century. They will tighten interactions between tier 2 and tier 3 sub-industries to optimize the production and exploration processes of producers and Joint Operating Committees. This industry-wide rebuilding process can only be conducted and funded through oil & gas production profitability, enabling producers to compete effectively in North American capital markets. (A non-dilutive strategy in terms of investor holdings.) They will also maintain affordable, reliable, abundant, and secure domestic sources of oil & gas for consumers. Our Business Operations Management module can be sourced here.
Managing the Joint Operating Committee is the opportunity provided by Business Operations Management. Starting with production field data capture via the Internet of Things (IoT), communicated through the Swarm satellite network, and managed and reported in the various modules of the Preliminary Specification, culminating in the Material Balance Report. It is through reviewing the Material Balance Report in this module that production activity can be analyzed.
Within Business Operations Management, Authorizations for Expenditure (AFEs) can be authored, purchase orders issued, Work Orders created and monitored, access to the Job Order system provided, and, for reporting purposes, definitions of the Industrial Command & Control established across the various participants of the Joint Operating Committees.
When engineers and geologists discover that the SEC financial performance of a property they oversee has slipped into unprofitability, the justification for shutting in production arises. At this point, the Joint Operating Committee serving as the industry's operational decision-making framework, must determine the appropriate course of action. They will consider factors such as the severity and nature of the losses and the time required to correct them. Whether or not production is shut in may seem irrelevant if the property's returns are marginal; however, it's crucial to assess the situation from a financial perspective to explore ways to enhance performance. One approach is to move the property to the Innovative Work-in-Progress Inventory
Once the property is designated for review with the goal of improving its performance, engineers and geologists can begin examining potential scientific applications that could be implemented. Through analytical modules, they can evaluate whether their proposed workovers or changes—along with the associated costs—could effectively turn the property's performance around in line with SEC capital market reporting requirements.
These two modules are grouped together because of their similar functionality and purpose. The Performance Evaluation module is intended for the Joint Operating Committee, while the Analytics & Statistics module is designed for the producer firm. Both modules provide access to relevant ERP data, allowing users to perform statistical and other analyses on the actual, factual financial information of a property or the producer firm. This facilitates the exploration of "what if" scenarios and other criteria.
These modules enable individual engineers and geologists to develop their own algorithms for unique analyses. There may also be a repository of algorithms shared by other engineers, along with generic analytical tools that are provided. Support is offered through interfaces to well-known tools such as Apache Spark, R, and others.
A key distinction lies in the access level each individual has to ERP financial data. Based on their defined access level, seniority, and assignments, this access may range from limited to quite extensive.
Expanding on the analytic theme. Artificial Intelligence provides its users with valuable insights. In order to gain that value extensive knowledge and effort has to develop the algorithm of the AI being provided. Secondly the real cost is the time and energy required to compile the output for usable information to be used. People, Ideas & Objects domain of information is the producer and Joint Operating Committee business related data contained within the Preliminary Specification.
Our approach is to limit the costs of this AI for business in North American oil & gas. If engineers and geologists find the business information that we believe will be available to them through AI. Then the potential for inordinately high costs being incurred on AI in oil & gas for this purpose would be inappropriate. Therefore we expect we’ll be able to provide a base set of algorithms and verified models for use by all producers and Joint Operating Committees. Employing our sharing of non-rival costs Organizational Construct to mitigate these potentially high costs.
The argument may be moot at this point as the Artificial Intelligence module will be approached for development during Phase IV of the Preliminary Specification.
The focus of the Security & Access Control modules is to ensure that the right people have appropriate access to the correct information with the necessary authority. This access should be provided at the right time, in the right place, and through the right device. Given the geographical regions where oil & gas producers operate, personnel may be dispersed across many locations to conduct their work. With the demand for work to be completed at any time of day, access must be provided not only within the producer firm's domain but also to our user community service providers who handle the producers' accounting and administration, Joint Operating Committee partners, and vendors. Maintaining and controlling this data within the producer's domain is a challenging task.
Ideally, a producer's data should be secured for their exclusive use. However, imposing strict limitations could impede efficiency and be detrimental to performance. Alternative methods should be considered to achieve the same outcome without compromising efficiency. The majority of the primary material in the Joint Operating Committee comes from public databases, while proprietary notes and derivative texts remain private within the producer firm. Data accessed by our user community service providers is specific to the managed process, is transactional and therefore of limited use to anyone outside the producer or Joint Operating Committee, which then aggregates all the accounting data from all service providers. It's just raw data that no meaning can be implied from. There are numerous ways to address specific exceptions regarding data types and their proprietary nature. Identifying these exceptions and determining how to secure them will be a collaborative effort between our user community and producer firms during this development. By recognizing these issues and addressing them appropriately, we can create suitable interfaces that grant authorized users access to the data they need. This does not need to become a daily burden on users for the sake of security. Instead, we can design interfaces that provide the right users with the access they require while keeping unauthorized users out.
