##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 Commission file number: 000-30586
 
 
 Ivanhoe Energy Inc.
  Yukon, Canada
    
    98-0372413(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 654-999 Canada Place
Vancouver, BC, Canada V6C 3E1
(604) 688-8323
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o Yes þ No




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##### 



TABLE OF CONTENTS
 PART IITEM 1: Financial StatementsUnaudited Condensed Consolidated Statements of Financial Position
    
    
    3Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss
    
    
    4Unaudited Condensed Consolidated Statements of Changes in Equity
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    7ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34ITEM 4: Controls and Procedures
    
    
    44PART IIITEM 1: Legal Proceedings
    
    
    44ITEM 6: Exhibits
    
    
    45Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Financial Position
 (Unaudited)
 March 31,
    
    
    December 31,
    
    
    January 1,(US$000s)
    
    Notes
    
    2011
    
    
    2010
    
    
    2010AssetsCurrent AssetsCash and cash equivalents
    
    5
    
    
    80,798
    
    
    
    68,317
    
    
    
    24,362Accounts receivable
    
    
    
    
    6,508
    
    
    
    6,359
    
    
    
    5,021Note receivable
    
    
    
    
    234
    
    
    
    264
    
    
    
    225Prepaid and other
    
    
    
    
    2,061
    
    
    
    2,859
    
    
    
    77189,601
    
    
    
    77,799
    
    
    
    30,379Intangible
    
    6
    
    
    284,149
    
    
    
    273,568
    
    
    
    207,750Property, plant and equipment
    
    7
    
    
    42,731
    
    
    
    40,618
    
    
    
    41,983Long term receivables
    
    
    
    
    2,584
    
    
    
    2,433
    
    
    
    839419,065
    
    
    
    394,418
    
    
    
    280,951Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    
    
    24,702
    
    
    
    21,482
    
    
    
    10,779Debt
    
    8
    
    
    40,985
    
    
    
    39,832
    
    
    
    Derivative financial instruments
    
    9, 10
    
    
    4,211
    
    
    
    8,447
    
    
    
    13,023Income taxes
    
    
    
    
    351
    
    
    
    
    
    
    
    530Decommissioning costs
    
    11
    
    
    
    
    
    
    
    
    
    
    75370,249
    
    
    
    69,761
    
    
    
    25,085Long term debt
    
    8
    
    
    
    
    
    
    
    
    
    
    36,934Long term provisions
    
    11
    
    
    3,031
    
    
    
    3,008
    
    
    
    2,187Deferred income taxes
    
    
    
    
    21,730
    
    
    
    21,165
    
    
    
    22,33695,010
    
    
    
    93,934
    
    
    
    86,542Shareholders EquityShare capital
    
    13
    
    
    585,664
    
    
    
    550,562
    
    
    
    422,322Contributed surplus
    
    14
    
    
    22,736
    
    
    
    23,141
    
    
    
    18,724Accumulated deficit
    
    
    
    
    (284,345
    )
    
    
    (273,219
    )
    
    
    (246,637
    )324,055
    
    
    
    300,484
    
    
    
    194,409419,065
    
    
    
    394,418
    
    
    
    280,951Nature of operations and going concern
    
    1
   3




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IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Loss and Comprehensive Loss
 (Unaudited)
 Three Months Ended March 31,(US$000s, except share and per share amounts)
    
    Note
    
    2011
    
    
    2010RevenueOil
    
    
    
    
    8,119
    
    
    
    5,330Interest
    
    
    
    
    67
    
    
    
    198,186
    
    
    
    5,349ExpensesOperating
    
    18
    
    
    4,523
    
    
    
    3,454Exploration and evaluation
    
    6
    
    
    
    
    
    
    606General and administrative
    
    
    
    
    13,417
    
    
    
    8,432Depletion and depreciation
    
    7
    
    
    1,831
    
    
    
    1,537Foreign currency exchange gain
    
    
    
    
    (225
    )
    
    
    (4,187
    )Derivative instruments (gain) loss
    
    9, 10
    
    
    (1,129
    )
    
    
    2,057Interest
    
    
    
    
    8
    
    
    
    418,425
    
    
    
    11,903Loss before income taxes
    
    
    
    
    (10,239
    )
    
    
    (6,554
    )Provision for income taxesCurrent
    
    
    
    
    (322
    )
    
    
    (79
    )Deferred
    
    
    
    
    (565
    )
    
    
    (172
    )(887
    )
    
    
    (251
    )Net loss and comprehensive loss
    
    
    
    
    (11,126
    )
    
    
    (6,805
    )Net loss per common share, basic and diluted
    
    
    
    
    (0.03
    )
    
    
    (0.02
    )Weighted average number of common sharesBasic and diluted (000s)
    
    
    
    
    338,403
    
    
    
    307,233
   4




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IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Changes in Equity
 (Unaudited)
 Share CapitalShares
    
    
    
    
    
    
    Contributed
    
    
    Accumulated(US$000s, except share amounts)
    
    Note
    
    (000s)
    
    
    Amount
    
    
    Surplus
    
    
    Deficit
    
    
    TotalBalance January 1, 2010
    
    
    
    
    282,559
    
    
    
    422,322
    
    
    
    18,724
    
    
    
    (246,637
    )
    
    
    194,409Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,805
    )
    
    
    (6,805
    )Shares issued for cash, net of share issue costs
    
    
    
    
    50,000
    
    
    
    122,322
    
    
    
    
    
    
    
    
    
    
    
    122,322Shares issued for services
    
    
    
    
    280
    
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    799Exercise of stock options
    
    14
    
    
    912
    
    
    
    3,518
    
    
    
    (1,887
    )
    
    
    
    
    
    
    1,631Exercise of purchase warrants
    
    
    
    
    2
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Share-based compensation expense
    
    14
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    
    
    
    
    1,223Balance March 31, 2010
    
    
    
    
    333,753
    
    
    
    548,970
    
    
    
    18,060
    
    
    
    (253,442
    )
    
    
    313,588
 Share CapitalShares
    
    
    
    
    
    
    Contributed
    
    
    Accumulated(US$000s, except share amounts)
    
    Note
    
    (000s)
    
    
    Amount
    
    
    Surplus
    
    
    Deficit
    
    
    TotalBalance January 1, 2011
    
    
    
    
    334,365
    
    
    
    550,562
    
    
    
    23,141
    
    
    
    (273,219
    )
    
    
    300,484Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,126
    )
    
    
    (11,126
    )Exercise of stock options
    
    14
    
    
    947
    
    
    
    4,055
    
    
    
    (2,181
    )
    
    
    
    
    
    
    1,874Exercise of purchase warrants
    
    
    
    
    8,621
    
    
    
    31,047
    
    
    
    
    
    
    
    
    
    
    
    31,047Share-based compensation expense
    
    14
    
    
    
    
    
    
    
    
    
    
    1,776
    
    
    
    
    
    
    
    1,776Balance March 31, 2011
    
    
    
    
    343,933
    
    
    
    585,664
    
    
    
    22,736
    
    
    
    (284,345
    )
    
    
    324,055
   5




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IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Three Months Ended March 31,(US$000s)
    
    Note
    
    2011
    
    
    2010Operating ActivitiesNet loss
    
    
    
    
    (11,126
    )
    
