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 STEPTOE & JOHNSON 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 Interim Fee Application of Steptoe & Johnson LLP for the Third Interim Period (the Application). BACKGROUND 1. Steptoe & Johnson LLP (S&J) was retained as counsel to the Official Committee

of Unsecured Creditors. In the Application, S&J seeks approval of fees totaling $29,340.50 and costs totaling $721.87 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 S&J an initial report based on our review, and received a response from S&J, portions of which response are quoted herein. DISCUSSION 3. In our initial report, we noted two time entries for travel time which does not appear

to have been billed at 50% of the normal hourly rate1: 09/11/2009 J.R. Taylor SP Counsel Travel from hearing. 09/01/2009 J.R. Taylor SP Counsel Return travel from hearing. 0.90 0.70 432.00 336.00

We asked S&J to explain these entries or confirm that a reduction is warranted in each instance. S&J responded, Both of the reference travel time entries were billed at 50% through the reduction of the time entry by 50%. We appreciate this response and recommend no reduction in this regard. 4. In our initial report, we noted one time entry including an activity description whose

meaning was unclear: 09/01/2009 J.R. Taylor SP Counsel Prepare summary of hearing for committee members prepared to follow-up questions. 0.60 288.00

We asked S&J to provide further explanation regarding this time entry. S&J provided the following response: Mr. Taylor prepared a summary for the Committee Members of the results of the Debtors' hearing regarding the sale/abandonment of certain of their Alaska assets,at which Mr. Taylor appeared on behalf of the Committee, and prepared to follow-up

Pursuant to Local Rule 2016-2(d)(viii), Travel time during which no work is performed shall be separately described and may be billed at no more than 50% of regular hourly rates.
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with the Committee Members on any questions they may have. We appreciate this response and have no objection to these fees. 5. In our initial report, we noted one instance in which two professionals participated

in the same conference call: 10/26/2009 J.R. Taylor SP Counsel Call with Committee re sale hearing and upcoming matters. 10/26/2009 K.C. Piper Partner Attend Committee Meeting. 1.00 480.00

1.00

480.00

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. Additionally, Rule 2016-2(d)(ix) states the activity descriptions shall individually identify all meetings and hearings, each participant, the subject(s) of the meeting or hearing, and the participants role. We noted further that the $960 in fees for this call constitute 12.5% of S&Js total fees for October. We asked S&J to explain why it was necessary for both attorneys to participate. S&J provided the following response: To the extent that this inquiry is related to the Committee Meeting held on Oct. 26, 2009, involved lengthy discussions with the Committee Members regarding the Debtors' strategy regarding their Alaska assets and other pending matters. Each of Mr. Taylor and Ms. Piper, consulted with the Committee Members with respect to various aspects of the Alaska asset situation and possible options, Ms. Piper was also responsible for advising the Committee Members regarding certain other upcoming matters separate from the Alaska asset issues. We appreciate this response, but note that S&J bears the burden of proof of the necessity of the participation of both these professionals on this call, and we believe that, due to the lack of specifics regarding the various aspects and the division of labor between the two attorneys, S&J did not

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carry its burden regarding this call. Thus, we recommend a reduction of one of the attorneys participation time, for a reduction of $480 in fees. 6. In our initial report, we noted that, during the Application Period, S&J billed

$4,154.50 in fees for preparation and prosecution of its fee applications, compared to $24,967 for substantive work. The amount billed for fee applications thus equals 17.52% of the amount billed for substantive work. We asked S&J to explain why the $4,154.50 in fees for preparation and prosecution of its fee applications during the Application Period should be considered reasonable. S&J provided the following response: In general response to the inquiry above, we note that the approximate amount spent on the preparation of S&J's fee applications during the relevant time period has remained exceedingly low, which is concomitant with S&J's commitment to performing tasks in an efficient and cost sensitive manner. More specifically, however, with respect to the above, Task Code 107, is not solely used for the preparation of the S&J's fee applications, but with respect to all tasks associated with the Committee's professionals' fee applications. Therefore, in September 2009, the time included not only preparation and filing of S&J's August 2009 Monthly Fee Application, but also drafting S&J's Second Interim Fee Application and responding to the Fee Auditor's inquiries. Similarly, in October 2009, the time included not only preparation and filing of S&J's September 2009 Monthly Fee Application, but also finalizing S&J's Second Interim Fee Application, and reviewing and preparing for filing Deloitte's August 2009 Monthly Fee Application and Deloitte's Second Interim Fee Application. Finally, in November 2009, the time included not only preparation and filing of S&J's October 2009 Monthly Fee Application, but also preparation for the First Interim Fee Application hearing and review of the Fee Auditors final report for the First Interim period in preparation for such hearing. We appreciate this response, and, noting S&Js assistance on fee applications of Deloitte & Touche, we recommend no reduction in this regard. CONCLUSION 7. Thus we recommend approval of fees in the amount of $28,860.50 ($29,340.50 minus

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$480) and expenses in the amount of $721.87 for S&Js 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 14th day of May 2010.

Warren H. Smith

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SERVICE LIST The Applicant Filiberto Agusti, Esq. STEPTOE & JOHNSON LLP 1330 Connecticut Ave., N.W. Washington, D.C. 20036 Robbin L. Itkin, Esq. STEPTOE & JOHNSON LLP 2121 Avenue of the Stars, Suite 2800 Los Angeles, California 90067 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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