Cybersecurity addresses the challenges associated with malicious operators gaining access to systems and locking producers out, holding them ransom for access keys. This form of cybercrime has been highly successful, with ransom payments proving lucrative for the perpetrators. Fortunately, as time passes and these attacks continue, organizations become more secure by identifying and addressing weaknesses. Through extensive research and development of a comprehensive plan to develop software that tackles these threats from the outset, producers can more effectively manage issues like these.
In today's world, success depends less on who you know and more on what you can do—your capabilities and the capacity to deliver. The Work Order serves two primary purposes that make it a valuable tool for engineers and geologists in the oil & gas industry.
First, it facilitates the formation of working groups or temporary organizations with individuals or entities with whom the producer or Joint Operating Committee may have no prior relationship and no intention of establishing a long-term one. For example, conducting research projects not affiliated with any specific property but aimed at achieving general technological competitive advantages. These temporary organizations are needed in significantly greater numbers for the oil & gas industry to become more innovative. Research often stems from innovations that in turn expand the science which subsequently sponsor additional innovations.
People, Ideas & Objects' Work Order provides a means by which these ad-hoc organizations can be supported administratively and financially without burdening the individuals involved with excessive accounting and administrative tasks—a factor we believe has contributed to the decline in the use of working groups. It offers a seamless interface that can evaluate and accept agreements to contribute cash, resources, or Intellectual Property in exchange for rights to the output. By managing the accounting and unique billing needs of these working groups, the Work Order allows for increased participation and volume of activity.
Second, the Work Order enables engineers and geologists to bill their time to projects, Joint Operating Committees, working groups, or the overhead accounts of a producer—a process we can all agree is feasible today. However, our Work Order operates across the entire North American producer and vendor population. For individuals involved in startup oil & gas producers who need revenue, this system allows them to secure work by deploying their tacit knowledge associated with their Intellectual Property.
With anticipated shortages of engineers and geologists, the elimination of the "operator" designation, and the introduction of People, Ideas & Objects' "pooling" concept aim to increase the industry's overall capacity through specialization and division of labor. Hyper-specialized producers in Joint Operating Committees contribute their unique competitive advantages, but any deficiencies—usually at the lower or intermediate professional levels—need to be supplemented by the market. The Work Order facilitates this augmentation of resources.
In our development efforts at People, Ideas & Objects, approaching North American oil & gas producers collectively as an industry, allows us to transform the perspective on how our applications can operate—such as our Cloud Administration & Accounting for Oil & Gas software and services. This industry-wide approach enables us to develop applications that would not be feasible through any other means. The Material Balance Report is one such application that, in my opinion, could not be undertaken effectively otherwise. The scope and scale of this report demand significant development effort from our developers, user community, and the producer firms. If an individual producer attempted this development alone, the net result would be minimal to marginal benefit at best. However, from an industry perspective, it provides a foundational tool that has long been necessary.
Our Cloud Administration & Accounting for Oil & Gas expands on the cloud computing paradigm by sharing the technical infrastructure costs. Moreover, it organizes accounting and administrative costs with greater specialization and division of labor than what is attainable within a single organization. Recall Adam Smith’s research on specialization and division of labor in a pin factory in the late 1700s, which yielded a 240-fold increase in productivity. Since then, specialization and division of labor have been the source of all value generation. By sharing these costs, we build upon the enhanced specialization we can achieve.
By distributing the development costs of the Material Balance Report across the industry, we reduce them to a manageable amount. This report’s value is gained when used industry-wide is multiples greater than what could ever be attained otherwise. When we follow the production process through the oil & gas producer and the Joint Operating Committee, every area of the company is involved in some aspect of data, process management, or reporting—from production and accounting to administration and sales. Could this be standardized across the industry? Could it serve as the foundation for a broad-based implementation of the Internet of Things (IoT)? Yes, these are the objectives of the Material Balance Report.
But there is more. Standardized data lays the groundwork for automating business processes. If we can balance production across the industry with distribution and sales points—and yes, it can be done—imagine the productivity opportunities we could unlock through automation. Such ambitions are well beyond the comprehension of current officers and directors. We are directing our message to those we believe will become the new leadership in the rebuilt oil & gas industry.