    
    (6,805
    )Items not requiring use of cashDepletion and depreciation
    
    7
    
    
    1,831
    
    
    
    1,537Share-based compensation expense
    
    14
    
    
    1,776
    
    
    
    1,223Unrealized (gain) loss on derivative instruments
    
    9, 10
    
    
    (1,129
    )
    
    
    2,057Unrealized foreign currency exchange gain
    
    
    
    
    (227
    )
    
    
    (4,373
    )Deferred income tax expense
    
    
    
    
    565
    
    
    
    172Exploration and evaluation expense
    
    6
    
    
    
    
    
    
    606Other
    
    
    
    
    6
    
    
    
    192Decommissioning costs settled
    
    
    
    
    
    
    
    
    (58
    )Changes in non-cash working capital items
    
    19
    
    
    1,796
    
    
    
    18Net cash used in operating activities
    
    
    
    
    (6,508
    )
    
    
    (5,431
    )Investing ActivitiesIntangible expenditures
    
    
    
    
    (10,364
    )
    
    
    (23,082
    )Property, plant and equipment expenditures
    
    
    
    
    (3,949
    )
    
    
    (818
    )Long term receivables
    
    
    
    
    (147
    )
    
    
    (348
    )Changes in non-cash working capital items
    
    19
    
    
    2,475
    
    
    
    880Net cash used in investing activities
    
    
    
    
    (11,985
    )
    
    
    (23,368
    )Financing ActivitiesShares and warrants issued on private placements, net of share issue costs
    
    
    
    
    
    
    
    
    136,321Proceeds from exercise of options and warrants
    
    10, 14
    
    
    29,814
    
    
    
    1,636Changes in non-cash working capital items
    
    19
    
    
    (19
    )
    
    
    Net cash provided by financing activities
    
    
    
    
    29,795
    
    
    
    137,957Foreign exchange gain on cash and cash equivalents held in a foreign currency
    
    
    
    
    1,179
    
    
    
    5,715Increase in cash and cash equivalents, for the period
    
    
    
    
    12,481
    
    
    
    114,873Cash and cash equivalents, beginning of period
    
    
    
    
    68,317
    
    
    
    24,362Cash and cash equivalents, end of period
    
    
    
    
    80,798
    
    
    
    139,235
   6




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IVANHOE ENERGY INC.
 
 Notes to the Unaudited Condensed Consolidated Financial Statements
  1. NATURE OF OPERATIONS AND GOING CONCERN
  TM
     2. BASIS OF PRESENTATION
 2.1 Statement of Compliance
   2.2 Basis of Presentation
    7




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3. SIGNIFICANT ACCOUNTING POLICIES
 3.1 Basis of Consolidation
   3.2 Foreign Currency Translation
   3.3 Cash and Cash Equivalents
  3.4 Intangible Assets
 i. Technology Assets
 TM
 ii. Exploration and Evaluation Assets
     8




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3.5 Property, Plant and Equipment
 i. Oil and Gas Property and Equipment
   ii. Other Assets
  3.6 Impairment
    3.7 Decommissioning Provision
  3.8 Provisions and Contingencies
    9




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3.9 Financial Assets
  i. Loans and Receivables
  ii. Available-for-Sale
  iii. Financial Assets at Fair Value through Profit or Loss
  iv. Held-to-Maturity
  v. Impairment
     10




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vi. Derecognition
  3.10 Financial Liabilities
  i. Financial Liabilities at Fair Value through Profit or Loss
  ii. Other Financial Liabilities
  3.11 Oil and Gas Revenue
  3.12 Income Tax
  i. Current income tax
  ii. Deferred income tax
   
    
    where the deferred income tax liability arises from the initial recognition of goodwill
or of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither accounting profit nor taxable profit or loss; and
 
    
    in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future.
  11




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
    
    where the deferred income tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
 
    
    in respect of deductible temporary differences associated with investments in
subsidiaries, jointly controlled entities and associates, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized.
     3.13 Borrowing Costs
  3.14 Share-Based Payments
     12




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3.15 Income or Loss per Common Share
  3.16 Standards and Interpretations Issued But Not Yet Adopted
 i. IFRS 9 Financial Instruments
   4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINITY
  4.1 Critical Judgments in Applying Accounting Policies
 i. E&E Assets
   ii. Impairment
 a. Property, Plant and Equipment
   13




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b. Technology Assets
  4.2 Key Sources of Estimation Uncertainty
 i. Oil and Gas Reserves
    ii. HTL Technology
  iii. Decommissioning Provisions
  iv Option Pricing Models
   14




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v. Subsidiary Option
  vi. Deferred Income Taxes
  5. CASH AND CASH EQUIVALENTS
 March 31,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Cash at banks and on hand
    
    
    56,805
    
    
    
    10,147
    
    
    
    6,797Term deposits
    
    
    23,470
    
    
    
    57,670
    
    
    
    Money market accounts
    
    
    
    
    
    
    
    
    
    
    14,715Restricted cash
    
    
    523
    
    
    
    500
    
    
    
    2,85080,798
    
    
    
    68,317
    
    
    
    24,362
  6. INTANGIBLE ASSETS
 Exploration and Evaluation AssetsLatin
    
    
    
    
    
    
    HTLTM
    
    
    Total IntangibleAsia
    
    
    Canada
    
    
    America
    
    
    Total
    
    
    Technology
    
    
    AssetsCostBalance January 1, 2010
    
    
    14,411
    
    
    
    94,431
    
    
    
    6,755
    
    
    
    115,597
    
    
    
    92,153
    
    
    
    207,750Additions during the period
    
    
    27,261
    
    
    
    29,324
    
    
    
    17,704
    
    
    
    74,289
    
    
    
    
    
    
    
    74,289Exploration and evaluation expense
    
    
    (3,537
    )
    
    
    
    
    
    
    (4,934
    )
    
    
    (8,471
    )
    
    
    
    
    
    
    (8,471
    )Balance December 31, 2010
    
    
    38,135
    
    
    
    123,755
    
    
    
    19,525
    
    
    
    181,415
    
    
    
    92,153
    
    
    
    273,568Additions during the period
    
    
    6,499
    
    
    
    2,756
    
    
    
    1,326
    
    
    
    10,581
    
    
    
    
    
    
    
    10,581Balance March 31, 2011
    
    
    44,634
    
    
    
    126,511
    
    
    
    20,851
    
    
    
    191,996
    
    
    
    92,153
    
    
    
    284,149
 TM
   15




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7. PROPERTY, PLANT AND EQUIPMENT
 Oil and Gas Property and EquipmentLatin
    
    
    
    
    
    
    Other
    
    
    TotalAsia
    
    
    Canada
    
    
    America
    
    
    Total
    
    
    Assets
    
    
    PP&ECostBalance January 1, 2010
    
    
    31,816
    
    
    
    
    
    
    
    
    
    
    
    31,816
    
    
    
    11,373
    
    
    
    43,189Additions during the period
    
    
    4,123
    
    
    
    
    
    
    
    
    
    
    
    4,123
    
    
    
    1,648
    
    
    
    5,771Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Balance December 31, 2010
    
    
    35,939
    
    
    
    
    
    
    
    
    
    
    
    35,939
    
    
    
    13,009
    
    
    
