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 RUTAN & TUCKER, LLP, 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 Fee Application of Rutan & Tucker, LLP, for the Fifth 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 $31,553.00, and costs totaling $99.45 for its services from March 1, 2010, through May 31, 2010 (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 that Rutan billed $8,560 for time devoted to its own

fee applications, or 37.23% as much as it billed ($22,993.00) for substantive work for the client. We asked Rutan to explain why these fees should be considered reasonable and necessary. Rutan provided the following response: a. March 2010. In March 2010, Rutan spent 5 hours preparing and prosecuting its fee applications. Rutan spent 4 hours drafting, revising, and finalizing its February 2010 fee application. Rutan spent another hour 1) reviewing and analyzing the Fee Auditor's report regarding Rutan's Second Interim Fee Application; 2) exchanging emails with Ms. McFarland advising her that Rutan would consent to the Fee Auditor's recommendations so that the Pachulski firm could advise the Court of the same; 3) talking with Ms. McFarland about whether the Court would require the estate's professionals consenting to the Fee Auditor's recommendations regarding their second interim fee applications to appear at the March 2010 fee application hearing; and 4) exchanging emails with Ms. McFarland advising her that Rutan had not received an objection to its most recent interim fee application. b. April 2010. In April 2010, Rutan spent 11.7 hours preparing and prosecuting its fee applications. First, Rutan spent 3.4 hours responding to the Fee Auditor's Initial Report regarding Rutan's Third Interim Fee Application. There, the Fee Auditor 1) asked for a detailed explanation regarding why multiple professionals participated in the same conference calls, 2) noted certain of Rutan's time entries contained lumping and asked that it be resolved, and 3) asked for additional details regarding other time entries. Rutan provided the Fee Auditor with a detailed explanation addressing each concern raised. Notably, based on the detailed explanations provided, the Fee Auditor's Final Report Regarding Interim Fee Application of Rutan & Tucker LLP for the Third Interim Period repeatedly states "We appreciate Rutan's response and have no objection to these fees." Indeed, the Fee Auditor fully supported all of the fees sought by Rutan based on its response. Rutan also spent 3.9 hours drafting, revising, and finalizing its fourth interim fee application, and another 4.2 hours drafting, revising, and finalizing its March 2010 fee application. Rutan spent another .2 hours exchanging emails with Ms. McFarland and others regarding pending fee application issues.
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c. May 2010. In May 2010, Rutan spent 4.7 hours preparing and prosecuting its fee applications. Rutan spent 3.8 hours drafting, revising, and finalizing its April 2010 fee application. Additionally, Rutan spent .6 hours exchanging numerous emails with Ms. McFarland and others regarding pending fee application issues. Rutan also spent .1 hours reviewing the Fee Auditor's Final Report Regarding Interim Fee Application of Rutan & Tucker LLP for the Third Interim Period, and another .2 hours exchanging emails with the Fee Auditor in response to a request by the Fee Auditor for additional information from Rutan. We appreciate this response. In regard to the activities associated with earlier applications, we note that such applications involved significantly greater amounts. The fee application for the third interim period, which Rutan mentions in its response, involved just over $250,000 in fees. However, we note that all of the fee application work (21.4 hours) was performed by an associate billing at $400 per hour. While some attorney participation is necessary, Rutan has not justified the use of an attorney for all such work. In the absence of such justification, we will assume that a paralegal, such as Laurie Biegel at $215 per hour, could have performed 75% of the work at a much lower cost. Thus, we believe the reasonable charge for these activities to be $5,590.75, consisting of $2,140.00 for 5.35 hours (25% of 21.4 hours) at $400 and $3,450.75 for 16.05 hours (75% of 21.4 hours) at $215. Accordingly, we recommend a reduction of $2,969.25 in fees. 4. In our initial report, we noted one telecopy charge that was inconsistent with Rutans

stated fax billing practices, in which the first page is billed at a dollar and subsequent pages are billed at 50 cents each with no additional charge for any long-distance calls: March 2010 Telecopier 3.58

We asked Rutan to explain this charge. Rutan responded, Rutan withdraws its request for payment of that cost. We appreciate this response and recommend a reduction of $3.58 in expenses.

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CONCLUSION 5. Thus, we recommend approval of fees in the amount of $28,583.75 ($31,553.00

minus $2,969.25) and expenses in the amount of $95.87 ($99.45 minus $3.58) for Rutans services for the Application Period.

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 23rd day of December 2010.

Warren H. Smith

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SERVICE LIST Notice Parties 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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