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, 2014

Commission file number:
000-30586




ie_logo_drop_RGB_300dpi

Ivanhoe
Energy Inc.
(Exact name of registrant as specified in its charter)



|Yukon,
    Canada                                                                  |  | 98-0372413             
|---------------------------------------------------------------------------------- |  | -----------------------
|(State
    or other jurisdiction of                                                |  | (IRS
    Employer      
|incorporation
    or organization)                                                 |  | Identification
    No.)
|                                                                                   |  |                        
|                                                                                  
|654-999 Canada Place                                                              
|Vancouver,
    BC, Canada V6C 3E1                                                 
|(604)
    688-8323                                                                
|(Address
    and telephone number of the registrant’s principal executive offices)





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	 þYes
o No



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).	 oYes o No



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



|Large
    accelerated filer | o | Accelerated
    filer         | þ
|--------------------------- | - | ----------------------------- | -
|Non-accelerated
    filer   | o | Smaller
    reporting company | o





Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).

oYes
þ No



As at April 30, 2014, Ivanhoe Energy Inc. had 114,824,253 common
shares outstanding with no par value.










1





TABLE
OF CONTENTS

|PART I   FINANCIAL INFORMATION                                                                     | 3 
|-------------------------------------------------------------------------------------------------- | --
|ITEM 1. FINANCIAL STATEMENTS                                                                       | 3 
|ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS | 13
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 17
|ITEM 4. CONTROLS AND PROCEDURES                                                                    | 17
|PART II   OTHER INFORMATION                                                                        | 18
|ITEM 1.  LEGAL PROCEEDINGS                                                                         | 18
|ITEM 1A:  RISK FACTORS                                                                             | 18
|ITEM 6. EXHIBITS                                                                                   | 19









2









PART I FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



IVANHOE ENERGY INC.

Condensed Consolidated Statements of Financial Position

(Unaudited)



|                                                                                          |  |      |   | March
    31, |  | December
    31,
|----------------------------------------------------------------------------------------- |  | ---- | - | ------------- |  | ----------------
|(US$000s)                                                                                 |  | Note |   | 2014          |  | 2013            
|                                                                                          |  |      |   |               |  |                 
|Assets                                                                                    |  |      |   |               |  |                 
|Current Assets                                                                            |  |      |   |               |  |                 
|Cash
    and cash equivalents                                                             |  |      |   |               |  |                 
|Restricted
    cash                                                                       |  |      |   |               |  |                 
|Accounts
    receivable                                                                   |  |      |   |               |  |                 
|Prepaid
    and other                                                                     |  |      |   |               |  |                 
|Assets
    held for sale                                                                  |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|Intangible assets                                                                         |  |      | 4 |               |  |                 
|Property, plant and equipment                                                             |  |      |   |               |  |                 
|Long term receivables                                                                     |  |      |   |               |  |                 
|Note
    receivable                                                                       |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|Liabilities
    and Shareholders’ Equity                                                  |  |      |   |               |  |                 
|Current Liabilities                                                                       |  |      |   |               |  |                 
|Accounts
    payable and accrued liabilities                                              |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|Long
    term debt                                                                        |  |      |   |               |  |                 
|Long
    term provisions                                                                  |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|Shareholders’ Equity                                                                      |  |      |   |               |  |                 
|Share capital                                                                             |  |      |   |               |  |                 
|Contributed
    surplus                                                                   |  |      |   |               |  |                 
|Accumulated
    deficit                                                                   |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|Nature of operations and
    going concern                                                |  |      | 1 |               |  |                 
|                                                                                          |  |      |   |               |  |                 
|(See
    accompanying Notes to the Unaudited Condensed Consolidated Financial Statements)





3





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 |   | 2014                            
|                                                                                          |  |      |   |                                 
|Interest
    income                                                                       |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Expenses
    and other                                                                    |  |      |   |                                 
|Operating                                                                                 |  |      |   |                                 
|General and administrative                                                                |  |      |   |                                 
|Depreciation                                                                              |  |      |   |                                 
|Foreign currency exchange
    gain                                                        |  |      |   |                                 
|Derivative instruments
    gain                                                           |  |      |   |                                 
|Finance                                                                                   |  |      |   |                                 
|Other                                                                                     |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Loss before income taxes                                                                  |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Recovery
    of (provision for) income taxes                                              |  |      |   |                                 
|Current                                                                                   |  |      |   |                                 
|Deferred                                                                                  |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Net loss and total comprehensive
    loss from continuing operations                      |  |      |   |                                 
|Net
    loss and total comprehensive loss from discontinued operations                    |  |      | 3 |                                 
|Net
    loss and comprehensive loss                                                       |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Net
    loss per common share, basic and diluted                                          |  |      |   |                                 
|From continuing operations                                                                |  |      |   |                                 
|From
    discontinued operations                                                          |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Weighted average number
    of common shares                                              |  |      |   |                                 
|Basic
    and diluted (000s)                                                              |  |      |   |                                 
|                                                                                         
|(See
    accompanying Notes to the Unaudited Condensed Consolidated Financial Statements)