    48,948Additions during the period
    
    
    3,530
    
    
    
    
    
    
    
    
    
    
    
    3,530
    
    
    
    419
    
    
    
    3,949Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Balance March 31, 2011
    
    
    39,469
    
    
    
    
    
    
    
    
    
    
    
    39,469
    
    
    
    13,423
    
    
    
    52,892Accumulated DepreciationBalance January 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,206
    
    
    
    1,206Depletion and depreciation for the period
    
    
    6,196
    
    
    
    
    
    
    
    
    
    
    
    6,196
    
    
    
    934
    
    
    
    7,130Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Balance December 31, 2010
    
    
    6,196
    
    
    
    
    
    
    
    
    
    
    
    6,196
    
    
    
    2,134
    
    
    
    8,330Depletion and depreciation for the period
    
    
    1,576
    
    
    
    
    
    
    
    
    
    
    
    1,576
    
    
    
    256
    
    
    
    1,832Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Balance March 31, 2011
    
    
    7,772
    
    
    
    
    
    
    
    
    
    
    
    7,772
    
    
    
    2,389
    
    
    
    10,161Net Book ValueAs at January 1, 2010
    
    
    31,816
    
    
    
    
    
    
    
    
    
    
    
    31,816
    
    
    
    10,167
    
    
    
    41,983As at December 31, 2010
    
    
    29,743
    
    
    
    
    
    
    
    
    
    
    
    29,743
    
    
    
    10,875
    
    
    
    40,618As at March 31, 2011
    
    
    31,697
    
    
    
    
    
    
    
    
    
    
    
    31,697
    
    
    
    11,034
    
    
    
    42,731
 Oil and Gas Property and Equipment
  Other Assets
   16




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8. DEBT
 March 31,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Convertible note
    
    
    41,178
    
    
    
    40,217
    
    
    
    38,005Unamortized discount
    
    
    (193
    )
    
    
    (385
    )
    
    
    (1,071
    )Carrying amount
    
    
    40,985
    
    
    
    39,832
    
    
    
    36,934
     9. FINANCIAL INSTRUMENTS
 9.1 Fair Value of Financial Instruments Measured at Amortized Cost
  March 31,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010DebtCarrying Amount
    
    
    40,985
    
    
    
    39,832
    
    
    
    36,934Fair Value
    
    
    40,189
    
    
    
    40,193
    
    
    
    35,950
  9.2 Financial Instruments Measured at Fair Value Through Profit and Loss
  
    
    Level 1  using quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2  using inputs for the asset or liability, other than quoted prices, that are
observable either directly (i.e. as prices) or indirectly (i.e. derived from prices).
 
    
    Level 3  using inputs for the asset or liability that are not based on observable
market data, such as prices based on internal models or other valuation methods.
  17




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Level 1
    
    
    Level 2
    
    
    Level 32006
    
    
    2009 & 2010
    
    
    Convertible
    
    
    
    
    
    TotalPurchase
    
    
    Purchase
    
    
    Component
    
    
    Subsidiary
    
    
    FairWarrants
    
    
    Warrants
    
    
    of Debt
    
    
    Option
    
    
    ValueBalance January 1, 2010
    
    
    7,582
    
    
    
    667
    
    
    
    4,774
    
    
    
    
    
    
    
    13,023Issuance of purchase warrants
    
    
    
    
    
    
    13,999
    
    
    
    
    
    
    
    
    
    
    
    13,999Exercise of purchase warrants
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Derivative gains through profit and loss
    
    
    (1,964
    )
    
    
    (13,050
    )
    
    
    (3,558
    )
    
    
    
    
    
    
    (18,572
    )Balance December 31, 2010
    
    
    5,615
    
    
    
    1,616
    
    
    
    1,216
    
    
    
    
    
    
    
    8,447Exercise of purchase warrants
    
    
    (2
    )
    
    
    (3,107
    )
    
    
    
    
    
    
    
    
    
    
    (3,109
    )Expiration of purchase warrants through profit and loss
    
    
    
    
    
    
    (1,477
    )
    
    
    
    
    
    
    
    
    
    
    (1,477
    )Derivative (gains) losses through profit and loss
    
    
    (3,267
    )
    
    
    2,968
    
    
    
    (537
    )
    
    
    1,186
    
    
    
    350Balance March 31, 2011
    
    
    2,346
    
    
    
    
    
    
    
    679
    
    
    
    1,186
    
    
    
    4,211
   9.3 Risks Arising from Financial Instruments
  i. Commodity Price Risks
  ii. Foreign Currency Exchange Rate Risk
   18




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##### Table of Contents



Change From a 10%
    
    
    Change From a 10%(Increase) Decrease in Net Loss and Comprehensive Loss
    
    Increase or Weakening
    
    
    Decrease or StrengtheningChinese renminbi
    
    
    605
    
    
    
    (740
    )Canadian dollar
    
    
    (1,715
    )
    
    
    2,040
 iii. Interest Rate Risk
  iv. Credit Risk
    March 31,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Accounts receivable  current
    
    
    6,508
    
    
    
    6,329
    
    
    
    5,004Accounts receivable  over 90 days
    
    
    
    
    
    
    30
    
    
    
    176,508
    
    
    
    6,359
    
    
    
    5,021
 v. Liquidity Risk
   19




---



##### Table of Contents



Less thanAs at March 31, 2011
    
    1 yearDerivative financial liabilitiesPurchase warrants
    
    
    2,346Convertible component of note
    
    
    679Subsidiary option
    
    
    1,186Non-derivative financial liabilitiesAccounts payable and accrued liabilities
    
    
    24,702Debt and interest
    
    
    42,285
 10. DERIVATIVE FINANCIAL INSTRUMENTS
  10.1 Purchase Warrants
  Purchase
    
    
    Shares(000s)
    
    Warrants
    
    
    IssuableBalance January 1, 2010
    
    
    12,135
    
    
    
    12,135Private placements
    
    
    12,500
    
    
    
    12,500Exercised
    
    
    (2
    )
    
    
    (2
    )Balance December 31, 2010
    
    
    24,633
    
    
    
    24,633Exercised
    
    
    (8,620
    )
    
    
    (8,620
    )Expired
    
    
    (4,619
    )
    
    
    (4,619
    )Balance March 31, 2011
    
    
    11,394
    
    
    
    11,394
  Price Per
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Cash Value onSpecial
    
    
    Outstanding(1)
    
    
    Fair Value
    
    
    
    
    
    
    Price Per
    
    
    Exercise
    
    
    ValuationYear of Issue
    
    Warrant
    
    
    (000s)
    
    
    ($US000s)
    
    
    Expiry Date
    
    
    Share
    
    
    ($US000s)
    
    
    Method2006
    
    
    US$2.23
    
    
    
    11,394
    
    
    
    2,346
    
    
    May 2011
    
    
    Cdn$2.93
    (2)
    
    
    34,365
    
    
    Quoted Market Price
 (1)
    
    One common share is issuable for each purchase warrant upon exercise.(2)
    
    Each common share purchase warrant originally entitled the holder to purchase one
common share at a price of US$2.63 per share until the fifth anniversary date of the closing.
In September 2006, these warrants were listed on the TSX and the exercise price was changed
to Cdn$2.93.  20




---



##### Table of Contents



Price Per
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Cash Value onSpecial
    
