UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In Regarding 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 INTERIM FEE APPLICATION OF RUTAN & TUCKER, LLP, FOR THE THIRD 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 Fee Application of Rutan & Tucker, LLP, for the Third Interim Period (the Application). BACKGROUND 1. Rutan & Tucker, LLP (Rutan), was retained as special corporate and litigation

counsel for the debtors-in-possession. In the Application, Rutan seeks approval of fees totaling $250,597.00, and costs totaling $951.66 for its services from September 1, 2009 through November 30, 2009 (the Application Period). 2. 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
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Bankruptcy Court for the District of Delaware, the United States District Court for the District of Delaware, and the Third Circuit Court of Appeals. We served on Rutan an initial report based on our review, and received a response from Rutan, portions of which response are quoted herein. DISCUSSION 3. In our initial report, we noted a few instances in which multiple professionals

participated in conference calls. See Exhibit A. Guideline II.D.5 provides that [i]f more than one professional from the applicant firm attends a hearing or conference, the applicant should explain the need for multiple attendees. Furthermore, Delaware Local Rule 2016-2(d)(ix) states that [t]he activity descriptions shall individually identify all meetings and hearings, each participant, the subject(s) of the meeting or hearing, and the participants role. We asked Rutan to review Exhibit A and provide further explanation regarding these fees. Rutans response is attached hereto as Response Exhibit 1. We appreciate Rutans response and have no objection to these fees. 4. 03/19/09 We noted several instances of lumping: Garett Sleichter 3.50 Prepare updated anti-dilution calculation under lender warrants; research and respond to L. Martinez and B. Lynn inquiries re audit disclosures. Continue review and revision of AIF, financial statement footnotes and MD&A; audit committee meeting. Review materials circulated by G. Tywoniuk; reserve committee and board meetings. Review emails regarding minutes; assemble list of minutes and written consents needing signature; follow up regarding same.

03/27/09

Gregg Amber

4.00

03/30/09 03/31/09

Gregg Amber Laurie Biegel ( PA)

3.00 1.30

Guideline II.D.5 provides that [s]ervices should be noted in detail and not combined or "lumped" together, with each service showing a separate time entry; however, tasks performed in a project which total a de minimis amount of time can be combined or lumped together if they do not exceed .5 hours on a daily aggregate.
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We asked Rutan to advise timekeepers to avoid such lumping, and Rutan responded as follows: In paragraph 4 of the Report, the Fee Auditor notes examples of lumping. The referenced time entries should have been broken down in tenth-of-an-hour increments, and the time entries are hereby amended as follows: 03/19/09 Garett Sleichter 3.50 Prepare updated anti-dilution calculation under lender warrants (1.0); research and respond to L. Martinez and B. Lynn inquiries re audit disclosures (2.5). Continue review and revision of AIF, financial statement footnotes and MD&A (2.8); audit committee meeting (1.2). Review materials circulated by G. Tywoniuk (0.8); reserve committee and board meetings (2.2). Review emails from G. Amber and others regarding minutes (0.4); assemble minutes and written consents needing signature (0.8); follow up regarding same (0.1).

03/27/09

Gregg Amber

4.00

03/30/09 03/31/09

Gregg Amber Laurie Biegel ( PA)

3.00 1.30

Rutan has reviewed the Courts policy against lumping with each of the professionals listed above to ensure their compliance with the policy. We appreciate this response and have no objection to these fees. 5. In our initial report, we noted one inadequately detailed time entry for Laurie Biegel

($215 per hour): 03/09/09 Laurie Biegel (PA) 1.30 Review emails regarding transaction matters.

We asked Rutan to provide a further description of the indicated activities. We asked Rutan, in doing so, to consider Guideline II.D.5, which provides, Time entries for telephone calls, letters, and other communications should give sufficient detail to identify the parties to and the nature of the communication. Rutan responded as follows: In paragraph 5 of the Report, the Fee Auditor notes a time entry that lacks sufficient information. The time entry is hereby amended as follows:

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03/09/09

Laurie Biegel (PA)

1.30

Review email exchange with R. Kumararatne regarding consents, minutes appoints officers, and transaction matters in order to prepare board resolutions and filings re same (0.4); begin preparing same (0.9).

We appreciate this response and have no objection to these fees. 6. In our initial report, we noted two expense items for meals that were charged to the

estate without explanation, a $36.40 expense incurred on September 4 and a $22.88 expense incurred on March 30, 2009. We asked Rutan to explain why these meals were charged to the estate as well as why they should be reimbursed. Rutan responded: In paragraph 6 of the Report, the Fee Auditor asks Rutan to provide additional detail regarding two meals charged to the estate (one for $36.40 and the other for $22.88). Rutan hereby withdraws the reimbursement request and reduces its holdback request $59.28 ($36.40 + $22,88). We appreciate Rutans response, and thus recommend a reduction in the amount of $59.28 in expenses. CONCLUSION 7. Thus, we recommend approval of fees in the amount of $250,597.00 and expenses

in the amount of $892.38 ($951.66 minus $59.28) for Rutans services for the Application Period.

