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 FINAL FEE APPLICATION OF MILLSTREAM ENERGY, L.L.C., FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR THE PERIOD OF MARCH 9, 2009 THROUGH DECEMBER 31, 2009 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 Final Fee Application of Millstream Energy, LLC, for Compensation and Reimbursement of Expenses for the Period of March 9, 2009 through December 31, 2009 (the Application). BACKGROUND 1. Millstream Energy, LLC (Millstream), was retained as engineering consultant to In the Application, Millstream seeks final approval of fees totaling

the debtors-in-possession.

$314,131.001 and costs totaling $8,877.032 for its services from March 9, 2009 through December

We note that the total of the fees requested in Millstreams prior interim applications is $312,331.00. Millstream has not deducted from this amount the $66.00 in fee reductions ordered by the Court for the Second Interim Period, which period is discussed in more detail in paragraph 4, to arrive at the figure for which it seeks final approval in the Application. The Application does not explain the difference between the total of the amounts previously requested ($312,331) and the amount requested in the Application ($314,131). We note that the Court has ruled on the First through Sixth Interim Periods, but that no rulings have been made on the Seventh and Eighth Interim Periods. We note that the total of the expenses requested in Millstreams prior interim applications is $8,877.03. Millstream has not deducted from this amount the $375.47 in expense
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2

31, 2009 (the Final 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, 2011, 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. On March 29, 2011 we served on Millstream an initial report based on our review, by hard copy and e-mail. On May 2, 2011 and again on May 5, 2011, we sent e-mail reminders to Millstream. However, we have not received a response from Millstream, and thus we are filing this final report without the benefit of a response from Millstream. DISCUSSION Final Application Period 3. In our initial report, we noted that the Application seeks final approval of $314,131

in fees, while the prior applications requested a total of $312,331 in fees. The amount of $312,331, moreover, is reflected in numerous charts in the Application, as well as in the prayer for relief on page 11 of the Application. We asked Millstream to explain this discrepancy or confirm that

reductions ordered by the Court for the First and Second Interim Periods, which periods are discussed in more detail in paragraph 4, to arrive at the figure for which it seeks final approval in the Application. We note that the Court has ruled on the First through Sixth Interim Periods, but that no rulings have been made on the Seventh and Eighth Interim Periods.
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$312,331 is the correct amount of its fee request. In the absence of a response, we conclude that $312,331 is the correct amount. Accordingly, we recommend a reduction of $1,800.00 in fees. Prior Interim Periods 4. We note that we previously filed the following final reports for Millstreams prior

interim applications, which final reports we incorporate by reference herein, and we also note the following orders that ruled on Millstreams prior interim fee applications: 1st Period: Fee Auditors Amended Final Report Regarding Interim Fee Application of Millstream Energy, LLC, for the First Interim Period (docket #1213) filed on or about December 15, 2009, in which we recommended approval of fees totaling $122,550.00 and expenses totaling $4,260.71, reflecting our recommended reduction of $130.97 in expenses, as further explained in paragraphs 4, 5 and 7 of that final report. The recommendations for fees and expenses were adopted in the Order Approving First Quarterly Fee Applications of Professionals for the Period March 9, 2009 - May 31, 2009 With Respect to Millstream Energy, LLC,, dated December 23, 2009 (docket #1238). 2nd Period: Fee Auditors Final Report Regarding Interim Fee Application of Millstream Energy, LLC, for the Second Interim Period (docket #1366) filed on or about February 26, 2010, in which we recommended approval of fees totaling $69,165.00 and expenses totaling $4,240.85 reflecting our recommended reduction of $66.00

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in fees and $244.50 in expenses, as further explained in paragraphs 5 and 8 of that final report. The recommendations for fees and expenses were adopted in the Omnibus Order Approving Second Interim Fee Application Requests, dated March 29, 2010 (docket #1455). 4th Period: The Court approved Millstreams request for $100,000 in transaction fees (docket #1292) in its Order Approving Application for Transaction Fees of Millstream Energy, LLC, as Engineering Consultant to Certain of the Debtors and Debtors in Possession, dated February 8, 2010 (docket #1318). We accepted the opinion of Debtors counsel that these fees were beyond the scope of our review, and accordingly did not file a final report with respect to these fees. 5th Period: Fee Auditors Final Report Regarding Interim Fee Application of Millstream Energy, LLC, for Allowance of Termination Fee for the Fifth Interim Period (docket #2062) filed on or about December 6, 2010, in which we recommended approval of fees totaling $20,550.00. The Court approved Millstreams application for these fees in its Order Approving Application of Millstream Energy, LLC as Engineering Consultants for Termination Fee, dated August 3, 2010 (docket #1750). 5. We have reviewed the final reports and orders allowing fees and expenses for the

prior interim periods, and we do not believe there is any reason to change the amounts awarded for

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those periods. CONCLUSION 6. Thus we recommend final approval of fees totaling $312,265.00 ($314,131.003 minus

$1,866.004) and costs totaling $8,501.56 ($8,877.035 minus $375.476) for Millstreams services for the Final Application Period.

We note that the total of the fees requested in Millstreams prior interim applications is $312,331.00. Millstream has not deducted from this amount the $66.00 in fee reductions ordered by the Court for the Second Interim Period, which period is discussed in more detail in paragraph 4, to arrive at the figure for which it seeks final approval in the Application. The Application does not explain the difference between the total of the amounts previously requested ($312,331) and the amount requested in the Application ($314,131). We note that the Court has ruled on the First through Sixth Interim Periods, but that no rulings have been made on the Seventh and Eighth Interim Periods.
4

See paragraphs 3 and 4 supra.

We note that the total of the expenses requested in Millstreams prior interim applications is $8,877.03. Millstream has not deducted from this amount the $375.47 in expense reductions ordered by the Court for the First and Second Interim Periods, which periods are discussed in more detail in paragraph 4, to arrive at the figure for which it seeks final approval in the Application. We note that the Court has ruled on the First through Sixth Interim Periods, but that no rulings have been made on the Seventh and Eighth Interim Periods.
6

See paragraph 4 supra.

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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 13th day of May 2011.

Warren H. Smith

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SERVICE LIST Notice Parties The Applicant Mark A. Clemans Millstream Energy, LLC 4918 Menlo Park Drive Sugar Land, TX 77479 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. O'Neill, 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

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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

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