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 INTERIM FEE APPLICATION OF LOEB & LOEB LLP FOR THE FOURTH 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 Loeb & Loeb LLP for the Fourth Interim Period (the Application). BACKGROUND 1. Loeb & Loeb LLP (Loeb) was retained as special tax counsel to the debtors-in-

possession. In the Application, Loeb seeks approval of fees totaling $17,479.00 and costs totaling $17.49 for its services from December 1, 2009, through February 28, 20101 (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

Although September through November 2009 generally constituted the third interim period, Loeb nevertheless filed its previous interim application for the months of September through December 2009.
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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. We served on Loeb an initial report based on our review, and received a response from Loeb, portions of which response are quoted herein. DISCUSSION 3. In our initial report, we noted that the Application (filed at docket #1559) appears

wholly redundant of the prior application (filed at docket # 1297). In our initial report, we advised Loeb that it appeared that we had previously recommended allowance of the fees and expenses requested in the prior application and that the amounts requested in the Application should be disallowed as duplicative. We asked Loeb to confirm that this is the case. Loeb provided the following response: 1. In paragraph 3 of the Report, the Fee Auditor asks Loeb to confirm that the Applications are duplicative. They are not, and we apologize for the confusion that the filings have caused. As further discussed below, the Interim Fee Application (copy attached) sought an interim allowance and 80% payment of fees for the relevant period and the Quarterly Application (copy attached) sought payment of the balance. 2. As the Fee Auditor can tell, Loeb has expended relatively little time on this matter. For the months of September - November 2009, the time was especially de minimus: 8 hours and $3,044 billed for the months of September and October 2009 in connection with Applicant's retention and its First Quarterly fee application dated October 9, 2009, and $1462.50 on account 1.9 hours billed on tax matters in November 2009. In an effort to save the estate the expenses associated with fee applications, Loeb determined not to file monthly or quarterly applications during the Third Interim Period. Instead, the Interim Application, dated January 22, 2010, picked up the time for this period. We explain this in footnote 2 of the Interim Application and again in paragraph 5 thereof.

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3. In an effort to save the estate unnecessary expenses, we unfortunately caused unnecessary confusion, and apologize for not following proper procedure. It appeared wasteful, however, to file applications on account of fees expended for prior fee applications (which is all that we would have requested in the September and October monthlies, and November had only 2 hours of tax-related work). 4. As to whether the applications are duplicative, we respectfully submit that they are not. Page 2 of the Interim Application provides as follows By this Application Loeb seeks a first monthly interim allowance of compensation in the amount of $17,479 and actual and necessary expenses in the amount of $17.49, for a total allowance of $17,496.49, and payment of $13,983.20 (80% of the allowed fees) and reimbursement of $17.49 (100% of the allowed expenses) for a total payment of $14,000.69 for the period of September 1, 2009 through December 31, 2009 (the "Interim Period"), the substantial portion of which fees and expenses were incurred in December 2009 (i.e., $12,972.50). In support of this Application, Loeb respectfully represents as follows: 5. Loeb did not incur additional fees after the Interim Application was filed. We thus filed the Quarterly Application on account of the same fees and time sought in the Interim Application. Page 2 of the Quarterly Application provides as follows: By this Application, Loeb seeks quarterly interim allowance of compensation in the amount of $17,479.00 and actual and necessary expenses in the amount of $17.49, for a total allowance of $17,496.49 and payment of the unpaid portions of such amounts for the period September 1, 2009 through February 28, 2010 (the "Interim Period"), the substantial portion of which were incurred in December 2009 (i.e., $12,972.50). In support of this Application, Loeb respectfully represents as follows: 6. Paragraphs 5 and 6 of the Quarterly Application indicate that Loeb filed the Interim Application and received payment on account thereof of 80% of its fees and 100% of its expenses. Paragraph 7 then asks that the Court approve payment of 100% thereof (i.e., the unpaid portion). We conclude the Quarterly Application as follows: WHEREFORE, Loeb respectfully requests that the Court enter an Order, in the form attached hereto, providing that (a) an interim allowance be made to Loeb for the period September 1, 2009 through February 28, 2010, in the sum of $17,479.00, as compensation for necessary professional services rendered, and the sum of $17.49 for
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actual and necessary expenses, for a total of $17,496.49; (b) directing the Debtors to pay Loeb the outstanding amount of such sums; and (c) granting Loeb such other and further relief as this Court may deem just and proper. 7. We hope that this clarifies that Loeb is not seeking the same payment twice but rather that it seeks payment in the Quarterly Application of amounts that were not paid on account of the Interim Application. Please do not hesitate to contact us if we can be of additional assistance. We appreciate this response but note that it is directed primarily at payment rather than allowance of the amounts in question. Having reviewed the application filed at docket # 1297, we previously recommended allowance of fees totaling $17,479.00 and expenses totaling $17.49 for Loebs services from September 1, 2009, through December 31, 2009. The Court adopted this

recommendation, as is reflected on the second page of Exhibit A attached to its Order (Omnibus) Approving Third Quarterly Fee Applications of Professionals for the Period September 1, 2009 November 30, 2009 (docket #1656). Thus, the fees and expenses requested in the Application have already been approved. We are not aware of any reason why the 20% holdback should not be paid, but this is a separate issue that is beyond the scope of the fee auditors role, which is to make recommendations regarding allowance. Since the requested fees and expenses have been allowed, we cannot recommend allowance of the same amounts again. CONCLUSION 4. Thus, as the fees and expenses requested in the Application have already been

allowed, we do not recommend approval of the fees and expenses sought in the Application.

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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 6th day of July 2010.

Warren H. Smith

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SERVICE LIST The Applicant Vadim J. Rubinstein Loeb & Loeb LLP 345 Park Avenue New York, NY 10154-1895 vrubinstein@loeb.com Notice Parties 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
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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

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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