4





IVANHOE ENERGY INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



|                                                                                              |      | Share
    Capital |  |         |  |             |  |            
|--------------------------------------------------------------------------------------------- | ---- | ----------------- |  | ------- |  | ----------- |  | -----------
|                                                                                              |      | Shares            |  |         |  | Contributed |  | Accumulated
|(US$000s,
    except share amounts)                                                           | Note | (000s)            |  | Amount  |  | Surplus     |  | Deficit    
|                                                                                              |      |                   |  |         |  |             |  |            
|Balance
    January 1, 2013                                                                   |      | 114,713           |  | 586,108 |  | 29,759      |  | (312,869)  
|Net
    loss and comprehensive loss                                                           |      | -                 |  | -       |  | -           |  | (14,046)   
|Funding
    of equity-settled share-based awards                                              |      | -                 |  | -       |  | (132)       |  | -          
|Share-based
    compensation expense                                                          | 5    | 111               |  | 250     |  | 661         |  | -          
|Balance
    March 31, 2013                                                                    |      | 114,824           |  | 586,358 |  | 30,288      |  | (326,915)  
|                                                                                              |      |                   |  |         |  |             |  |            
|                                                                                              |      |                   |  |         |  |             |  |            
|                                                                                              |      | Share
    Capital |  |         |  |             |  |            
|                                                                                              |      | Shares            |  |         |  | Contributed |  | Accumulated
|(US$000s,
    except share amounts)                                                           | Note | (000s)            |  | Amount  |  | Surplus     |  | Deficit    
|                                                                                              |      |                   |  |         |  |             |  |            
|Balance
    January 1, 2014                                                                   |      | 114,824           |  | 586,358 |  | 32,614      |  | (458,695)  
|Net
    loss and comprehensive loss                                                           |      | -                 |  | -       |  | -           |  | (7,880)    
|Funding
    of equity-settled share-based awards                                              |      | -                 |  | -       |  | (94)        |  | -          
|Share-based
    compensation expense                                                          | 5    | -                 |  | -       |  | 683         |  | -          
|Balance
    March 31, 2014                                                                    |      | 114,824           |  | 586,358 |  | 33,203      |  | (466,575)  
|(See accompanying Notes to the
        Unaudited Condensed Consolidated Financial Statements)



5





IVANHOE ENERGY INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                          |  |      |   | Three
    Months Ended March 31,
|----------------------------------------------------------------------------------------- |  | ---- | - | --------------------------------
|(US$000s)                                                                                 |  | Note |   | 2014                            
|                                                                                          |  |      |   |                                 
|Operating
    Activities                                                                  |  |      |   |                                 
|Net loss                                                                                  |  |      |   |                                 
|Adjustments to reconcile
    net loss to cash from operating activities                   |  |      |   |                                 
|Depreciation                                                                              |  |      |   |                                 
|Share-based
    compensation expense                                                      |  |      |   |                                 
|Unrealized
    foreign currency exchange gain                                             |  |      |   |                                 
|Unrealized
    derivative instruments gain                                                |  |      |   |                                 
|Current
    income tax expense                                                            |  |      |   |                                 
|Deferred
    income tax recovery                                                          |  |      |   |                                 
|Finance
    expense                                                                       |  |      |   |                                 
|Other                                                                                     |  |      |   |                                 
|Current
    income tax paid                                                               |  |      |   |                                 
|Share-based payments                                                                      |  |      |   |                                 
|Changes
    in non-cash working capital items                                             |  |      | 8 |                                 
|Net
    cash used in operating activities                                                 |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Investing
    Activities                                                                  |  |      |   |                                 
|Intangible and assets
    held for sale expenditures                                      |  |      |   |                                 
|Property, plant and equipment
    expenditures                                            |  |      |   |                                 
|Restricted cash                                                                           |  |      |   |                                 
|Long term receivables                                                                     |  |      |   |                                 
|Changes
    in non-cash working capital items                                             |  |      | 8 |                                 
|Net
    cash (used in) provided by investing activities                                   |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Financing
    Activities                                                                  |  |      |   |                                 
|Changes
    in non-cash working capital items                                             |  |      | 8 |                                 
|Net
    cash provided by (used in) financing activities                                   |  |      |   |                                 
|                                                                                          |  |      |   |                                 
|Foreign
    exchange loss on cash and cash equivalents held in a foreign currency         |  |      |   |                                 
|Decrease
    in cash and cash equivalents, for the period                                 |  |      |   |                                 
|Cash
    and cash equivalents, beginning of period                                        |  |      |   |                                 
|Cash
    and cash equivalents, end of period                                              |  |      |   |                                 
|(See
    accompanying Notes to the Unaudited Condensed Consolidated Financial Statements)