    
    Outstanding(1)
    
    
    Fair Value
    
    
    
    
    
    
    Price Per
    
    
    Exercise
    
    
    ValuationYear of Issue
    
    Warrant
    
    
    (000s)
    
    
    ($US000s)
    
    
    Expiry Date
    
    
    Share
    
    
    ($US000s)
    
    
    Method2006
    
    
    US$2.23
    
    
    
    11,398
    
    
    
    5,615
    
    
    May 2011
    
    
    Cdn$2.93
    (2)
    
    
    33,577
    
    
    Quoted Market Price2009
    
    
    N/A
    
    
    
    735
    
    
    
    11
    
    
    Feb 2011
    
    
    Cdn$4.05
    
    
    
    2,993
    
    
    Black-Scholes2010
    
    
    Cdn$3.00
    
    
    
    10,417
    
    
    
    1,326
    
    
    Feb 2011
    
    
    Cdn$3.16
    
    
    
    33,095
    
    
    Black-Scholes2010
    
    
    Cdn$3.00
    
    
    
    2,083
    
    
    
    279
    
    
    Feb 2011
    
    
    Cdn$3.16
    
    
    
    6,619
    
    
    Black-Scholes24,633
    
    
    
    7,231
    
    
    
    
    
    
    
    
    
    
    
    76,284
 (1)
    
    One common share is issuable for each purchase warrant upon exercise.(2)
    
    Each common share purchase warrant originally entitled the holder to purchase one
common share at a price of $2.63 per share until the fifth anniversary date of the closing.
In September 2006, these warrants were listed on the Toronto Stock Exchange and the
exercise price was changed to Cdn$2.93.  10.2 Convertible Note
   10.3 Subsidiary Option
     21




---



##### Table of Contents



11. LONG TERM PROVISIONS
 March 31,
    
    
    December 31,2011
    
    
    2010Decommissioning provisionBalance, beginning of period
    
    
    1,108
    
    
    
    1,040Liabilities incurred
    
    
    
    
    
    
    642Liabilities settled
    
    
    
    
    
    
    (179
    )Revisions in cash flow estimates
    
    
    
    
    
    
    (488
    )Unwinding of discount
    
    
    8
    
    
    
    23Change in discount rates
    
    
    15
    
    
    
    70Balance, end of period
    
    
    1,131
    
    
    
    1,108Long term obligation
    
    
    1,900
    
    
    
    1,9003,031
    
    
    
    3,008
 11.1 Decommissioning Provision
  11.2 Long term obligation
 TM
 12. COMMITMENTS AND CONTINGENCIES
 12.1 Income Taxes
    12.2 Operating Lease Arrangements
   Remainder of 2011
    
    
    1,3722012-2013
    
    
    1,1532,525
  22




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##### Table of Contents



12.3 Other
    13. SHARE CAPITAL
 Authorized
    
    Unlimited common shares with no par value
Unlimited preferred shares with no par valueIssued and Outstanding
    
    343,932,658 common shares (December 31, 2010  334,365,482) 
Nil preferred shares (December 31, 2010  nil)
  14. SHARE-BASED PAYMENTS
    Three months ended March 31,
    
    2011
    
    
    2010Expected life (in years)
    
    
    6.3
    
    
    
    5.1Volatility (1)
    
    
    74.4
    %
    
    
    77.5
    %Dividend yield
    
    
    
    
    
    
    Risk-free rate
    
    
    2.9
    %
    
    
    3.0
    %Estimated forfeiture rate
    
    
    2.9
    %
    
    
    2.1
    %
 (1)
    
    Expected volatility factor based on historical volatility of the Companys publicly
traded common shares.   23




---



##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Number of
    
    
    Weighted Average
    
    
    Number of
    
    
    Weighted AverageStock Options
    
    
    Exercise Price
    
    
    Stock Options
    
    
    Exercise Price(000s)
    
    
    (Cdn$)
    
    
    (000s)
    
    
    (Cdn$)Outstanding, beginning of period
    
    
    16,927
    
    
    
    2.24
    
    
    
    15,013
    
    
    
    2.27Granted
    
    
    50
    
    
    
    3.44
    
    
    
    6,041
    
    
    
    2.56Exercised
    
    
    (1,480
    )
    
    
    2.41
    
    
    
    (2,743
    )
    
    
    2.28Expired
    
    
    
    
    
    
    
    
    
    
    (635
    )
    
    
    2.60Forfeited
    
    
    (1
    )
    
    
    2.30
    
    
    
    (749
    )
    
    
    2.64Outstanding, end of period
    
    
    15,496
    
    
    
    2.21
    
    
    
    16,927
    
    
    
    2.24Exercisable, end of period
    
    
    6,478
    
    
    
    2.06
    
    
    
    7,324
    
    
    
    2.19
   Weighted AverageRemaining
    
    
    Weighted AverageOutstanding
    
    
    Contractual Life
    
    
    Exercise PriceRange of Exercise Prices (Cdn$)
    
    (000s)
    
    
    (years)
    
    
    (Cdn$)1.51 to 2.06
    
    
    5,788
    
    
    
    2.5
    
    
    
    1.712.15 to 2.71
    
    
    7,535
    
    
    
    4.8
    
    
    
    2.332.77 to 3.44
    
    
    2,173
    
    
    
    4.9
    
    
    
    3.1615,496
    
    
    
    3.9
    
    
    
    2.21
 15. RETIREMENT PLANS
   16. SEGMENT INFORMATION
      24




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##### Table of Contents



Latin
    
    
    TechnologyThree months ended March 31, 2011
    
    Asia
    
    
    Canada
    
    
    America
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil(1)
    
    
    8,119
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,119Interest
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    678,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    8,186ExpensesOperating
    
    
    3,310
    
    
    
    
    
    
    
    
    
    
    
    1,213
    
    
    
    
    
    
    
    4,523Exploration and evaluation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General and administrative
    
    
    2,772
    
    
    
    1,306
    
    
    
    1,680
    
    
    
    510
    
    
    
    7,149
    
    
    
    13,417Depletion and depreciation
    
    
    1,605
    
    
    
    2
    
    
    
    23
    
    
    
    132
    
    
    
    69
    
    
    
    1,831Foreign currency exchange gain
    
    
    (10
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (212
    )
    
    
    (225
    )Derivative instruments (gain) loss
    
    
    1,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,315
    )
    
    
    (1,129
    )Interest
    
    
    
    
    
    
    2
    
    
    
    4
    
    
    
    2
    
    
    
    
    
    
    
    88,863
    
    
    
    1,307
    
    
    
    1,707
    
    
    
    1,857
    
    
    
    4,691
    
    
    
    18,425Loss before income taxes
    
    
    (743
    )
    
    
    (1,307
    )
    
    
    (1,707
    )
    
    
    (1,857
    )
    
    
    (4,625
    )
    
    
    (10,239
    )(Provision for) recovery of income taxesCurrent
    
    
    (264
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    (322
    )Deferred
    
    
    (1,165
    )
    
    
    
    
    
    
    
    
    
    
    (391
    )
    
    
    991
    
    
    
    (565
    )(1,429
    )
    
    
    
    
    
    
    
    
    
    
    (391
    )
    
    
    933
    
    
    
