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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In Re: PACIFIC ENERGY RESOURCES LTD., et al.,

Debtors.

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Chapter 11 Case No. 09-10785 (KJC) (Jointly Administered)

FEE AUDITORS FINAL REPORT REGARDING THE FEE APPLICATION WITH NO FEE OR EXPENSE ISSUES FOR THE FIFTH INTERIM PERIOD This is the final report of Warren H. Smith & Associates, P.C., acting in its capacity as fee auditor in the above-captioned bankruptcy proceedings, regarding the Interim Fee Application of the firms for which we have no fee or expense issues for the Fifth Interim Period (collectively referred to hereafter as the Application(s)). BACKGROUND 1. Steptoe & Johnson LLP (S&J) was retained as counsel to the official committee

of unsecured creditors. In the Application, S&J seeks approval of fees totaling $20,559.001 and costs totaling $9.00 for its services from March 1, 2010 through May 31, 2010 (the Application Period). 2. Zolfo Cooper Management, LLC (Zolfo Cooper), was retained to provide

restructuring management services to the debtors-in-possession. In the Application, Zolfo Cooper

We note that we questioned a S&J fee issue for additional clarification. See the attached Appendix 1 for this question and S&Js response.
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seeks approval of fees totaling $11,713.502 and costs totaling $14.27 for its services from March 1, 2010, through June 30, 20103 (the Application Period). 3. In conducting this audit and reaching the conclusions and recommendations

contained herein, we reviewed in detail the Application in its entirety, including each of the time and expense entries included in the exhibits to the Application, for compliance with Local Rule 2016-2 of the Local Rules of the United States Bankruptcy Court for the District of Delaware, Amended Effective February 1, 2010, and the United States Trustee Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. 330, Issued January 30, 1996, (the "Guidelines"), as well as for consistency with precedent established in the United States Bankruptcy Court for the District of Delaware, the United States District Court for the District of Delaware, and the Third Circuit Court of Appeals. DISCUSSION 4. We have no objections to, or issues with, any of the Applications. CONCLUSION 5. Thus, for the Application Period, we recommend approval of all fees and costs for

the following applicants, as follows: a. b. S&J - fees totaling $20,559.00 and costs totaling $9.00; and Zolfo Cooper - fees totaling $11,713.50 and costs totaling $14.27.

We note that we questioned a Zolfo Cooper fee issue for additional clarification. See the attached Appendix 2 for this question and Zolfo Coopers response. The Fifth Interim Period is March 1, 2010, through May 31, 2010. However, for unknown reasons, Zolfo Coopers Application covers the time frame of March 1, 2010, through June 30, 2010. Thus, this report covers the time frame set forth by Zolfo Cooper.
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Respectfully submitted, WARREN H. SMITH & ASSOCIATES, P.C.

By: Warren H. Smith Texas State Bar No. 18757050 325 North St. Paul Street Suite 1250 Dallas, Texas 75201 214-698-3868 214-722-0081 (fax) whsmith@whsmithlaw.com FEE AUDITOR

CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing document has been served by First Class United States mail to the attached service list on this 22nd day of December, 2010.

Warren H. Smith

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SERVICE LIST Notice Parties The Applicant Filiberto Agusti, Esq. STEPTOE & JOHNSON LLP 1330 Connecticut Ave., N.W. Washington, D.C. 20036 Robbin L. Itkin, Esq. STEPTOE & JOHNSON LLP 2121 Avenue of the Stars, Suite 2800 Los Angeles, California 90067 The Applicant Scott Winn Mark Cervi Zolfo Cooper Management, LLC 101 Eisenhower Parkway Roseland, NJ 07068 United States Trustee Office of the United States Trustee 844 N. King Street, Room 2207 Lock Box 35 Wilmington, DE 19801 Counsel to the Debtors Laura Davis Jones, Esq. James E. ONeill, Esq. Kathleen P. Makowski, Esq. Pachulski Stang Ziehl & LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington DE 19899 Counsel to the Debtors Ian S. Fredericks, Esq. Skadden Arps, Slate, Meagher & Flom LLP One Rodney Square P.O. Box 636 Wilmington, DE 19899 Special Counsel to the Debtors Penelope Parmes, Esq. Rutan & Tucker, LLP 611 Anton Boulevard 14th Floor Costa Mesa, CA 92626 Canadian Counsel to the Debtors Jensen Lunny MacInnes Law Corporation H.C. Ritchie Clark, Q.C. P.O. Box 12077 Suite 2550 555 West Hastings Street Vancouver, BC V6B 4N5 Engineering Consultant to the Debtors Mark A. Clemans Millstream Energy, LLC 4918 Menlo Park Drive Sugarland, TX 77479 Special Oil and Gas Transactional Counsel to the Debtors Anthony C. Marino, Esq. Schully, Roberts, Slattery & Marino PLC Energy Centre 1100 Poydras Street, Suite 1800, New Orleans, LA 70163 Financial Advisor to the Debtors Curtis A. McClam Deloitte Financial Advisory Services LLP 350 South Grand Ave, Ste. 200 Los Angeles, CA 90071 Financial Advisor to the Debtors John Rutherford Lazard Freres & Co. LLC 30 Rockefeller Plaza, 61st Floor New York, NY 10020

