Malone Petroleum Consulting



AFE (Authority for expenditure) Checklist for a Horizontal Well

AFE Checklist for a Horizontal Well

An AFE (authority for expenditure) is a budget document used by the oil and gas industry as a cost control measure in order to estimate the cost of drilling a well and obtain an approval by the operator and non-operators. It can also be used for completing a well, doing a workover on a well or doing a construction project, like the construction of an offshore pipeline and/or platform. According the AAPL joint operating agreement (JOA), an AFE must be prepared for Non-Operator approval if the amount exceeds the pre-established limit in the JOA. Some operators will try to put these costs in segments so they can bypass the contractual limit.

Tangibles are very easy to recognize – basically installed well items you can touch; the rest are intangibles. AFE’s include tangible (casing, wellhead, tubing) and intangible (acidizing, bits, cementing, drill rig, fuel, labor, logging, perforating, rentals, supervision, trucking, water), are categories within the drilling and completion categories. If the well is a dry hole, then the completion portion would not be used and the geologist would be questioned for the failure. The well might find production; however, logging might show the well will not be economical; therefore, the expensive production casing should not be run and cemented. If the well is capable of production, later, a cement bond log will be run and the and acid/frac will be performed on the well.

The AFE is usually assigned codes with each item so the actual expenditures can be coded allowing actual costs to be compared to estimated costs. This helps the operator to determine where major over-expenditures are under each category. A variance column would be used to show how much the actual costs varied from the estimated costs, by amount and by %.

Obviously, on a drilling well, the costs depend on how deep the well is since deeper depths take a much longer time to be reached. Location costs can vary significantly based on the condition of the land the projected area. We have seen it in the past, that an AFE can be manipulated, e.g., actual costs (based on actuals of near-by wells), low costs (to sell the project to management of investors), high costs (high estimates as a built in safety for over expenditures.

Development IDC (Intangible Drilling Costs)

5000 Permits and Fees
5003 Bits/Reamers/Stabilizers
5004 Casing Crew / Tongs
5005 Cementing - Casing
5009 Directional Drilling
5010 Drilling - Daywork
5013 Drilling - Mob/Demobilization
5015 Fuel
5022 Miscellaneous and Contingencies
5023 Communications and Monitoring
5024 Mud-Chemicals
5025 Overhead/Management
5027 Water Supply
5029 Rental-Downhole
5030 Rental-Fluid Mgmt.
5031 Rental-Surface Equip.
5033 Services-Misc.
5035 Supervision
5036 Trucking-Hauling
5039 Disposal-Cuttings
5040 Disposal-Fluids
5203 Bits/Reamers/Stabilizers-Horizontal
5204 Casing Crew/Tongs-Horizontal
5205 Cementing-Casing-Horizontal
5207 Cement Production Casing-Horizontal
5209 Directional Drilling-Horizontal
5210 Drilling/Daywork-Horizontal
5213 Drilling/Mob/Demobilization-Horizontal
5214 Geologic Consulting and Geo Steer
5215 Fuel-Horizontal
5220 Logging/Mud-Horizontal
5222 Misc and Contingencies-Horizontal
5223 Communications/Monitoring-Horizontal
5224 Mud/Chemicals-Horizontal
5227 Water Supply-Horizontal
5230 Rental/Fluid Mgt-Horizontal
5231 Rental/Surface Equip-Horizontal
5233 Services/Misc-Horizontal
5234 Security-Horizontal
5235 Supervision/Engineering-Horizontal
5236 Trucking/Hauling-Horizontal
5239 Disposal Cuttings-Horizontal
5240 Disposal Fluids-Horizontal

Development TDC (Tangible Drilling Costs)

5501 Casing – Conductor
5502 Casing – Surface
5503 Casing – Intermediate
5507 Float Equipment/Centralizers
5512 Wellheads, Casing heads, Misc. fittings

Development ICC (Intangible Completion Costs)

6301 Acidizing and Fracturing Completion
6305 Completion Unit-Coil Tubing
6308 Contract Labor
6313 Flow Testing-Completions
6315 Fuel
6318 Logging Downhole-Completions
6319 Miscellaneous-Completions
6320 Disposal-Solids, Sand
6322 Disposal - Fluids, Water
6323 Water Supply-Completions
6325 Perforating and Logging-Completion
6326 Rental-Surface-Completions
6328 Rental-Frac Stack-Completions
6329 Supervision-Completions
6333 Services/Misc.-Completion
6335 Well Equip. Downhole Exp Comp
6336 Trucking-Hauling
6337 Security-Completions
6342 Engineering/Consultant-Completion

Development TCC (Tangible Completion Costs)

6701 Casing Production-Horizontal
6706 FloatEquip/Centralizers-Horizontal
6719 Well/Casing Heads, Misc. Fittings
6819 Wellhead/Xmas Tree-Completion

Location and Access

2047 HI way Improvements and Repairs
2049 Engineering
2085 Tax
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