Please review the Material Balance Report in the Preliminary Specification to see how it or any of the individual modules details are designed and will be implemented.
All of People, Ideas & Objects' discussions have underscored the absolute necessity of achieving the highest possible quality in the Preliminary Specification and Cloud Administration & Accounting for Oil & Gas software and services. This is not a luxury or a “nice-to-have” feature; it is essential. We are laying the cultural foundation for an industry whose influence may last for decades. If we begin without a clear objective of achieving quality and the means to ensure it, we risk failing to restructure the industry in a manner that will gain the long-term trust and support of the investment community. Currently, there are no dynamic, innovative, accountable, and profitable oil & gas producers; although some are close, these future operating configurations remain unknown. Navigating the dense “jungle” to find the ideal engineering or geological business model will be one of the most difficult and challenging tasks.
These concerns have fueled my concerns for decades, prompting us to construct what I believe is a reasonable starting point. We’ve empowered our user community to ensure that quality is their ultimate outcome. Giving our user community the authority and responsibility to guide the software’s development is critical to its long-term success. However, what goes into the software will depend on the influences within the industry and the broader oil & gas economy. With newly configured oil & gas producers embracing the vision we’ve discussed, I anticipate that new leadership in the engineers and geologists will strongly support and engage with our software. They will be very demanding in terms of what they require.
Engineers and geologists have seen first-hand how the lack of profitability has harmed the industry. They should also recognize that investors are not merely a ready source of capital. A firm can have all the resources it wants if it earns them. Earning them involves making the right business decisions and taking the appropriate actions. Leadership should personally maintain significant equity stakes in the firms they establish, holding these positions for the long term. Diluting their interests equates to diluting their investors’ interests—thus making share dilution the last resort. Issuing equity is the most expensive financial resource. While some producers have relied on debt as a strategy, successful companies leverage their capital structure with genuine profitability. Profitability arises from dynamic, innovative, accountable business models that disintermediate the oil & gas industry and approach operations from a fresh perspective. Those producers that attain profitability as People, Ideas & Objects describe, will have an independence from others and an unlimited future in which they’ll explore.
Cloud Administration & Accounting for Oil & Gas provides an industry-standard, objective measure of a producer’s performance. It equips users with the data needed to identify profitable properties, considering a property's unique makeup, and those that are losing money. However, it does not decide whether to shut in unprofitable properties or how to rework them into profitable ventures—that responsibility rests with leadership: engineers and geologists. Accounting and administration serve as tools to guide operational decisions. They highlight where and how a producer can improve profitability, but the onus is on the operational team to turn insight into action. With this emphasis on quality, our user community will stand ready to supply the information, guidance and resource, the business perspective, required to move the industry forward.
People, Ideas & Objects offers a vision for the North American oil & gas industry, built on several underlying assumptions:
Shale formations have been neglected, misused, and wasted, leaving steep decline curves that threaten their future deliverability.
Service industry capacities and capabilities have been severely degraded, necessitating active reconstruction before shale production can resume its upward trajectory.
Financial success has been absent for at least four decades, driven by producers' Officers and directors misguided and inappropriate accounting principles of “building balance sheets” and “putting cash in the ground.”
Investors, displeased with performance, withdrew support from producers beginning in 2015.
The industry’s competitive structure is subpar, sustained by a status quo culture of poor performance. Compromising with this culture would be expensive, difficult, and ultimately futile.
Leadership has failed. Beyond consolidation, what vision do existing officers and directors offer? Clean energy, shale, offshore production, conventional or heavy oil? And it's appropriate to ask, for how long?
Our first priority must be to organize and address the core challenges of the North American oil & gas sector, which is the aim of the Preliminary Specification. A looming issue may arise with North American oil & gas deliverability. Historically, if producers or any public companies fail to meet their projected targets—especially for daily oil & gas output—they face severe capital market repercussions. Once production declines become evident, reversing the downward trajectory is exceedingly difficult, and capital markets abandon these companies swiftly. (Investors stopped providing more capital in 2015 however they’ve continued to own large positions in oil & gas producers.)
People, Ideas & Objects views this as the start of a transformative phase, moving away from the old “muddle through” culture toward a model centered on preservation, performance, and profitability, as envisioned by the Preliminary Specification. Accelerated shale declines are compounded by depleted service industry capacities and capabilities. Approximately 600 rigs are currently available, which pales in comparison to the 2,000 rigs once used to boost production. How many rigs are needed now just to halt potential declines and rebuild productive capacity?