6





IVANHOE ENERGY INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(tabular amounts in US$000s, except share
and per share amounts)



1. NATURE OF OPERATIONS AND GOING CONCERN

Ivanhoe Energy Inc. (the “Company”
or “Ivanhoe”) is a publicly listed limited liability company incorporated under the laws of Yukon, Canada. Ivanhoe’s
common shares are listed on the Toronto Stock Exchange (“TSX”) and the NASDAQ Stock Market (“NASDAQ”).
The principal corporate office of Ivanhoe is located at 999 Canada Place, Suite 654, Vancouver, British Columbia, V6C 3E1. Our
registered and records office is located at 300-204 Black Street, Whitehorse, Yukon, Y1A 2M9 and our operational headquarters
are located at 101-6th Avenue SW, 19th Floor, Calgary, Alberta, T2P 3P4.



Ivanhoe is an independent international heavy
oil development company focused on pursuing long term growth in its reserves and production. Ivanhoe plans to utilize advanced
technologies, such as its patented Heavy-to-Light (“HTL®”) technology, that are designed to improve
recovery of heavy oil resources. In addition, the Company seeks to expand its reserve base and production through conventional
exploration and production of oil.



The March 31, 2014 unaudited condensed consolidated
financial statements (“Financial Statements”) have been prepared using International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to a going concern,
which contemplates the realization of assets and settlement of liabilities in the normal course of business as they become due
and assumes that Ivanhoe will be able to meet its obligations and continue operations for at least its next fiscal year. Realization
values may be substantially different from carrying values as shown and these Financial Statements do not give effect to adjustments
that may be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue
as a going concern. Such adjustments could be material.



At March 31, 2014, Ivanhoe had an accumulated
deficit of $466.6 million and a working capital surplus of $8.8 million, excluding assets held for sale. For the three months
ended March 31, 2014, cash used in operating activities was $8.7 million and the Company expects to incur further losses in the
development of its business. Continuing as a going concern is dependent upon attaining future profitable operations to repay liabilities
arising in the normal course of operations and accessing additional capital to develop the Company’s properties. Ivanhoe
intends to finance its future funding requirements through a combination of partnering with strategic investors and/or public
and private debt and equity markets, either at the parent company level or at the project level, and through the sale of interests
in existing oil properties. There is no assurance that the Company will be able to obtain such financing, or obtain it on favorable
terms. Without access to additional financing or other cash generating activities in 2014, there is material uncertainty that
casts substantial doubt upon the Company’s ability to continue as a going concern.



The March 31, 2014 Financial Statements were
approved by the Board of Directors and authorized for issue on April 29, 2014.



The Financial Statements are presented in US
dollars and all values are rounded to the nearest thousand dollars except where otherwise indicated.



2. BASIS OF PRESENTATION

2.1 Statement of Compliance

The Financial Statements have been prepared
in accordance with IAS 34, “Interim Financial Reporting” (“IAS 34”), using accounting policies consistent
with IFRS as issued by the IASB. The Financial Statements are not subject to qualification relating to the application of IFRS
as issued by the IASB.



The Financial Statements are condensed as they
do not include all of the information required for full annual financial statements, and they should be read in conjunction with
the Company’s annual consolidated financial statements for the year ended December 31, 2013 prepared in accordance with
IFRS as issued by the IASB. The same accounting policies, presentation and methods of computation have been followed in these
Financial Statements as were applied in the Company’s annual IFRS consolidated financial statements for the year ended December
31, 2013 except as discussed below.



7







2.2 Basis of Presentation

The Financial Statements have been prepared
on an historical cost basis, except derivative instruments, which are measured at fair value.



