M & T, Inc. v. Fuel Resources Development Co.
United States District Court for the District of Colorado
518 F. Supp. 285 (D. Colo. 1981)
M & T, Inc. (plaintiff) and Fuel Resources Development Co. (Fuelco) (defendant) entered a joint operating agreement to drill an oil and gas well, signing an AFE estimating the drilling costs they'd share; once actual drilling costs exceeded that estimate, Fuelco told M & T it would stop making further payments, but M & T continued drilling before eventually terminating for financial reasons. M & T sued to recover Fuelco's share of the costs incurred after Fuelco's withdrawal but before M & T's own decision to stop drilling.
Whether a party's approval of an Authority for Expenditure is a commitment to pay its proportionate share of all reasonable and necessary costs incurred until the AFE's objective is reached.