Aggravating this predicament, officers and directors have spent decades blaming everyone except themselves. Excuses have been their most abundant output. Recently, the government has become their scapegoat for obstructing the industry’s prospects. If the government wields such influence, why not credit it for discovering and producing all that oil & gas previously—a patently absurd notion. If government-related obstacles have existed throughout the past century, why is it only now an insurmountable barrier? Compared to the pioneers and trailblazers who once overcame truly impossible challenges, today’s officers and directors appear weak, hindered by mere paperwork.
The political dimension deepens. President Trump ran on a “drill baby drill” agenda, influenced by “friends” in oil & gas leadership who promised a surge in production that would slash consumer energy costs, cure inflation, and ignite unprecedented economic growth. While the economy may well boom, it will not be due to abundant, low-cost energy from North American producers. A political backlash seems inevitable, wholly attributable to the false narratives and decades of incompetence from officers and directors.
Additionally, producers have grossly mismanaged the service industry, setting its development back by at least 30 years. Worse yet, the service sector’s motivation, trust, faith, confidence, and goodwill toward producers is not just eroded but aggressively negative, declining each day. During rare “good times,” service providers were labeled greedy and lazy. In tougher periods, drilling operations were slashed in half or more, and producers demanded steep discounts of 50%. Such “cost control” is neither a legitimate business model nor a path to profitability; it’s merely a tactic that, combined with the sharing of proprietary innovations among competitors, violates Intellectual Property rights and undermines the industry’s capacity for genuine innovation.
In summary, the industry stands at a crossroads, with a need for fundamental reorganization, cultural overhaul, and strategic foresight. It must break free from the dysfunctional cultural legacy, restore credibility with service providers, and move toward an era defined by dynamism, innovation, accountability and profitability.
The service industry exists to support oil & gas producers, serving as a critical resource rather than a cost center to be slashed. Historically, however, producers have treated the service sector as if it should share in their boom-and-bust cycles—where producers reap the rewards during boom times, leaving the service industry to endure all other, less favorable periods. The question facing future industry leaders is whether the boom/bust cycle itself is outdated. Will the Preliminary Specification proposed by People, Ideas & Objects truly fulfill its promise of eliminating these cycles?
Past leadership bears responsibility for these outcomes. Their decisions have harmed every stakeholder in the oil & gas sector, down to local businesses in rural areas. Confidence in profitability will not return until producers restore it permanently within their operations. Many stakeholders are unwilling to reinvest in an environment where the service industry has been so poorly treated. As rigs were scrapped and horsepower sold off, officers and directors showed no concern for long-term consequences. The ramifications are illustrated by Liberty Energy’s September 30, 2024, quarterly report.
Focused investments have allowed us to develop new markets and lead technology innovation and operational efficiency in the industry. Over the past year, Liberty entered partnerships to develop the new gas-rich Beetaloo Basin in Australia. We have taken a significant step forward with the arrival of a Liberty fleet in country,” continued Mr. Wright. “During the third quarter, the Liberty Advanced Equipment Technologies (LAET) manufacturing and assembly division delivered its first digiPrime pumps. Additionally, Liberty Power Innovations’ (LPI) expanded operations in the DJ Basin are off to a strong start, helping bring our frac fleet CNG fueling services to critical mass.”
And
Today, the rising demand for power in commercial and industrial applications offers compelling opportunities for LPI. We are excited to leverage the expertise that we have built constructing and managing power plants for frac fleets to additional opportunities both inside and outside the oilfield.
Outlook
Elevated uncertainty in energy markets has further left operators reluctant to accelerate completions activity in advance of the new year. We now expect a low double-digit percentage reduction in Q4 activity, a bit more than the typical Q4 softening. Completions activity likely increases in early 2025 to support flattish E&P oil & gas production targets. Since late 2023, U.S. crude oil production has been relatively flat and would likely decline if current completions activity levels persist.
Faith, trust, and confidence in producers' ability to manage industry challenges have all but disappeared. Liberty Energy, for instance, seeks new fracing opportunities outside North America and looks to apply its expertise to other industries. They have little doubt that production volumes will decline due to decades of mismanagement and leadership failures in oil & gas boardrooms. It is noted the founder and CEO of Liberty, Chris Wright is president Trump’s Energy Secretary.