3. RESULTS OF DISCONTINUED OPERATIONS

Analysis of the results of discontinued operations
and on the disposal of the assets of the Zitong Block and Pan-China Resources Ltd., constituting the discontinued operations,
is as follows:



|                                              |  |  |  |  | Three
    Months Ended March 31,
|--------------------------------------------- |  |  |  |  | --------------------------------
|                                              |  |  |  |  | 2014                            
|Revenue                                       |  |  |  |  | -                               
|Expenses
    and other                        |  |  |  |  | -                               
|Net
    income before tax and before disposal |  |  |  |  | -                               
|Income
    taxes                              |  |  |  |  | -                               
|Net
    income after tax and before disposal  |  |  |  |  | -                               
|                                              |  |  |  |  |                                 
|Pre-tax
    loss on disposal                  |  |  |  |  | -                               
|Tax
    on disposal                           |  |  |  |  | -                               
|After-tax
    loss on disposal                |  |  |  |  | -                               
|Net
    loss from discontinued operations     |  |  |  |  | -                               



The loss on disposal for the three months ended
March 31, 2013 consisted of professional services rendered in connection with the disposal of the assets constituting the discontinued
operations.



The net cash flows attributable to the operating, investing and
financing activities of the discontinued operations are as follows:



|                         |  |  |  |  | Three Months Ended March 31,
|------------------------ |  |  |  |  | ----------------------------
|                         |  |  |  |  | 2014                        
|Operating
    activities |  |  |  |  | -                           
|Investing
    activities |  |  |  |  | -                           
|Financing
    activities |  |  |  |  | -                           
|Total
    cash flows     |  |  |  |  | -                           





4. INTANGIBLE ASSETS

|                                         | Exploration
    and Evaluation Assets |  |         |  |                  
|---------------------------------------- | ------------------------------------- |  | ------- |  | -----------------
|                                         | Asia                                  |  | Canada  |  | Latin
    America
|Cost                                     |                                       |  |         |  |                  
|Balance
    December 31, 2012            | 14,659                                |  | 141,627 |  | 36,872           
|Additions                                | 722                                   |  | 11,196  |  | 7,982            
|Exploration
    and evaluation expense   | (15,381)                              |  | -       |  | -                
|Impairment
    charge                    | -                                     |  | -       |  | -                
|Assets
    reclassified as held for sale | -                                     |  | -       |  | (44,854)         
|Balance
    December 31, 2013            | -                                     |  | 152,823 |  | -                
|Additions                                | -                                     |  | 1,091   |  | -                
|Balance
    March 31,
    2014           | -                                     |  | 153,914 |  | -                



8







5. SHARE-BASED PAYMENTS

Share-based transactions were charged to earnings,
as general and administrative or operating expenses, as follows:



|Three
    months ended March 31,   | 2014 |  | 2013 
|---------------------------------- | ---- |  | -----
|Share-based
    expense related to |      |  |      
|Equity
    settled transactions    | 683  |  | 911  
|Cash
    settled transactions      | 175  |  | 275  
|Total
    share-based expense      | 858  |  | 1,186



5.1 Stock Option Plan

Details of transactions under the Company’s
stock option plan are as follows:



|                                   |  |  |  |  | Number of Stock Options
        (000s) |  | Weighted Average Exercise
        Price
        (Cdn$)
|---------------------------------- |  |  |  |  | -------------------------------------- |  | ------------------------------------------------------
|Outstanding,
    December 31, 2012 |  |  |  |  | 4,958                                  |  | 5.68                                                  
|Granted                            |  |  |  |  | 2,587                                  |  | 2.16                                                  
|Exercised                          |  |  |  |  | -                                      |  | -                                                     
|Expired                            |  |  |  |  | (1,120)                                |  | 5.14                                                  
|Forfeited                          |  |  |  |  | (531)                                  |  | 6.58                                                  
|Outstanding,
    December 31, 2013 |  |  |  |  | 5,894                                  |  | 4.16                                                  
|Granted                            |  |  |  |  | 1,216                                  |  | 0.54                                                  
|Exercised                          |  |  |  |  | -                                      |  | -                                                     
|Expired                            |  |  |  |  | -                                      |  | -                                                     
|Forfeited                          |  |  |  |  | (33)                                   |  | 1.36                                                  
|Outstanding,
    March 31, 2014    |  |  |  |  | 7,077                                  |  | 3.55                                                  
|                                   |  |  |  |  |                                        |  |                                                       
|Exercisable,
    December 31, 2013 |  |  |  |  | 2,363                                  |  | 6.31                                                  
|Exercisable,
    March 31, 2014    |  |  |  |  | 3,188                                  |  | 5.29                                                  



Shares authorized for issuance under the option
plan at March 31, 2014 were 11.5 million (December 31, 2013 - 11.5 million).



The weighted average share price per option
at the date of exercise for stock options exercised in the three months ended March 31, 2014 was nil (2013 - nil).