    (887
    )Net loss and comprehensive loss
    
    
    (2,172
    )
    
    
    (1,307
    )
    
    
    (1,707
    )
    
    
    (2,248
    )
    
    
    (3,692
    )
    
    
    (11,126
    )Capital investments  Intangible
    
    
    6,499
    
    
    
    2,539
    
    
    
    1,326
    
    
    
    
    
    
    
    
    
    
    
    10,364Capital investments  Property, plant and equipment
    
    
    3,546
    
    
    
    
    
    
    
    62
    
    
    
    341
    
    
    
    
    
    
    
    3,949As at March 31, 2011Assets(2)
    
    
    91,835
    
    
    
    126,708
    
    
    
    28,042
    
    
    
    102,092
    
    
    
    70,388
    
    
    
    419,065Liabilities(3)
    
    
    123,714
    
    
    
    135,402
    
    
    
    45,434
    
    
    
    79,189
    
    
    
    (288,729
    )
    
    
    95,010As at December 31, 2010Assets(2)
    
    
    85,273
    
    
    
    123,890
    
    
    
    24,392
    
    
    
    101,899
    
    
    
    58,964
    
    
    
    394,418Liabilities(3)
    
    
    114,980
    
    
    
    131,277
    
    
    
    42,162
    
    
    
    76,747
    
    
    
    (271,232
    )
    
    
    93,934As at January 1, 2010Assets(2)
    
    
    57,528
    
    
    
    94,594
    
    
    
    7,778
    
    
    
    101,893
    
    
    
    19,158
    
    
    
    280,951Liabilities(3)
    
    
    81,047
    
    
    
    98,262
    
    
    
    13,145
    
    
    
    56,909
    
    
    
    (162,821
    )
    
    
    86,542
 (1)
    
    All revenues in Asia are generated from the sale of oil production in China to one
customer.(2)
    
    Assets include investments in subsidiaries that are eliminated for consolidation under
Corporate.(3)
    
    Liabilities for Corporate include intercompany receivables of $368.1 million at March
31, 2011 (December 31, 2010  $352.5 million; January 1, 2010  $216.7 million) resulting
in a negative balance.  25




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##### Table of Contents



Latin
    
    
    TechnologyThree months ended March 31, 2010
    
    Asia
    
    
    Canada
    
    
    America
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil(1)
    
    
    5,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,330Interest
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    195,332
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    5,349ExpensesOperating
    
    
    2,236
    
    
    
    
    
    
    
    
    
    
    
    1,218
    
    
    
    
    
    
    
    3,454Exploration and evaluation
    
    
    606
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    606General and administrative
    
    
    1,213
    
    
    
    972
    
    
    
    1,675
    
    
    
    228
    
    
    
    4,344
    
    
    
    8,432Depletion and depreciation
    
    
    1,723
    
    
    
    2
    
    
    
    7
    
    
    
    (243
    )
    
    
    48
    
    
    
    1,537Foreign currency exchange (gain) loss
    
    
    9
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (4,188
    )
    
    
    (4,187
    )Derivative instruments loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,057
    
    
    
    2,057Interest
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    45,787
    
    
    
    967
    
    
    
    1,682
    
    
    
    1,206
    
    
    
    2,261
    
    
    
    11,903Loss before income taxes
    
    
    (455
    )
    
    
    (967
    )
    
    
    (1,682
    )
    
    
    (1,206
    )
    
    
    (2,244
    )
    
    
    (6,554
    )Provision for income taxesCurrent
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (79
    )Deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    
    
    
    
    (172
    )(78
    )
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    (1
    )
    
    
    (251
    )Net loss and comprehensive loss
    
    
    (533
    )
    
    
    (967
    )
    
    
    (1,682
    )
    
    
    (1,378
    )
    
    
    (2,245
    )
    
    
    (6,805
    )Capital investments  Intangible
    
    
    1,927
    
    
    
    17,428
    
    
    
    3,727
    
    
    
    
    
    
    
    
    
    
    
    23,082Capital investments  Property, plant & equipment
    
    
    376
    
    
    
    3
    
    
    
    11
    
    
    
    206
    
    
    
    222
    
    
    
    818
 (1)
    
    All revenues in Asia are generated from the sale of oil production in China to one
customer.  26




---



##### Table of Contents



17. CAPITAL MANAGEMENT
    18. OPERATING EXPENSES
  Three months ended March 31,
    
    2011
    
    
    2010AsiaField operating
    
    
    1,623
    
    
    
    1,297Windfall levy
    
    
    1,577
    
    
    
    811Engineering support
    
    
    110
    
    
    
    1283,310
    
    
    
    2,236Technology DevelopmentFTF operating costs
    
    
    1,213
    
    
    
    1,218Total operating costs
    
    
    4,523
    
    
    
    3,454
  19. SUPPLEMENTAL CASH FLOW INFORMATION
 19.1 Cash Payments For Interest And Taxes
  Three months ended March 31,
    
    2011
    
    
    2010Income taxes
    
    
    57
    
    
    
    427Interest
    
    
    983
    
    
    
    805Shares issued for bonuses and services
    
    
    
    
    
    
    799
  27




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##### Table of Contents



19.2 Changes in Non-Cash Activities
  Three months ended March 31,
    
    2011
    
    
    2010Operating activitiesAccounts receivable
    
    
    (624
    )
    
    
    244Note receivable
    
    
    31
    
    
    
    (36
    )Prepaid and other current assets
    
    
    66
    
    
    
    123Accounts payable and accrued liabilities
    
    
    1,972
    
    
    
    37Income taxes payable
    
    
    351
    
    
    
    (350
    )1,796
    
    
    
    18Investing activitiesAccounts receivable
    
    
    476
    
    
    
    (25
    )Prepaid and other current assets
    
    
    732
    
    
    
    83Accounts payable and accrued liabilities
    
    
    1,267
    
    
    
    8222,475
    
    
    
    880Financing activitiesAccounts payable and accrued liabilities
    
    
    (19
    )
    
    
    4,252
    
    
    
    898
 20. RELATED PARTY TRANSACTIONS
   Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    213
    
    
    
    307Ivanhoe Capital Aviation Ltd.
    
    Aircraft
    
    
    300
    
    
    
    300I2MS.Net PTE Ltd.
    
    Information systems
    
    
    58
    
    
    
    32Ivanhoe Capital Services Ltd.
    
    Administration
    
    
    92
    
    
    
    26SouthGobi Resources Ltd.
    
    Administration
    
    
    51
    
    
    
    GoviEx Gold Inc.
    
    Business development
    
    
    
    
    
    
    251092155 Ontario Inc.
    
    HTLTM technology
    
    
    12
    
    
    
    13Ensyn Technologies Inc.
    
    HTLTM technology
    
    
    
    
    
    
    7Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    74
    
    
    
    3Ivanhoe Mines Ltd.
    
    Administration
    
    
    
    
    
    
    1800
    
    
    
    714
  March 31,
    
    
    December 31,
    
    
    January 1,Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    38
    
    
    
    86
    
    
    
    40I2MS.Net PTE Ltd.
    
    Information systems
    
    
    16
    
    
    
    13
    
    
    
    17SouthGobi Resources Ltd.
    
    Administration
    
    
    13
    
    
    
    38
    
    
    
    Ivanhoe Capital Services Ltd.
    