Producers will need to rebuild the service industry themselves, likely through philanthropic investments to restore capacity and capabilities. The service industry invested in good faith once before and suffered irreparable damage. “Fool me once, shame on you; fool me twice, shame on me” now resonates deeply with the service industry. If producers put their own resources at stake, they may finally develop some appreciation and respect for the service sector.
The first step toward resolving these deep-seated issues is organization. The Preliminary Specification—together with People, Ideas & Objects, our user community and their service providers—offer a structured approach via Cloud Administration & Accounting for Oil & Gas. This framework defines how the industry’s future administrative and accounting functions will support a leadership dedicated to a culture of preservation, performance, and profitability.
Building the Golden Gate Bridge requires distinct strategies. One method is comparable to running a corner store and using its daily profit to buy another bag of cement. The more logical method is to secure project financing from the start. Likewise, developing the Preliminary Specification and Cloud Administration & Accounting for Oil & Gas software and services is a project that will become a business once it’s built. Our Profitable Production Rights are the key to making that happen.
The potential of cryptocurrency and blockchain technology has drawn significant interest from the Trump administration and the market, particularly for managing rights, ownership, and property exchanges. While People, Ideas & Objects is not a source for the latest insights on crypto, we are incorporating it into the financing strategy for developing our Cloud Administration & Accounting for Oil & Gas software, hardware and operation. This financing mechanism involves the sale of Profitable Production Rights, which will provide an oil & gas producer with access to the Cloud Administration & Accounting for Oil & Gas platform.
Each Profitable Production Right grants the holder the ability to process one barrel of oil equivalent of production through our service. Each right is implemented using blockchain technology and its smart contract is used to manage billing to the licensed producer and any ongoing payments to the facility once built. Without sufficient Profitable Production Rights, a producer would be unable to account for or administer all of their properties. Each smart contract is negotiated between the rights holder and a producer to determine whether the fee they charge for access to Cloud Administration & Accounting for Oil & Gas is a fixed amount or a royalty on revenues. As a revenue-generating approach, crypto-based transactions hold broad appeal for those anticipating the economic landscape we are moving into.
Occidental Petroleum’s recent sale of its Delaware Basin assets to Permian Resources—priced at $818 million for 15,000 BOE/day and 29,500 acres—translates to roughly $54,533 of capital cost per BOE/day. Based on the Preliminary Specification’s value proposition, People, Ideas & Objects recommends that Profitable Production Rights be structured as a percentage royalty on production, generally in the range of 2.5% to 5%. Although fees and rates are ultimately negotiable, a 2.5%–5% royalty interest (calculated against the $54,533/BOE/day figure) suggests a value of approximately $1,363–$2,726 per BOE/day for each Profitable Production Right.
Looking at 2023 as a whole, there were $234 billion in property and merger transactions within the oil & gas industry. One key example is Exxon’s $64.5 billion acquisition of Pioneer Natural Resources, which increased Exxon’s production by a reported 714,730 BOE/day. That puts Exxon’s effective purchase price at approximately $90,244 per flowing BOE/day. Under a Profitable Production Right model, a 2.5%–5% royalty would equate to an asset value of about $2,256–$4,512 per BOE/day. Averaging these two examples (Occidental’s $54,533/BOE and Pioneer’s $90,244/BOE) yields a rough valuation of $1,809–$3,619 per BOE/day (2.5%–5% royalty).
On average, one BOE has recently generated around $75.98 in revenue, or $27,732.70 in annual revenue per daily BOE (assuming a 6:1 gas-to-oil price equivalence for appropriately priced gas). At a 2.5%–5% royalty, annual revenues for a Profitable Production Right would be approximately $693–$1,386 per BOE license. Costs of Cloud Administration & Accounting for Oil & Gas are unknown at this time, they are designed to be paid by the Profitable Production Rights holders and therefore attaching them directly to the production of oil & gas. For more information, see the Flexible Profitable Production Rights.
Proceeds from the sale of Profitable Production Rights finances the development of the Preliminary Specification and the broader Cloud Administration & Accounting for Oil & Gas system, in exchange for securing the right itself. A monthly maintenance and support fee—managed via a smart contract—will also apply. This fee excludes individual service provider costs, which will be invoiced separately and directly to each Joint Operating Committee or producer for work undertaken by them in a given month. Those costs lie outside the Cloud facility’s billing and management. It is unknown at this time what the operating costs would involve.
Early in this process, People, Ideas & Objects identified a range of individuals, groups, and organizations that may be interested in purchasing Profitable Production Rights, including:
Investors:
Engagement Strategy: Highlight the disillusionment investors have with past industry practices. Our strategy aims to re-engage them by offering a license to dynamic, innovative, accountable, and profitable oil & gas production.