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Respectfully submitted, WARREN H. SMITH & ASSOCIATES, P.C.

By: Warren H. Smith Texas State Bar No. 18757050 325 N. St. Paul Street, Suite 1250 Republic Center 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 via First-Class United States mail to the attached service list on this 24th day of May 2010.

Warren H. Smith

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SERVICE LIST The Applicant Penelope Parmes Matt Grimshaw Rutan & Tucker, LLP 611 Anton Blvd., 14th Floor Costa Mesa, CA 92626 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. Ira D. Kharasch, Esq. Scotta E. McFarland, Esq. Robert M. Saunders, 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 19899-8705 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 Corp. 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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Exhibit A 1. On September 2, 2009, CGP ($450 per hour), GA ($550 per hour), GS ($375 per hour), and RK ($325 per hour) (two partners and two associates) participated in a conference call. The total time spent including any preparation time was 6.00 hours for a total fee of $2,537.50. CGP 7.50 ...; conference calls with working group and office conferences re same (2.5);... All hands conference call regarding Group 2 abandonment and regarding Group 1 abandonment/sale work responsibilities (1.0);... Telephone conference with C. Parker, L. Wolf, G. Tywoniuk and R. Kumararatne regarding checklist of closing for Group 1 assets. Prepare for and attend telephone conference with client regarding closing items.

09/02/09

09/02/09

GA

2.50

09/02/09

GS

1.00

09/02/09

RK

1.50

2.

On October 22, 2009, CGP ($450 per hour), GA ($550 per hour), and GS ($375 per hour) (two partners and an associate) participated in a conference call. The total time spent including any preparation time was 2.40 hours for a total fee of $1,067.50. Cristy G Parker 0.60 Participate on weekly status update call with G. Tywoniuk, M. Cervi, I. Kharasch, L. Wolf and various others re open items. Weekly all hands update call. Prepare for weekly status call (0.3); participate in weekly status call with Pacific Energy working group (0.8).

10/22/09

10/22/09 10/22/09

Gregg Amber Garett Sleichter

0.70 1.10

3.

On October 29, 2009, CGP ($450 per hour), GA ($550 per hour), and GS ($375 per hour) (two partners and an associate) participated in a conference call. The total time spent including any preparation time was 2.50 hours for a total fee of $1,112.50. Cristy G Parker Gregg Amber Garett Sleichter 0.70 0.70 1.10 Participate on weekly all hands status update call with G. Tywoniuk, M. Cervi and others. Weekly all hands update call. Prepare for and participate in Pacific Energy working group weekly status conference call.

10/29/09 10/29/09 10/29/09

RESPONSE EXHIBIT 1
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In paragraph 3 of the Report, the Fee Auditor notes that on three occasions multiple Rutan lawyers participated in the same phone call. The Fee Auditor then asks that Rutan explain why it was necessary for each of the Rutan lawyers to participate in the calls. Initially, Rutan notes that during the interim fee period, at the Debtors request, three Rutan attorneysidentified in billing statements as CGP, GA, and GSparticipated in weekly conference calls with the Debtors officers and directors and certain professionals. Globally, the participants in these calls were working together, among other things, to facilitate and coordinate the sale of the Debtors assets. Each participant was handling a different aspect of the various transactions, and therefore, each participants input was necessary. The various tasks were, in certain aspects, interrelated, making communication between the members of the working group a vital part of the success of these sales. Due to the complexity of the transactions, a single Rutan lawyer could not have adequately addressed all the issues raised during the various conference calls. a. September 2 2009. Four Rutan attorneys billed time for participating in two conference calls on September 2, 2009. First, at the Debtors request, CGP and GA participated in a conference call with the Debtors and other professionals. CGP and GA were responsible for different aspects of the transactions that were discussed, and therefore, the participation of both was vital and necessary. Second, at the Debtors request, GS and RK participated in a conference call with the Debtors and other professionals. GS and RK were responsible for different aspects of the transactions that were discussed. RK was responsible for preparing the closing documents that were being discussed while GS was responsible for preparing the close checklist and other documents. Thus, the participation of both was necessary. b. October 22, 2009. At Debtors request, three Rutan attorneysCGP, GA, and
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GSparticipated in a conference call on October 22, 2009. CGP, GA, and GS were responsible for different aspects of the complex transactions that were discussed, and therefore the participation of each was vital. c. October 29, 2009. At Debtors request, three Rutan attorneysCGP, GA, and GSparticipated in a conference call on October 29, 2009. Again, CGP, GA, and GS were responsible for different aspects of the complex transactions that were discussed, and therefore the participation of each was vital.

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