The weighted average fair value of stock options
granted from the stock option plan during the three months ended March 31, 2014 was Cdn$0.54 (2013 - Cdn$1.47) per option
at the grant date using the Black-Scholes option pricing model. The weighted average assumptions used for the calculation were:



|Three
    months ended March 31, | 2014  |  | 2013 
|-------------------------------- | ----- |  | -----
|Expected
    life (in years)     | 6.4   |  | 6.3  
|Volatility
    (1)               | 82.9% |  | 75.2%
|Dividend
    yield               | -     |  | -    
|Risk-free
    rate               | 1.8%  |  | 1.6% 
|Estimated
    forfeiture rate    | 9.6%  |  | 10.0%

| | (1) | Expected volatility factor
                                         based on historical volatility of the Company’s publicly traded common shares.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



9







The following table summarizes information
in respect of stock options outstanding and exercisable at March 31, 2014:



|Range
    of Exercise Prices (Cdn$) | Outstanding
        (000s) |  | Weighted
    Average Remaining Contractual Life (years) |  | Weighted Average Exercise
        Price
        (Cdn$)
|----------------------------------- | -------------------------- |  | ------------------------------------------------------- |  | ------------------------------------------------------
|0.54
    to 1.47                    | 1,382                      |  | 6.8                                                     |  | 0.63                                                  
|1.48
    to 2.40                    | 2,487                      |  | 5.9                                                     |  | 2.20                                                  
|2.41
    to 4.77                    | 1,067                      |  | 4.6                                                     |  | 3.04                                                  
|4.78
    to 7.19                    | 1,347                      |  | 2.4                                                     |  | 6.57                                                  
|7.20
    to 10.32                   | 794                        |  | 3.5                                                     |  | 8.40                                                  
|                                    | 7,077                      |  | 4.9                                                     |  | 3.55                                                  



5.2 Restricted Share Unit Plan (“RSU”)

Details of transactions under the Company’s
RSU plan are as follows:



|                                   |  |  |  |  | Number of RSUs
        (000s)
        (1) |  | Weighted Average Fair
        Value
        (Cdn$)
|---------------------------------- |  |  |  |  | ----------------------------------------- |  | --------------------------------------------------
|Outstanding,
    December 31, 2012 |  |  |  |  | 876                                       |  | 2.16                                              
|Granted                            |  |  |  |  | 1,693                                     |  | 0.72                                              
|Vested                             |  |  |  |  | (312)                                     |  | 2.07                                              
|Forfeited                          |  |  |  |  | (48)                                      |  | 1.94                                              
|Outstanding,
    December 31, 2013 |  |  |  |  | 2,209                                     |  | 1.01                                              
|Granted                            |  |  |  |  | 2,379                                     |  | 0.52                                              
|Vested                             |  |  |  |  | (764)                                     |  | 0.89                                              
|Forfeited                          |  |  |  |  | (47)                                      |  | 1.12                                              
|Outstanding,
    March 31, 2014    |  |  |  |  | 3,777                                     |  | 0.66                                              

| | (1) | Includes RSUs that will be withheld
                                         on behalf of employees to satisfy statutory tax withholding requirements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------



The weighted average assumptions used for the calculation were:



|Three
    months ended March 31, | 2014   | 2013 
|-------------------------------- | ------ | -----
|Expected
    life (in years)     | 2.0    | 2.0  
|Volatility
    (1)               | 140.3% | 76.4%
|Dividend
    yield               | -      | -    
|Risk-free
    rate               | 1.1%   | 1.1% 
|Estimated
    forfeiture rate    | 9.6%   | 18.8%

| | (1) | Expected volatility factor based
                                         on historical volatility of the Company’s publicly traded common shares.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



The liabilities arising from the RSUs to be
settled by way of cash payments and the intrinsic value of those liabilities are:



|                                                  | March
    31, 2014
|------------------------------------------------- | ------------------
|Current
    liabilities related to RSUs           | 240               
|Long
    term liabilities related to RSUs         | 102               
|Intrinsic
    value of vested and unreleased RSUs | -                 



10







6. FINANCIAL INSTRUMENTS

6.1 Fair Value of Financial Instruments Measured at Amortized
Cost

Except as detailed below, the fair value of
the Company’s financial instruments recognized at amortized cost approximates their carrying value due to the short term
maturity of these instruments.



|                           |  |  |  | March
    31,2014 |  | December
    31, 2013
|-------------------------- |  |  |  | ----------------- |  | ---------------------
|Convertible
    Debentures |  |  |  |                   |  |                      
|Carrying
    amount        |  |  |  | 61,118            |  | 63,012               
|Fair
    value             |  |  |  | 35,148            |  | 31,017               



The fair value of the liability component of
the Convertible Debentures was estimated using the closing price of the publicly traded debentures at period end.