Value Proposition: Provide a direct, persistent royalty share in oil & gas production, showcasing a shift towards transparency and profitability.
Oil & Gas Employees:
Risk Mitigation: Acknowledge the risks faced by individuals supporting industry transformation.
Future Potential: Emphasize confidentiality and the potential for a safer, more rewarding future in a transformed industry.
Service Industry Representatives:
Stability Advocacy: Address the boom/bust cycle and advocate for a more stable and trustworthy relationship between producers and the service industry.
Trust Rebuilding: Focus on rebuilding trust and ensuring mutual profitability, emphasizing long-term partnerships.
Producers (North American and Worldwide):
Direct Purchase Incentive: Encourage direct purchase of North American Profitable Production Rights Licenses.
Cultural Shift: Promote a culture of preservation, performance, and profitability across the industry through our approach.
Our user community and their service provider organizations:
Participation and Motivation: Reflect their motivation for profitability everywhere and always by participating in these software developments.
Incremental Value-Add: Offer a Profitable Production Rights License that provides incremental value-add, enhancing their involvement in the industry.
Direct Participation: Highlight the attractiveness of direct participation in the production process as an incremental form of value for those within the oil & gas community.
YouTube illustrates how early innovators often fail to fully capture the long-term value of their creations. Despite being in the market for less than two years, YouTube was sold in October 2006 for $1.65 billion. Today, it may represent over 10% of Alphabet’s $2.41 trillion market capitalization—an estimated $241 billion. In hindsight, it’s easy to wonder if YouTube’s founders, who earned billions in just a few years, left money on the table.
Cryptocurrencies, by design, empower company founders to sustain ownership as their ventures grow. Whether YouTube’s founders could have steered the platform to a $236 billion valuation is unknown, but with cryptocurrency-based funding mechanisms, they would have had ready access to capital throughout the company’s evolution.
Meanwhile, the U.S. Securities and Exchange Commission (SEC) and financial institutions are stepping into the cryptocurrency space. Banks now provide trading platforms for these digital assets, and the SEC has chosen to regulate them. The Trump administration and Federal Reserve officials have also been receptive—likely due, in part, to the points mentioned above and to the emerging role of digital rights and Intellectual Property in the broader economy. As People, Ideas & Objects suggest, owning the oil & gas asset alone is no longer sufficient; it is equally critical to have access to the software, or the rights to, that ensures the asset’s profitability. Without both, oil & gas value is severely constrained.
People, Ideas & Objects aims to tackle the many challenges confronting the oil & gas sector by reimagining the industry’s core operations. By emphasizing dynamic, innovative, accountable, and profitable oil & gas producers—and by engaging a wide network of stakeholders through the Profitable Production Rights License—our approach aspires to foster a cultural shift. This shift is necessary to preserve resources, drive performance, and achieve sector-wide profitability. Such a transformation is not only vital for the industry’s survival but also for its competitiveness in North American capital markets, which increasingly prize these qualities.
For more information on our Profitable Production Rights.
Success for this reconstruction is far from guaranteed; it demands concerted effort from the entire oil & gas industry. Achieving true industry-wide success means everyone must rise to the challenge and commit to a level of engagement far beyond the passive, “muddle through” strategies of many current producers. There’s no question that today’s challenges are among the most difficult the industry’s ever faced—yet they also present unprecedented opportunities for those willing to step forward. For anyone considering oil & gas as a long term career, now may be the ideal time to start. And if we encounter anyone attempting to excuse, deflect blame or create scapegoats, urge them to reconsider and refocus on genuine solutions.
Recent months have illustrated how rapidly the United States economy can shift, reaffirming its position as the world’s most formidable economic and political force. In hindsight, we may see this as both a blessing and a curse: higher energy demand will follow the country’s newfound freedom from past constraints. Meanwhile, oil & gas producers will grapple with plummeting shale production, diminished industrial capacity, strained capital structures, and a cultural complacency that makes even “muddle through” look proactive. The risk is failing to provide the energy that North America’s economy and society need to fulfill their promise.
This predicament did not arise overnight. I trace its origins to purposeful misinterpretations of the SEC’s late-1970s Full Cost Accounting Guidelines, which triggered an ongoing cycle of value destruction, first manifesting in the 1986 oil price crash and inflicting years of hardship. Since then, we’ve experienced chronically low commodity prices, repeated crashes, and persistent negative pricing, all of which contribute to varying degrees of unprofitability—some on a staggering scale and all of it unnecessary.