    Management
    
    
    15
    
    
    
    70
    
    
    
    15Ensyn Technologies Inc.
    
    HTLTM technology
    
    
    
    
    
    
    
    
    
    
    Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    11
    
    
    
    
    
    
    
    93
    
    
    
    207
    
    
    
    72
  28




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##### Table of Contents



21. REMUNERATION OF KEY MANAGEMENT PERSONNEL
  Three months ended March 31,
    
    2011
    
    
    2010Base salaries or fees and other cash payments
    
    
    780
    
    
    
    705Employers contributions to retirement plan
    
    
    16
    
    
    
    17Share-based compensation expense
    
    
    718
    
    
    
    3961,514
    
    
    
    1,118
 22. INVESTMENTS IN SUBSIDIARIES
  Name of Subsidiary
    
    Jurisdiction of Incorporation or FormationSunwing Holding Corporation *
    
    BarbadosSunwing Energy Ltd.
    
    BermudaSunwing Zitong Energy Ltd.
    
    British Virgin IslandsPan-China Resources Ltd.
    
    British Virgin IslandsIvanhoe Energy Mongolia Inc. *
    
    AlbertaPanAsian Energy Ltd.
    
    NevisShaman LLC
    
    MongoliaIvanhoe Energy Latin America Inc. *
    
    British ColumbiaIvanhoe Energy Ecuador Inc.
    
    British ColumbiaIvanhoe Energy Canada Inc. *
    
    AlbertaIvanhoe Energy Holdings Inc. *
    
    NevadaIvanhoe HTL Petroleum Ltd
    
    Nevada
 *
    
     subsidiary held directly by Ivanhoe Energy Inc. All other companies are held through
subsidiary undertakings. 23. FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
  23.1 Exemptions from Full Retrospective Application .
  i. Deemed Cost
  ii. Decommissioning Provisions Included in the Cost of Property, Plant and Equipment
   29




---



##### Table of Contents



iii. Share-Based Payment
  iv. Business Combinations
  v. Leases
  23.2 Reconciliations to IFRS
    
  30




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##### Table of Contents



Reconciliation of Consolidated Statements of Financial Position
 At January 1, 2010
    
    
    At December 31, 2010
    
    
    At March 31, 2010Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS(US$000s)
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    BalancesAssetsCurrent AssetsCash and cash equivalents
    
    
    24,362
    
    
    
    
    
    
    
    24,362
    
    
    
    68,317
    
    
    
    
    
    
    
    68,317
    
    
    
    139,235
    
    
    
    
    
    
    
    139,235Accounts receivable
    
    
    5,021
    
    
    
    
    
    
    
    5,021
    
    
    
    6,359
    
    
    
    
    
    
    
    6,359
    
    
    
    4,802
    
    
    
    
    
    
    
    4,802Note receivable
    
    
    225
    
    
    
    
    
    
    
    225
    
    
    
    264
    
    
    
    
    
    
    
    264
    
    
    
    261
    
    
    
    
    
    
    
    261Prepaid and other current assets
    
    
    771
    
    
    
    
    
    
    
    771
    
    
    
    2,859
    
    
    
    
    
    
    
    2,859
    
    
    
    565
    
    
    
    
    
    
    
    56530,379
    
    
    
    
    
    
    
    30,379
    
    
    
    77,799
    
    
    
    
    
    
    
    77,799
    
    
    
    144,863
    
    
    
    
    
    
    
    144,863Intangible assets
    
    
    92,153
    
    
    
    115,597
    a
    
    
    207,750
    
    
    
    92,153
    
    
    
    197,193
    a
    
    
    273,568
    
    
    
    92,153
    
    
    
    141,043
    a
    
    
    231,199
    
    
    
    
    
    
    
    
    
    
    
    (7,482
    ) b
    
    
    
    
    
    
    
    
    
    
    (1,391
    ) b
    
    
    
    
    
    
    
    
    
    
    
    175
    c
    
    
    
    
    
    
    
    
    
    
    (606
    ) g
    
    
    
    
    
    
    
    
    
    
    
    (8,471
    ) g
    
    
    
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    
    158,392
    
    
    
    (115,597
    ) a
    
    
    41,983
    
    
    
    237,200
    
    
    
    (197,193
    ) a
    
    
    40,618
    
    
    
    182,219
    
    
    
    (141,043
    ) a
    
    
    40,865(904
    ) b
    
    
    
    
    
    
    
    
    
    
    (2,014
    ) b
    
    
    
    
    
    
    
    
    
    
    (949
    ) b92
    c
    
    
    
    
    
    
    
    
    
    
    189
    c
    
    
    
    
    
    
    
    
    
    
    92
    c
    
    
    
    
    
    
    
    
    
    
    
    2,436
    f
    
    
    
    
    
    
    
    
    
    
    546
    fLong term receivables
    
    
    839
    
    
    
    
    
    
    
    839
    
    
    
    2,433
    
    
    
    
    
    
    
    2,433
    
    
    
    1,183
    
    
    
    
    
    
    
    1,183281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    420,418
    
    
    
    (2,308
    )
    
    
    418,110Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    10,779
    
    
    
    
    
    
    
    10,779
    
    
    
    21,482
    
    
    
    
    
    
    
    21,482
    
    
    
    11,638
    
    
    
    
    
    
    
    11,638Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    
    
    
    
    Derivative financial instruments
    
    
    
    
    
    
    13,023
    d
    
    
    13,023
    
    
    
    
    
    
    
    8,447
    d
    
    
    8,447
    
    
    
    
    
    
    
    29,076
    d
    
    
    29,076Income tax payable
    
    
    530
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    180Decommissioning costs
    
    
    753
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    
    
    
    
    33012,062
    
    
    
    13,023
    
    
    
    25,085
    
    
    
    61,314
    
    
    
    8,447
    
    
    
    69,761
    
    
    
    12,148
    
    
    
    29,076
    
    
    
    41,224Long term debt
    
    
    36,934
    
    
    
    
    
    
    
    36,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,449
    
    
    
    
    
    
    
    38,449Long term provisions
    
    
    2,095
    
    
    
    92
    c
    
    
    2,187
    
    
    
    2,644
    
    
    
    364
    c
    
    
    3,008
    
    
    
    2,249
    
    
    
    92
    c
    
    
    2,341Deferred income tax liability
    
    
    22,643
    
    
    
    (307
    ) b
    
    
    22,336
    
    
    
    21,518
    
    
    
    (367
    ) b
    
    
    21,165
    
    
    
    22,817
    
    
    
    (313
    ) b
    
    
    22,508
    
    
    
    
    
    
    
    
    
    
    
    14
    f
    
    
    
    
    
    
    
    
    
    
    4
    f73,734
    
    
    
    12,808
    
    
    
    86,542
    
    
    
    85,476
    
    
    
    8,458
    
    
    
    93,934
    
    
    
    75,663
    
    
    
    28,859
    
    
    
    104,522Shareholders EquityShare capital
    
    
    422,322
    
    
    
    
    
    
    
    422,322
    
    
    
    550,562
    
    
    
    
    
    
    
    550,562
    
    
    
    549,075
    
    
    
    (105
    ) e
    
    
    548,970Purchase warrants
    
    
    19,427
    
    
    