6.2 Risks Arising from Financial Instruments

Ivanhoe is exposed in varying degrees to normal
market risks resulting from foreign currency exchange rate risk, credit risk, interest rate risk and liquidity risk. The Company
recognizes these risks and manages its operations to minimize the exposure to the extent practicable. There have not been
any significant changes to the Company’s exposure to risks, or processes to manage these risks as described in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (“2013 Form 10-K”).



7. SEGMENT INFORMATION

The following table presents the Company’s
segment loss, capital investments and identifiable assets and liabilities:



|                                                        | Asia   |  | Canada  |  | Latin
    
America |  | Technology

    Development |  | Corporate(3) |  | Total   
|------------------------------------------------------- | ------ |  | ------- |  | ------------------ |  | --------------------------- |  | ------------ |  | --------
|Segment
    revenue from continuing operations          |        |  |         |  |                    |  |                             |  |              |  |         
|For
    the three months ended March 31, 2014           | -      |  | -       |  | -                  |  | -                           |  | 31           |  | 31      
|For
    the three months ended March 31, 2013           | -      |  | -       |  | -                  |  | -                           |  | 17           |  | 17      
|Segment
    loss from continuing operations             |        |  |         |  |                    |  |                             |  |              |  |         
|For
    the three months ended March 31, 2014           | (70)   |  | (1,406) |  | (1,410)            |  | (2,390)                     |  | (2,635)      |  | (7,911) 
|For
    the three months ended March 31, 2013           | (317)  |  | (441)   |  | (1,390)            |  | (1,405)                     |  | (8,422)      |  | (11,975)
|Segment
    assets (1)                                  |        |  |         |  |                    |  |                             |  |              |  |         
|As
    at March 31, 2014                                | 121    |  | 154,324 |  | 92,587             |  | 56                          |  | (24,144)     |  | 222,944 
|As
    at December 31, 2013                             | 125    |  | 153,682 |  | 92,342             |  | 87                          |  | (14,063)     |  | 232,173 
|Segment
    liabilities (2)                             |        |  |         |  |                    |  |                             |  |              |  |         
|As
    at March 31, 2014                                | 16,618 |  | 172,944 |  | 114,794            |  | 73,057                      |  | (307,454)    |  | 69,959  
|As
    at December 31, 2013                             | 16,552 |  | 170,897 |  | 113,140            |  | 70,698                      |  | (299,391)    |  | 71,896  
|Capital
    investments - Intangible                    |        |  |         |  |                    |  |                             |  |              |  |         
|For
    the three months ended March 31, 2014           | -      |  | 520     |  | 431                |  | -                           |  | -            |  | 951     
|For
    the three months ended March 31, 2013           | 628    |  | 4,876   |  | 1,807              |  | -                           |  | -            |  | 7,311   
|Capital
    investments - Property, plant and equipment |        |  |         |  |                    |  |                             |  |              |  |         
|For
    the three months ended March 31, 2014           | -      |  | -       |  | -                  |  | -                           |  | 52           |  | 52      
|For
    the three months ended March 31, 2013           | (41)   |  | -       |  | (80)               |  | -                           |  | 343          |  | 222     

| | (1) | Assets in the Latin America segment includes assets classified
                                         as held for sale. Assets in the Corporate segment includes investments in subsidiaries
                                         that are eliminated for consolidation resulting in a credit balance.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Liabilities for the Corporate segment include intercompany
                                         receivables of $414.6 million at March 31, 2014 (December 31, 2013 - $408.3 million)
                                         required to eliminate intercompany payables upon consolidation.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | As at, and for the three months ended, March 31, 2014 the
                                         Corporate segment includes the results of, and any remaining assets and liabilities not
                                         related to the transfer of the participating interest in the Zitong Petroleum Contract
                                         to Shell China Exploration and Production Co. from Sunwing Zitong Energy, a wholly owned
                                         subsidiary of the Company.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11







8. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash activities for the
Company are comprised of the following:

|Three
    Months Ended March 31,             |  |  |  | 2014    |  | 2013   
|-------------------------------------------- |  |  |  | ------- |  | -------
|Operating
    activities                     |  |  |  |         |  |        
|Accounts
    receivable                      |  |  |  | 419     |  | 52     
|Note
    receivable                          |  |  |  | 220     |  | 8      
|Prepaid
    and other current assets         |  |  |  | 186     |  | 840    
|Accounts
    payable and accrued liabilities |  |  |  | (1,184) |  | (3,177)
|                                             |  |  |  | (359)   |  | (2,277)
|Investing
    activities                     |  |  |  |         |  |        
|Accounts
    receivable                      |  |  |  | -       |  | 1,576  
|Accounts
    payable and accrued liabilities |  |  |  | 181     |  | 3,918  
|                                             |  |  |  | 181     |  | 5,494  
|Financing
    activities                     |  |  |  |         |  |        
|Accounts
    payable and accrued liabilities |  |  |  | 1       |  | (5)    
|                                             |  |  |  | 1       |  | (5)    
|                                             |  |  |  | (177)   |  | 3,212  



9. RELATED PARTY TRANSACTIONS

Ivanhoe is party to cost sharing agreements
with other companies which are related or controlled through common directors or shareholders. Through these agreements, the Company
shares office space, furnishings, equipment, air travel and communications facilities in various international locations. Ivanhoe
also shares the costs of employing administrative and non-executive management personnel at these offices.