I’ve spent 34 years (as of May 2025) urging officers and directors to recognize this systemic issue and adjust course. They never did. A decade ago, investors declared they would no longer support the industry; still, nothing changed. As a result of their obstinance to People, Ideas & Objects persistence and their own shareholders demands. Their record is indefensible and disqualifying. Last year’s LNG missteps further exposed an alarming lack of fundamental business knowledge when it became clear these leaders did not even grasp the business basics of free-on-board contracts. They were at the helm yet failed to steer when a single turn would have changed the outcome. They also watched while natural gas lost its heating value equivalent pricing of 6:1 which fell to as low as 50:1 in early 2024. These two points led to over $4.6 trillion in lost revenues since 2009. Without a whisper of acknowledgement or concern. “Clean energy was their future because shale was uncommercial.” There is no future for leadership of this character. When an industry neglects its responsibilities to such an extent that outside voices must attempt to persuade for 34 years for enhanced profitability—even when those approaches serve their own interests—how dynamic and innovative can that industry truly or ever be? Investors will need to know why anyone would pursue oil & gas in the organizational methods used today.
From late 2007 to early 2024, trillions of dollars were objectively shown to have been destroyed this century, calling into question the willingness of leadership to address profitability. We can now see the staggering cost of sustaining an unprofitable North American industry. This is likely the most valuable lesson ever learned in oil & gas—one that we will reference and heed for at least another generation. The 40-year-and-counting record of value destruction stands as a cautionary example. From now on, anyone serious about a career in oil & gas must give profitability top priority. It is what successful businesses do.
Adoption of the Preliminary Specification is the opportunity for industry to begin the process of turning North American oil & gas assets into profitable operations. New producers will have the independence and strength to write their own ticket towards whatever their destination is. It’s the Elon Musk, Steve Jobs and others type of thinking that is available to those that wish to adopt that independence and perform at the highest expectations of the North American capital markets. Manufacturing rockets is purely a cost, yet just look at how much revenue SpaceX expects to generate from internet services. (Elon is not taking SpaceX public for a reason.)
Today, the majority of producers—likely well over 90%—follow the same generic “drill-produce-repeat” business model, and that model has failed. Engineers and geologists must lead the charge to revitalize this industry. Who will be the one, to make a sailing metaphor, to ditch the dagger board for foils to reap the performance differential. Consider how many industry challenges and inefficiencies can be solved with such innovative thinking, and how much value could be created for those that do. This sector has languished for decades, but therein lies immense opportunity for those ready to break the cycle of complacency and drive meaningful dynamic, innovative, accountable and profitable change.
From Grok 2
During the preliminary regattas, speeds upwind were observed to be competitive, with teams like American Magic showing impressive performance even in challenging, light wind conditions, suggesting speeds could be in the high 20s to low 30s when conditions allowed for consistent foiling.
Downwind Speeds:
Downwind, the AC75s can achieve significantly higher speeds due to the ability to generate a lot of "apparent wind" over the sails. Speeds downwind have been recorded exceeding 50 knots, showcasing the incredible performance of these foiling monohulls. The design of these boats allows for a sailing experience where the apparent wind angle is always ahead of the sail, enabling them to sail faster than the true wind speed.
Posts on X have highlighted speeds of up to 55.6 knots (63.98 mph) in wind speeds estimated to be 18 - 22 knots (~23 mph) during the America's Cup races, indicating the high performance of these vessels in competitive conditions.
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Here are the four graphs discussed in the “The Challenge of Our Times” section of this paper. (And posted in the discussion below.) They are placed in this appendix for the purposes of easier analysis and comparison.
The next four graphs are marked with three vertical lines in the years 2015, 2018, and 2020. Each date represents a critical juncture where events should have prompted action by officers and directors:
2015: Investors withdrew their support industry-wide.
2018: The service industry realized producers were not paying on a reasonable schedule.
2020: The onset of COVID-19 and its global impact on the economy and energy markets.
Which of these events had the greatest influence on the industry’s current state?
The first graph highlights global and U.S. capital expenditures, illustrating the substantial cost escalation ushered in by shale development in the 21st century. It also shows the dramatic downturns in 2015, 2018, and 2020. Additionally, consider the mid-1980s, when capital expenditures were supported by natural gas prices equivalent to $10.00 today. At that time, performance showed investors what was achievable. Now, investors see such historical anomalies and question the quality of current producers’ earnings.