    (19,427
    ) d
    
    
    
    
    
    
    33,423
    
    
    
    (33,423
    ) d
    
    
    
    
    
    
    33,423
    
    
    
    (33,423
    ) d
    
    
    Contributed surplus
    
    
    20,029
    
    
    
    (2,947
    ) d
    
    
    18,724
    
    
    
    22,983
    
    
    
    (2,947
    ) d
    
    
    23,141
    
    
    
    18,573
    
    
    
    (2,947
    ) d
    
    
    18,0591,642
    e
    
    
    
    
    
    
    
    
    
    
    3,105
    e
    
    
    
    
    
    
    
    
    
    
    2,433
    eConvertible note
    
    
    2,086
    
    
    
    (2,086
    ) d
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    ) d
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    ) d
    
    
    Accumulated deficit
    
    
    (255,835
    )
    
    
    9,198
    
    
    
    (246,637
    )
    
    
    (284,945
    )
    
    
    11,726
    
    
    
    (273,219
    )
    
    
    (258,402
    )
    
    
    4,961
    
    
    
    (253,441
    )208,029
    
    
    
    (13,620
    )
    
    
    194,409
    
    
    
    324,109
    
    
    
    (23,625
    )
    
    
    300,484
    
    
    
    344,755
    
    
    
    (31,167
    )
    
    
    313,588281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    420,418
    
    
    
    (2,308
    )
    
    
    418,110
  31




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##### Table of Contents



Reconciliation of Consolidated Statements of Loss and Comprehensive Loss
 Year ended December 31, 2010
    
    
    Three months ended March 31, 2010Canadian
    
    
    Effect of
    
    
    
    
    
    
    Canadian
    
    
    Effect of(US$000s)
    
    GAAP
    
    
    Transition
    
    
    IFRS
    
    
    GAAP
    
    
    Transition
    
    
    IFRSRevenueOil
    
    
    21,720
    
    
    
    
    
    
    
    21,720
    
    
    
    5,330
    
    
    
    
    
    
    
    5,330Interest
    
    
    208
    
    
    
    
    
    
    
    208
    
    
    
    19
    
    
    
    
    
    
    
    1921,928
    
    
    
    
    
    
    
    21,928
    
    
    
    5,349
    
    
    
    
    
    
    
    5,349ExpensesOperating
    
    
    13,514
    
    
    
    111
    b
    
    
    13,625
    
    
    
    3,423
    
    
    
    31
    b
    
    
    3,454Exploration and evaluation
    
    
    
    
    
    
    8,471
    g
    
    
    8,471
    
    
    
    
    
    
    
    606
    g
    
    
    606General and administrative
    
    
    32,864
    
    
    
    8,481
    b
    
    
    42,807
    
    
    
    6,340
    
    
    
    1,406
    b
    
    
    8,4321,462
    e
    
    
    
    
    
    
    
    
    
    
    686
    eDepletion and depreciation
    
    
    8,960
    
    
    
    (2,436
    ) f
    
    
    6,524
    
    
    
    2,083
    
    
    
    (546
    ) f
    
    
    1,537Foreign exchange
    
    
    (3,325
    )
    
    
    
    
    
    
    (3,325
    )
    
    
    (4,187
    )
    
    
    
    
    
    
    (4,187
    )(Gain) loss on derivative instruments
    
    
    
    
    
    
    (18,571
    ) d
    
    
    (18,571
    )
    
    
    
    
    
    
    2,057
    d
    
    
    2,057Interest
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    4
    
    
    
    
    
    
    
    452,037
    
    
    
    (2,482
    )
    
    
    49,555
    
    
    
    7,663
    
    
    
    4,240
    
    
    
    11,903Loss before income taxes
    
    
    (30,109
    )
    
    
    2,482
    
    
    
    (27,627
    )
    
    
    (2,314
    )
    
    
    (4,240
    )
    
    
    (6,554
    )(Provision for) recovery of income taxesCurrent
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )
    
    
    (79
    )
    
    
    
    
    
    
    (79
    )Deferred
    
    
    1,125
    
    
    
    60
    b
    
    
    1,171
    
    
    
    (174
    )
    
    
    6
    b
    
    
    (172
    )(14
    ) f
    
    
    
    
    
    
    
    
    
    
    (4
    ) f999
    
    
    
    46
    
    
    
    1,045
    
    
    
    (253
    )
    
    
    2
    
    
    
    (251
    )Net loss and comprehensive loss
    
    
    (29,110
    )
    
    
    2,528
    
    
    
    (26,582
    )
    
    
    (2,567
    )
    
    
    (4,238
    )
    
    
    (6,805
    )
 Notes to reconciliation
 a.
    
    Reclassification of Intangible AssetsUnder Canadian GAAP, oil and gas properties in the exploration and evaluation stage were
classified as oil and gas properties and development costs. In accordance with IFRS 6, these
properties were reclassified as intangible assets.b.
    
    Adjustment for Capitalized OverheadUnder Canadian GAAP, the Company capitalized employee benefits and overhead that were directly
attributable to E&E assets and PP&E. A portion of the amounts capitalized under Canadian GAAP do
not meet the threshold for capitalization under IAS 16, Property, Plant and Equipment and
therefore have been reclassified as operating costs or general and administrative expenses, as
appropriate.c.
    
    Decommissioning ProvisionsUnder Canadian GAAP, the present value of the Companys estimated future decommissioning costs
was calculated using a credit-adjusted risk-free discount rate. The discount rate under IFRS
does not permit company specific credit adjustments and therefore the decommissioning provision
has been recalculated using a risk-free discount rate.d.
    
    Derivative Financial InstrumentsUnder Canadian GAAP, the equity component of the Companys Convertible Note and the purchase
warrants were classified as shareholders equity. In accordance with IAS 32, Financial
Instruments: Presentation, financial instruments with an exercise price denominated in a
currency other than the Companys functional currency are accounted for as derivatives. As a
result, the equity component and purchase warrants have been reclassified as derivative
financial instruments.This resulted in the reclassification of the convertible portion of the Convertible Note and
purchase from shareholders equity to liabilities under IFRS. Additionally, IFRS requires these
items to be recorded at fair value with changes in their fair value recognized in the income
statement.
  32




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##### Table of Contents



e.
    
    Share-Based PaymentsStock options were accounted for using the fair value method under Canadian GAAP and charged to
operations on a straight-line basis. Under IFRS 2, Share-Based Payment, share-based payments
are charged to operations on a graded vesting basis thereby accelerating the compensation
expense recognized in earnings. Additional compensation expense was recorded for unvested stock
options at January 1, 2010.f.
    
    DepletionUnder Canadian GAAP, the Company depleted its oil and gas assets using the unit-of-production
method, based on proved reserves. For IFRS purposes, the Company is depleting its oil and gas
assets using the unit-of-production method, based on proved plus probable reserves. This has
resulted in a deferral of depletion expense.g.
    
    Exploration and Evaluation ExpenseUnder Canadian GAAP, capitalization of unsuccessful exploration activities was permitted if the
carrying value of the Companys total capitalized oil and gas properties and development was not
impaired. Under IFRS, unsuccessful exploration and evaluation wells will be charged to earnings
as E&E expense, including $4.9 million in Ecuador and $3.5 million in Asia in the year ended
December 31, 2010.
 
