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 LAZARD FRRES & CO. LLC FOR THE SECOND 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 Lazard Frres & Co. LLC for the Second Interim Period (the Application). BACKGROUND 1. Lazard Frres & Co. LLC (Lazard) was retained as financial advisor to the

Debtors-in-Possession. In the Application, Lazard seeks approval of fees totaling $300,000.00, and costs totaling $16,076.99 for its services from June 1, 2009 through August 31, 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 December 1, 2009, 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 Lazard an initial report based on our review, and received a response from Lazard, portions of which response are quoted herein. DISCUSSION General Issues 3. Lazards compensation structure includes a $100,000 monthly advisory fee, for a total

of $300,000.00 in fees for the Application Period. During the Application Period Lazard recorded a total of 252.50 hours of activities devoted to these bankruptcy cases, for an imputed hourly rate of $1,188.12. 4. We note that the order authorizing the employment of Lazard (the Retention Order)

relaxes the information requirements of Local Rule 2016-2 to allow Lazard to keep time records in increments of halves rather than tenths of an hour. Specific Time and Expense Entries 5. In our initial report we noted the following expense item in the Car Services and

Taxis category for a date on which the indicated professional did not record any time on these cases: 8/28/09 Lynd-Library Hotel to LGA 7/21/2009 29.47

We asked Lazard to explain why the estate should reimburse this expense. Lazard responded as follows: Mr. Lynd traveled to New York on July 19th in connection with advising the board with regards to a pending 363-asset sale. On July 21st Mr. Lynd took a cab from his New York City hotel to LaGuardia Airport for his return flight to Houston. Mr. Lynd neglected to record and submit the appropriate time details in connection with this trip. Lazard regrets the administrative oversight but believes the expense to be reasonable and necessary.
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We appreciate Lazards response and have no objection to this expense. 6. We noted the following expense items in the Employee Meals category for dates

on which the indicated professional did not record any time on these cases: 8/3/09 8/3/09 8/3/09 8/14/09 8/27/09 Lynd-Shandys Caf 542929 HoustonT 07/08/09 Lynd-Flying Saucer-Housto Houston T 6/21/09 Lynd-Flying Saucer-Housto Houston T 7/12/09 Lynd-Magnolia Bar & Grill Houston T 6/22/09 Lynd-AU Bon Pain Flushing NY (bfast 1p) 7/21/09 14.02 10.65 7.57 23.11 6.26

We asked Lazard to explain why the estate should reimburse these expenses. Lazard responded as follows: Lazard proposes to voluntarily withdraw its request for the reimbursement of the (5) employee meals indicated in section 6 of the initial report totaling $61.61. We appreciate Lazards response and thus, recommend a reduction of $61.61 in expenses. 7. $13,877.50. 7/17/09 7/17/09 APR09 PACIFIC ENERGY RESOURCES/SONNENSCHEIN NATH & ROSENTHAL $12,352.50 MAY09 - PACIFIC ENERGY RESOURCES/SONNENSCHEIN NATH & ROSENTHAL 1,525.00 We noted that Lazard seeks reimbursement for legal fees in the amount of

We asked Lazard to provide the detailed invoices for the above referenced legal fees. In its response, Lazard provided the appropriate invoices which we have attached as Response Exhibit 1. We have reviewed the referenced invoices and have no objection to these expenses. 8. Ordinarily, if a professional bills three or more hours on a case in one day, we do not

object to the individuals reimbursement request for an overtime meal or taxi home. However, we noted the following meal charges which were billed on dates when the billing professional recorded less than three hours of time on tasks related to the estate:

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6/30/2009 6/30/2009 6/30/09 8/3/09 8/14/09 8/27/09 8/27/09 8/27/09

Lynd-La Madeline of Texas Houston T 6/11/2009 Lynd-Chipotle 0347 542929 Houston T 06/01/2009 Lynd-Renaissance9672RLNGB Long Beac 6/11/09LongBeach,Hotel Tratoria,brkfst-1 person Lynd Pronto Cucinino 8843 Houston T 6/23/09 Lynd-Hungrys Caf and 54 Houston T 07/09/09 Lynd-Caf Express #11110 Houston TX 7/29/09 Lynd-Caf Express #11103 Houston TX 7/15/09 Lynd-Randalls Store 1773 Houston TX 7/19/09

11.34 8.66 25.00 12.94 17.36 10.70 9.19 7.55

We asked Lazard to explain why these expenses should be reimbursed by the estate. Lazard responded as follows: With the exception of the breakfast Mr. Lynd incurred on June 11, 2009 while traveling on behalf of the client to perform due diligence in connection with a pending asset sale, Lazard proposes to voluntarily withdraw its request for the remaining (7) items listed in section 8 totaling $77.74. We appreciate Lazards response and thus, recommend a reduction of $77.74 in expenses. CONCLUSION 9. Thus we recommend approval of fees totaling $300,000.00 and expenses totaling

$15,937.64 ($16,076.99 minus $139.35) for Lazards 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 22nd day of February, 2010.

Warren H. Smith

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SERVICE LIST The Applicant John Rutherford Bradley Dunn Lazard Frres & Co. LLC 30 Rockefeller Plaza, 61st Floor New York, NY 10020 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 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

Co-Counsel to the Official Committee of

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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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