See Graph 1 “Field of Restraint”
The EIA graph below illustrates how these key dates influenced the reduction of U.S. drilling activity. People, Ideas & Objects suggests that the most detrimental factor affecting a producer’s activity level is whether investors actively support their capital structure. This notion is partially confirmed by the decline in activity during the 2008 financial crisis.
Regarding the service industry, an 80% drop in producer activity triggers a corresponding revenue collapse. Faced with significant overcapacity, service providers are forced to accept steep discounts of 50% or more on their day rates—potentially translating to a 90% reduction in their revenues at times. Adding a global pandemic into the mix only exacerbates the situation, leaving the service industry—whose customers have long failed to pay on time—to struggle for survival. This led to drastic measures, such as cannibalizing equipment for parts. Attrition continuously reduces fleet numbers, with even basic maintenance seen as wasted money. Then today, the service industry must endure an “industrial rationalization” prompted by producer consolidations.
Producers should consider how they would respond if a similar scenario played out in their own world, absent the steady stream of oil & gas revenues. Would they be willing to reinvest in rebuilding a recently constructed rig that was cut up for scrap, only to face challenging conditions imposed by customers who fail to appreciate their role in the success of producer operations?
If I were a producer, I wouldn’t wait much longer to let the service industry reflect on this alone. Perhaps producers, having broken the system, should now take the initiative to fix it.
The third graph supports my broader thesis of how we reached our current predicament. In the late 1970s, the SEC mandated Full Cost Accounting for all oil & gas producers listed on U.S. exchanges. This accounting standard fostered a cultural shift, making “spending” the only competitive advantage of North American producers. Overcapitalizing property, plant, and equipment in oil & gas artificially inflates reported profitability. This inflated profitability attracts excessive investor interest, leading to overinvestment. Ultimately, overinvestment results in overproduction of commodities that function under the economic dynamics of “price makers.”
In 1986, global overproduction of oil triggered a significant price collapse—a devastating downturn that persisted until the early 2000s. During the 1990s, the service industry introduced coiled tubing and spherical packers, innovations that producers cautiously applied to shale formations, igniting a second wave of industry development.
Today, we are confronted with a level of damage to North American oil & gas that is critically dangerous to our economy, politics, and overall prosperity. The consequences are severe, and the path forward demands careful consideration and transformative change.
See Graph 3 “U.S. worker in oil & gas extraction.”
In a capital-intensive industry, one would expect that products predominantly reflect capital costs. Ideally, these costs would be passed on to consumers in a timely and accurate manner, aligned with the reasonable returns that capital markets demand. However, in the oil & gas sector, capital is often stored on balance sheets for decades, artificially emulating a producer’s value. Consumers rarely see these costs, as investors effectively subsidize them on behalf of energy users. The magnitude of this subsidy is clearly documented in the producers’ property, plant, and equipment accounts.
What happens in practice is that producers capitalize most of their overhead expenses. Even routine costs, such as reception services, office supplies, and phone bills—normally considered overhead expenses—are treated as “capital” in oil & gas. Since these are recurring monthly overheads, they should logically be included in the commodity price each month. Instead, they are capitalized and depleted over decades, just like all other capital costs. As a result, the cash needed for overhead each month must come from elsewhere.
This approach has developed to the point where competitiveness was drained from industry. Investors acted as a subsidy and performance was not objective. Capacities and capabilities throughout the North American oil & gas economy are severely diminished which is now contributing to the decline in shale gas deliverability. Not only have production levels plateaued, but some formations are beginning to show reduced output. For the industry’s new leadership, today’s challenge is especially daunting. What level of drilling activity is required to regain the upward trajectory seen from 2015 to 2020? Will 2,000 rigs suffice? And if so, where will they come from, and who will run them?
Training new personnel to drill 10,000-foot wells and 10-mile laterals, and to perform complex, high-pressure fracing operations successfully, is no small feat—especially when those who once possessed such expertise have long since moved on to other industries. Will a high salary lure them back? Or will they wait to see if others are actually getting a second paycheck before committing?
See Graph 4 EIA’s “Monthly U.S. dry shale natural gas production by formation.”
The central question remains: which event proved most detrimental in shaping the industry’s current state? In a capital-intensive sector like oil & gas, capital availability is the decisive success factor. Without investor support for producers’ capital structures—and amid a cultural inability to generate genuine profits—financial resources erode. This leads to declining industrial capacity, diminishing capabilities, a widespread loss of confidence in leadership, and now falling oil & gas deliverability.