UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

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

) ) ) ) ) )

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

FEE AUDITORS FINAL REPORT REGARDING INTERIM FEE APPLICATION OF PACHULSKI STANG ZIEHL & JONES, 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 Pachulski Stang Ziehl & Jones, LLP, for the Fifth Interim Period (the Application). BACKGROUND 1. Pachulski Stang Ziehl & Jones, LLP (Pachulski), was retained to provide

restructuring management services to the debtors-in-possession. In the Application, Pachulski seeks approval of fees totaling $372,340.00 and costs totaling $30,846.55 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,
FEE AUDITORS FINAL REPORT - Page 1 pac FR Pachulski 5th int 3-5.10.wpd

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 Pachulski an initial report based on our review, and received a response from Pachulski, portions of which response are quoted herein. DISCUSSION 3. In our initial report, we noted that it appeared that timekeeper ARP block-billed by

the half hour instead of billing by the tenth of the hour as specified in Guideline II.D.5. We asked Pachulski about this issue, and Pachulski provided the following response: Paragraph 3 of the Report questions the billing practices of Andrea R. Paul. You requested that we advise Ms. Paul that she is to bill by the tenth of an hour rather than by the half hour as is specified in Guideline II.D.5. We have advised Ms. Paul of this requirement. She assures us that she was aware of the requirement and that she was and is billing by the tenth of an hour. We appreciate this response. 4. In our initial report, we noted a few time entries whose activity descriptions were not

clear and complete: 3/15/2010 SEM Email communications with Jamie O'Neill regarding covering the hearing on the claims objections want will go forward Emails with teach re claims issues. Review and finalize motion to authorize 0.1 525 52.50

3/17/2010 MBL 4/27/2010 JEO

0.2 0.4

550 110.00 535 214.00

We asked Pachulski to clarify these activity descriptions. Pachulski provided the following response, which addresses these three time entries as well as the time entry cited in paragraph 5 below:

FEE AUDITORS FINAL REPORT - Page 2 pac FR Pachulski 5th int 3-5.10.wpd

In paragraphs 4 and 5 of the Report, you requested that four time entries be revised to give more information concerning the tasks that were being performed. The first entry questioned is a 3/15/2010 time entry of Scotta McFarland. That time entry should read as follows: Email communications with Jamie O'Neill regarding covering the haring on the claims objections that will go forward at the March, 2010 hearing. The second time entry questioned is a 3/17/2010 entry of Max Litvak. That time entry should read as follows: Email with team (S. McFarland and I. Kharasch) re claims issues. The third time entry questioned is a 4/27/2010 entry of James O'Neill. That time entry should read as follows: Review and finalize Debtor's Third Motion to Deem Claims Satisfied. The fourth entry questioned is a 3/19/2010 entry of Leslie Forrester. Upon investigation, we cannot determine more details for this entry and agree to write off the $990.00. Based upon the above explanations, PSZ&J submits that the first three time entries are now adequately described and the Firm should be compensated for them. PSZ&J, as stated, agrees to write off the $990 associated with the fourth time entry. We appreciate this response and have no objection to the fees associated with the three time entries set forth in this paragraph 4, for which further descriptions were provided. 5. 3/19/2010 We further noted a time entry that required further explanation: LAF Review of email from Aparicios attorney and forward to J Kuritz. 2.0 495 990.00

We asked Pachulski to provide a further description of this time entry, and Pachulskis response, in which it offers a voluntary reduction for this item, is included in paragraph 4 above. We appreciate this response and thus recommend a reduction of $990.00 in fees. 6. In our initial report, we noted that Pachulski billed 3.80 hours of its law library

directors time at $250 per hour:

FEE AUDITORS FINAL REPORT - Page 3 pac FR Pachulski 5th int 3-5.10.wpd

3/19/2010 3/22/2010

LAF LAF

Locate AK statute. Cite check & edit pleading.

0.3 3.5

250 250

75.00 875.00

We asked Pachulski to explain why these activities should be compensated at this rate. Pachulski provided the following response: In paragraph 6 of the Report, you questioned the billable rates for work done by Leslie Forrester, the Firm's library director. As set forth in our response to the Initial Report on the PSZ&J's fourth interim fee application, Ms. Forrester, in addition to serving as the Firm's library director also serves as a research assistant to the attorneys in the Firm. Concerning the time entries questioned in the Report, on , March 19, 2010, she researched and located an Alaska statute that was needed by an attorney and on March 22, 2010, she checked the cites and edited the objection to certain administrative and priority claims of Union Oil. In both instances, the work was done at the request of one of the Firm's attorneys and was needed for pleadings the attorney was preparing. If Ms. Forrester had not done the work, an experienced legal assistant with a similar billable rate or an attorney with a much higher billable rate would have had to do it. Based upon the above explanation, PSZ&J submits that the billable rate for the work done by Ms. Forrester is reasonable, that the fees were incurred for the benefit of the Debtors, and that the Firm should be compensated in the amount of $250.00 an hour for such work. We accept this explanation and accordingly recommend no reduction in this regard. 7. In our initial report, we noted what appeared to be an overtime meal for S. Guerena,

who did not bill any time on this matter during the Application Period: 3/10/2010 Business Meal [E111] - Johnnie's New York Pizzeria (S. Guerena) 17.84