Related party expenses are as follows:



|                                   |                           |  |  | Three
    Months Ended March 31,
|---------------------------------- | ------------------------- |  |  | --------------------------------
|Related
    Party                  | Nature
    of Transaction |  |  | 2014                            
|Global
    Mining Management Corp. | Administration            |  |  | 21                              
|Ivanhoe
    Capital Aviation Ltd.  | Aircraft                  |  |  | 300                             
|Ivanhoe
    Systems PTE Ltd        | Information
    systems   |  |  | -                               
|Ivanhoe
    Capital Services Ltd.  | Administration            |  |  | 131                             
|1092155
    Ontario Inc.           | HTLTM
    technology       |  |  | 13                              
|                                   |                           |  |  | 465                             



The liabilities of the Company include the
following amounts due to related parties:



|Related
    Party                  | Nature
    of Transaction |  |  | March
    31, 2014 |  | December
    31, 2013
|---------------------------------- | ------------------------- |  |  | ------------------ |  | ---------------------
|Global
    Mining Management Corp. | Administration            |  |  | -                  |  | 38                   
|Ivanhoe
    Capital Services Ltd.  | Administration            |  |  | 27                 |  | 20                   
|                                   |                           |  |  | 27                 |  | 58                   





12









ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward-Looking Statements

With the exception of historical information,
certain matters discussed in this Quarterly Report on Form 10-Q (“Form 10-Q”), including those within this Item 2
- Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), are forward-looking
statements that involve risks and uncertainties.



Statements that contain words such as “could”,
“should”, “can”, “anticipate”, “estimate”, “propose”, “plan”,
“expect”, “seek”, “believe”, “will”, “may” and similar expressions
and statements relating to matters that are not historical facts constitute “forward-looking statements” within the
meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. In
particular, forward-looking statements contained in this Form 10-Q include, but are not limited to, statements relating to or
associated with individual wells, regions or projects; future crude oil prices; possible future production levels; future royalty
and tax levels; future capital expenditures, their timing and their allocation to exploration and development activities; future
asset acquisitions or dispositions; future sources of funding for the Company’s capital programs; future debt levels; availability
of future credit facilities; possible commerciality of the Company’s projects; development plans or capacity expansions;
future ability to execute dispositions of assets or businesses; future formation of joint ventures and other business relationships
with third parties; future sources of liquidity, cash flows and their uses; future drilling of new wells; ultimate recoverability
of current and long term assets; ultimate recoverability of reserves or resources; expected operating costs; estimates on a per
share basis; future foreign currency exchange rates, future expenditures and future allowances relating to environmental matters
and the Company’s ability to comply therewith; dates by which certain areas will be developed, come on-stream or reach expected
operating capacity; and changes in any of the foregoing.



Statements relating to “reserves”
are forward-looking statements, as they involve the implied assessment, based on estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and can be profitably produced in the future.



The forward-looking statements contained in
this Form 10-Q are based on certain assumptions and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate
in the circumstances. By their nature, forward-looking statements involve inherent risks and uncertainties, including the risk
that the outcome that they predict will not be achieved. Undue reliance should not be placed on forward-looking statements as
a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations
and anticipations, estimates and intentions expressed in the forward-looking statements, including those set out below and those
detailed in Item 1A, “Risk Factors” and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”
in the 2013 Form 10-K. Such factors include, but are not limited to: the Company’s short history of limited revenue, losses
and negative cash flow from its current exploration and development activities in Canada, Ecuador, Mongolia and the United States;
the Company’s limited cash resources and consequent need for additional financing; the ability to raise capital as and when
required, or to raise capital on acceptable terms; the timing and extent of changes in prices for oil and gas; competition for
oil and gas exploration properties from larger, better financed oil companies; environmental risks; title matters; drilling and
operating risks; uncertainties about the estimates of reserves and the potential success of the Company’s Heavy-to-light
(“HTL®”) technology; the potential success of the Company’s oil and gas properties in Canada,
Ecuador and Mongolia; the prices of goods and services; the availability of drilling rigs and other support services; legislative
and government regulations; political and economic factors in countries in which the Company operates; and implementation of the
Company’s capital investment program.



