LEARN
What is an Authorization for Expenditure (AFE)?
Definition
An Authorization for Expenditure (AFE) establishes the expected cost of a proposed oil and gas project or activity and provides a basis for authorizing and tracking that spending. AFEs are commonly used for activities such as drilling or completing a well, performing a workover, or constructing or modifying facilities. When multiple working-interest owners are involved, the AFE may also be part of the approval process before work begins. As the work progresses, actual spending can be compared with the AFE to identify and evaluate cost variances.
Practical questions
- What was this project expected to cost?
- How much has actually been spent?
- Is the project over or under its AFE?
- Which cost categories are driving the variance?
- When did actual spending begin to move away from plan?