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Co-Counsel to the Official Committee of Unsecured Creditors David B. Stratton, Esq. James C. Carignan, Esq. Pepper Hamilton LLP Hercules Plaza, Suite 1500 1313 Market Street Wilmington, DE 19899 Co-Counsel to the Official Committee of Unsecured Creditors Filiberto Agusti, Esq. Steven Reed, Esq. Joshua Taylor, Esq. Steptoe & Johnson LLP 1330 Connecticut Avenue NW Washington, DC 20036

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Appendix 1 In our initial report, we noted that during the Application Period S&J billed $1,911.00 in fees for preparation and prosecution of its fee applications, compared to $18,648.00 for substantive work. The amount billed for fee applications thus equals 10.25% of the amount billed for substantive work. We asked S&J to explain why the $1,911.00 in fees for preparation and prosecution of S&Js fee applications during the Application Period should be considered reasonable. S&J provided the following response:

In general response to the inquiry above, we note that the approximate amount spent on the preparation of S&J's fee applications during the relevant time period has remained exceedingly low, which is concomitant with S&J's commitment to performing tasks in an efficient and cost sensitive manner. More specifically, however, with respect to the above, Task Code 107, is not solely used for the preparation of the S&J's fee applications, but with respect to all tasks associated with the Committee's professionals' fee applications. Therefore, in March 2010, the time included not only preparation and filing of S&J's February 2010 fee application, but also reviewing and preparing responses to the Fee Auditor's inquiries from the Second Interim Period. Similarly, in April 2010, S&J prepared and filed its March 2010 fee application, but also prepared S&J's Fourth Interim Fee Application and reviewed and prepared responses to the Fee Auditor's inquiries regarding S&J's Third Interim Fee Application. Finally, in May 2010, the time included preparation and filing of S&J's April 2010 Monthly Fee Application. We appreciate this response. Our review indicates that no more than $176.00 of the fees in question related to the fee applications of other professional firms, but we note as well that much of the $1,911.00 total relates to preparation and follow-up for the second and third interim periods for which S&J requested fees and expenses of $265,357.75 and $15,421.99 (second interim period) and $29,340.50 and $721.87 (third interim period), respectively. In this light, we do not believe these fee application fees to be unreasonable, and we accordingly recommend no reduction in this regard.

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Appendix 2 In our initial report, we noted that $10,649.50 of the requested fees relate to Zolfo Coopers fee applications. This amount equals 90.92% of the total fees requested for the Application Period. We understand that fee-application fees may constitute a trailing expense and appreciate that Zolfos fees for prior periods were greater than those for this period. Nonetheless, we asked Zolfo Cooper to explain why this amount should be considered reasonable. Zolfo Cooper provided the following response: In response to discussion relating to the amount of fees requested for the Application Period, the fees requested are reasonable. Under this category, there are two buckets of fees incurred by Zolfo Cooper: time incurred preparing monthly fee statements and time incurred responding to fee auditor reports. Of these two buckets, the majority of the time spent by Zolfo Cooper was responding to fee auditor reports. In fact, the total amount of time spent on Fee Examiner issues during the Application Period is 7,593.00, while 3,055.50 was spent on preparing the monthly fee statements. The Fee Examiner challenged fees of $632.00 and expenses of $11,789.66. As the Fee Examiner is fully aware, Zolfo Cooper has consistently asserted that its fees are not reviewable by the Fee Examiner since its retention is one under Section 363 and not under Section 327, nevertheless, Zolfo Cooper agreed to the Fee Examiner's review of its fees. Zolfo Cooper should not be penalized by having to take a further reduction on fees in a situation where its fees should not have been reviewable. Moreover, as the Fee Examiner is well aware, the amount of time and effort required to respond to fee auditor statements is dependent upon the effort expended in responding and not the total amount of the fees. Zolfo Cooper made fulsome and complete disclosures of all issues and matters questioned. We believe that the time spent was reasonable in light of the level of detail provided and the fact that our reductions, as a result thereof, were $632.00 in fees and a mere $1,749.76 in expenses. We appreciate this response but believe that the buckets described above should be considered together in assessing the reasonableness of an applicants fees for preparing and prosecuting its fee applications. However, $5,833.50 of the amount in question relates to the fee application for the third interim period, when the amount requested was considerably greater (Zolfo Cooper requested approval of fees totaling $368,257.50 and costs totaling $16,612.55 for the third interim period). Our review indicates that $6,676.50 in fees from prior periods (i.e., periods prior to the current
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period) are attributable to the application for the third interim period. Thus, a total of $12,510.00 in fees are attributable to an application encompassing than $384,870.05 in fees and expenses. The $12,510.00 thus represents 3.25% of the total for that period, which we do not believe to be unreasonable. Accordingly, we have no objection to these fees.

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