What is an Authorization for Expenditure?

December 4, 2012

Authorization for Expenditure (AFE)

An AFE is a budgeting and approval form used during the planning process for a well about to be drilled (and for other projects).  It includes an estimate of costs to be incurred during the IDC (intangible drilling cost) category and in the tangible equipment category.  Costs are shown in total with accompanying breakdowns.  The AFE form represents: (1) a budget for the project against which actual expenditures are compared and (2) a joint venture form for evidencing agreement by joint interest owners to participate in the budgeted project.

How it’s important to us

The term “AFE” is used extremely frequently across departments in O&G organizations.  Before almost any well-related cost is incurred, it must be accounted for in an AFE.  Supplemental AFEs are often tied to initial authorizations for unplanned, but related work.

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