Additionally, we noted that this same charge appeared on both the April and May invoices. We asked Pachulski to explain these charges, and Pachulski provided the following response: The Report, at paragraph 7, questions two business meal charges of $17.84 each. PSZ&J agrees to write off both charges as one appears to be a duplicate charge and PSZ&J is not able to determine the purpose of the other. We appreciate this response and thus recommend a reduction of $35.68 in expenses.
FEE AUDITORS FINAL REPORT - Page 4 pac FR Pachulski 5th int 3-5.10.wpd

8. explanation: 3/21/2010

In our initial report, we noted a secretarial overtime charge that required further

Secretarial Overtime; G. Downing

143.38

We asked Pachulski to provide further explanation regarding this overtime charge. Pachulski provided the following response: The Report, at paragraph 8, questions the use of secretarial overtime on one occasion incurred by Gini Downing March 21, 2010, in the amount of $143.38. The Firm is unable to determine the matter worked on in sufficient detail and agrees to write off the $143.38 amount. We appreciate this response and thus recommend a reduction of $143.38 in expenses. 9. explanation: Auto Travel Expense [E109] - AMS/Pacific Transportation $173.40 Services Invoice #: 153378 (MBL) We asked Pachulski to provide further explanation regarding this car service charge. Pachulski provided the following response: The Report, at paragraph 9, questions why the Firm has charged the Debtors for car service on one occasion. The charge is for car service used to transport one the Firm's attorneys from the Philadelphia airport to Wilmington, Delaware for the April 19, 2010 hearing. As set forth in previous responses, car service is used instead of taxi service for the attorneys of the Firm because car service is more reliable than taxis. If an attorney has to wait for a taxi, the attorney time spent waiting will often amount to more costs than the additional small cost of using the car service. Also, the cars offer a better work environment than taxis. PSZ&J believes the use of a car service is reasonable and justified under the circumstances and submits that the charges should be allowed. We appreciate this response but believe that the use of a car service for travel from Wilmington to the Philadelphia airport (PHL) is justified, but not the reverse, because taxis are readily available 04/18/10 In our initial report, we noted the following car service charge requiring further

FEE AUDITORS FINAL REPORT - Page 5 pac FR Pachulski 5th int 3-5.10.wpd

at PHL. Moreover, a reasonable rate for this itinerary appears to be about $80.1 We accordingly recommend a reduction of $93.40 in expenses. 10. 05/12/10 05/12/10 05/13/10 05/13/10 05/14/10 05/14/10 05/17/10 05/17/10 05/18/10 05/18/10 05/19/10 05/19/10 05/20/10 05/20/10 05/24/10 05/24/10 05/26/10 05/26/10 05/27/10 05/27/10 We note that each PACER charge was duplicated in the May invoice: 68773.00002 PACER Charges for 05-12-10 68773.00002 PACER Charges for 05-12-10 68773.00002 PACER Charges for 05-13-10 68773.00002 PACER Charges for 05-13-10 68773.00002 PACER Charges for 05-14-10 68773.00002 PACER Charges for 05-14-10 68773.00002 PACER Charges for 05-17-10 68773.00002 PACER Charges for 05-17-10 68773.00002 PACER Charges for 05-18-10 68773.00002 PACER Charges for 05-18-10 68773.00002 PACER Charges for 05-19-10 68773.00002 PACER Charges for 05-19-10 68773.00002 PACER Charges for 05-20-10 68773.00002 PACER Charges for 05-20-10 68773.00002 PACER Charges for 05-24-10 68773.00002 PACER Charges for 05-24-10 68773.00002 PACER Charges for 05-26-10 68773.00002 PACER Charges for 05-26-10 68773.00002 PACER Charges for 05-27-10 68773.00002 PACER Charges for 05-27-10 $21.28 $21.28 $30.80 $30.80 $14.80 $14.80 $45.12 $45.12 $18.24 $18.24 $7.52 $7.52 $7.68 $7.68 $2.48 $2.48 $4.88 $4.88 $2.88 $2.88

We asked Pachulski to further explain these charges, and Pachulski provided the following response: The Report, at paragraph 10 questions all the May, 2010 PACER charges, which appear in duplicate in the Fifth Interim Fee Application.. The Firm contacted its PACER representative and it was determined that there had been a billing error on PACER's part. PSZ&J agrees that its Fifth Interim Fee App should be reduced by $155.68 to reflect the revised billing from PACER.

The information found at www.taxifarefinder.com suggests that taxi fare from the Philadelphia Airport to Wilmington would be approximately $75.00, including taxes, tolls, and tips. Additionally, in April, we surveyed two cab companies, Yellow Cab and Philly PHL Taxi, regarding fares from PHL to Wilmington. Yellow Cab quoted us $75 + a 15% tip, which equals $86.25. Philly PHL Taxi quoted us $65 - $70, plus tip, and, with a 15% tip, that amounts to $75 to $80.
FEE AUDITORS FINAL REPORT - Page 6 pac FR Pachulski 5th int 3-5.10.wpd

We appreciate this response and recommend a reduction of $155.68 in expenses. CONCLUSION 11. Thus, we recommend approval of fees in the amount of $371,350.00 ($372,340.00

minus $990.00) and expenses in the amount of $30,418.41 ($30,846.55 minus $428.14) for Pachulskis 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 30th day of November 2010.

Warren H. Smith

FEE AUDITORS FINAL REPORT - Page 7 pac FR Pachulski 5th int 3-5.10.wpd

SERVICE LIST The Applicant 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 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

FEE AUDITORS FINAL REPORT - Page 8 pac FR Pachulski 5th int 3-5.10.wpd

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

FEE AUDITORS FINAL REPORT - Page 9 pac FR Pachulski 5th int 3-5.10.wpd