  33




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Forward-Looking Statements
   Special Note to Canadian Investors
 National Instrument 51-101
 Standards of Disclosure for Oil and Gas Activities Special Note to Canadian Investors
 Advisories
   Non-IFRS Financial Measures
   34




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##### Table of Contents



bbl
    
    =
    
    barrel
    
    mcf
    
    =
    
    thousand cubic feetbbls/d
    
    =
    
    barrels per day
    
    mcf/d
    
    =
    
    thousand cubic feet per dayboe
    
    =
    
    barrel of oil equivalent
    
    mmcf
    
    =
    
    million cubic feetboe/d
    
    =
    
    barrels of oil equivalent per day
    
    mmcf/d
    
    =
    
    million cubic feet per daymbbls
    
    =
    
    thousand barrels
    
    mmbbls
    
    =
    
    million barrelsmbbls/d
    
    =
    
    thousand barrels per day
    
    mmbls/d
    
    =
    
    million barrels per daymboe
    
    =
    
    thousands of barrels of oil equivalent
    
    mmbtu
    
    =
    
    million British thermal unitsmboe/d
    
    =
    
    thousands of barrels of oil equivalent per day
    
    tcf
    
    =
    
    trillion cubic feet
  www.ivanhoeenergy.com www.sec.gov www.sedar.com
  35




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##### Table of Contents



INTERNATIONAL FINANCIAL REPORTING STANDARDS
 Transition to IFRS from Canadian GAAP
   Initial Adoption of IFRS
 i. IFRS 1 Exemptions
  a) Deemed Cost
  b) Decommissioning Provisions Included in the Cost of Property, Plant and Equipment
  c) Share-Based Payment
  d) Business Combinations
  e) Leases
   36




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##### Table of Contents



ii. Impact on Adoption of IFRS on Financial Reporting
   a) Reclassification of Intangible Assets
  b) Adjustment for Capitalized Overhead
  c) Decommissioning Provisions
  d) Derivative Financial Instruments
   e) Share-Based Payments
  f) Depletion
  g) Exploration and Evaluation Expense
   37




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##### Table of Contents



iii. Impact of IFRS on Financial Reporting in the Future
  a) Intangible Assets
  b) Adjustment for Capitalized Overhead
  c) Derivative Financial Instruments
  e) Share-Based Payments
  f) Depletion
  g) Exploration and Evaluation Expense
  HIGHLIGHTS
 Three months ended March 31, ($000, except as stated)
    
    2011
    
    
    2010Average daily production (bbls/d)
    
    
    1,007
    
    
    
    804Realized oil prices ($/bbl)
    
    
    89.62
    
    
    
    73.63Oil revenue
    
    
    8,119
    
    
    
    5,330Capital expenditures
    
    
    14,311
    
    
    
    23,900Cash flow used in operating activities
    
    
    (6,508
    )
    
    
    (5,431
    )Net loss
    
    
    (11,126
    )
    
    
    (6,805
    )Net loss per share, basic and diluted
    
    
    (0.03
    )
    
    
    (0.02
    )
     38




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##### Table of Contents



RESULTS OF OPERATIONS
 Three Months Ended March 31,
    
    2011
    
    
    2010Asia(net bbls)Dagang
    
    
    86,865
    
    
    
    67,794Daqing
    
    
    3,734
    
    
    
    4,602Total production
    
    
    90,599
    
    
    
    72,396Average daily production (bbls/d)
    
    
    1,007
    
    
    
    804PricingAverage realized oil price ($/bbl)
    
    
    89.62
    
    
    
    73.63West Texas Intermediate (WTI) ($/bbl)
    
    
    93.92
    
    
    
    78.71
 Oil Revenue
  Net Revenue from Operations
 Three Months Ended March 31, ($/bbl)
    
    2011
    
    
    2010Oil revenue(1)
    
    
    89.62
    
    
    
    73.63Less operating costsField operating
    
    
    (17.92
    )
    
    
    (18.45
    )Windfall Levy
    
    
    (17.39
    )
    
    
    (11.20
    )Engineering and support costs
    
    
    (1.21
    )
    
    
    (1.77
    )Net operating revenue(1)
    
    
    53.10
    
    
    
    42.21Depletion
    
    
    (17.42
    )
    
    
    (23.70
    )Net revenue (loss) from operations(1)
    
    
    35.68
    
    
    
    18.51
 (1)
    
    Oil revenue per barrel, net operating revenue per barrel and net revenue (loss) from
operations per barrel do not have standardized meanings prescribed by IFRS and therefore may
not be comparable to similar measures used by other companies. Please refer to the Non-IFRS
Financial Measures under the Advisories section in the MD&A for more details. Operating Costs
 Three months ended March 31,
    
    2011
    
    
    2010AsiaField operating
    
    
    1,623
    
    
    
    1,297Windfall levy
    
    
    1,577
    
    
    
    811Engineering support
    
    
    110
    
    
    
    1283,310
    
    
    
    2,236Technology DevelopmentFTF operating costs
    
    
    1,213
    
    
    
    1,218Total operating costs
    
    
    4,523
    
    
    
    3,454
   39




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##### Table of Contents



Exploration and Evaluation
  General and Administrative
  Depletion and Depreciation
  Foreign Exchange
  Derivative Instruments
    Provision for Income Taxes
   40




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Contractual Obligations
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    After 2014Debt
    
    
    41,256
    
    
    
    41,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    1,029
    
    
    
    1,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Decommissioning provisions(1)
    
    
    2,007
    
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    1,665Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900Lease commitments
    
    
    2,525
    
    
    
    1,372
    
    
    
    886
    
    
    
    267
    
    
    
    
    
    
    
    48,717
    
    
    
    43,657
    
    
    
    886
    
    
    
    609
    
    
    
    
    
    
    
    3,565
 (1)
    
    Represents undiscounted asset retirement obligations after inflation. The discounted value of
these estimated obligations is provided for in the Financial Statements. Debt
  Decommissioning Provisions
  Long Term Obligation
  Operating Leases
  Other
     41




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##### Table of Contents



Sources and Uses of Cash
  Three Months Ended March 31,
    
    2011
    
    
    2010Cash used in operating activities
    
    
    (6,508
    )
    
    
    (5,431
    )Cash used in investing activities
    
    
    (11,985
    )
    
    
    (23,368
    )Cash provided by financing activities
    
    
    29,795
    
    
    
    137,957
  Operating Activities
  Investing Activities
 E&E Expenditures
    PP&E Expenditures
  Financing Activities
   42




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##### Table of Contents



Capital Structure
 March 31,
    
    
    December 31,As at
    
    2011
    
    
    2010Debt
    
    
    40,985
    
    
    
    39,832Shareholders equity
    
    
    324,055
    
    
    
    300,484
  Outlook for 2011
   TM TM
   43




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##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
    
 PART II OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
     44




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 Exhibit   Number
    
    Description10.1
    
    
    Warrant Indenture Amendment Agreement10.2
    
    
    Warrant Indenture Amendment Agreement31.1
    
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 SIGNATURE
  IVANHOE ENERGY INC.By:
    
    /s/ Gerald D. Schiefelbein

Gerald D. SchiefelbeinChief Financial OfficerDate:
    
    May 10, 2011
  45