The forward-looking statements contained in
this Form 10-Q are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement.



Special Note to Canadian Investors

The Company is a registrant under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and voluntarily files reports with the United States Securities
and Exchange Commission (“SEC”) on Form 10-K, Form 10-Q and other forms used by registrants that are US domestic issuers.
Therefore, the Company’s reserves estimates and securities regulatory disclosures generally follow SEC requirements. National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), adopted by the Canadian Securities
Administrators (“CSA”), prescribes certain standards for the preparation, and disclosure of reserves and related information
by Canadian issuers. The Company has been granted certain exemptions from NI 51-101. Please refer to the Special Note to Canadian
Investors in the 2013 Form 10-K.

13









Advisories

This Form 10-Q should be read in conjunction
with the Company’s March 31, 2014 unaudited condensed consolidated financial statements (the “Financial Statements”)
contained herein, and the audited consolidated financial statements and Management’s Discussion and Analysis of Financial
Condition and Results of Operations contained in the 2013 Form 10-K. The Financial Statements have been prepared using accounting
policies consistent with International Financial Reporting Standards (“IFRS”) and in accordance with International
Accounting Standard 34, Interim Financial Reporting (“IAS 34”).



As a foreign private issuer in the US, Ivanhoe
is permitted to file with the SEC financial statements prepared under IFRS, as issued by the International Accounting Standards
Board, without a reconciliation to US GAAP. It is possible that some of the Company’s accounting policies under IFRS could
be different from US GAAP.



ALL TABULAR AMOUNTS ARE EXPRESSED IN THOUSANDS
OF U.S. DOLLARS, EXCEPT PER SHARE DATA.



Electronic copies of the Company’s filings
with the SEC and the CSA are available, free of charge, through the Company’s website (www.ivanhoeenergy.com) or, upon request,
by contacting its investor relations department at (403) 261-1700. Alternatively, the SEC and the CSA each maintains a website
(www.sec.gov and www.sedar.com) from which the Company’s periodic reports and other public filings with the SEC and the
CSA can be obtained. Copies of the charters for each of the committees of the Company's board of directors are available through
the Company’s website at
www.ivanhoeenergy.com/index.php?page=mandate_of_the_boardcommittee_overview.



HIGHLIGHTS

|                                                                      |  |  | Three
    months ended March 31,
|--------------------------------------------------------------------- |  |  | --------------------------------
|($000,
    except as stated)                                          |  |  |                                 
|Capital
    expenditures                                              |  |  |                                 
|                                                                      |  |  |                                 
|Net
    cash used in operating activities                             |  |  |                                 
|Net
    loss from continuing operations                               |  |  |                                 
|Net
    loss per share from continuing operations - basic and diluted |  |  |                                 



Net loss from continuing operations during
the three months ended March 31, 2014 was $7.9 million, which was $4.1 million lower compared to a net loss from continuing operations
of $12.0 million incurred during the same period in 2013. The decrease is primarily due to a $5.4 million decrease in general
and administrative (“G&A”) expenses and a $0.7 million increase in foreign currency exchange gains compared to
the prior year quarter. This was partially offset by a $0.9 million decrease in deferred income tax recoveries, a $0.5 million
increase in finance expense and a $0.6 million net increase in other items impacting net loss from continuing operations. These
changes are explained in detail below under “Results of Operations”.



RESULTS OF OPERATIONS

General and Administrative

G&A expenses mainly consist of staff, office
and legal and other contract services costs.



G&A expenses for the three months ended
March 31, 2014 was $7.3 million, which was $5.4 million lower compared to G&A expenses of $12.7 million incurred during the
same period in 2013. The decrease is primarily due to a $1.2 million decrease in accrued bonuses as no bonuses were accrued in
2014, a $1.2 million decrease in legal costs related to the proceedings discussed in Part II, Item 1 “Legal Proceedings”
disclosed within this Form 10-Q, a $1.1 million decrease in travel and business expenses due to reduced business activities, a
$1.0 million decrease in staff costs related to severance and retention of key employees in the Asia segment incurred in 2013
not recurring in 2014, and a $0.9 net decrease related to other miscellaneous G&A items.



14







Foreign Currency Exchange

The gain or loss on foreign currency exchange
results from the revaluation of monetary assets and liabilities denominated in currencies other than the Company’s functional
currency, the US dollar, at each period end and from the settlement of the Company’s receivables and payables denominated
in foreign currencies.



Foreign currency exchange gains for the three
months ended March 31, 2014 were $2.0 million, which was $0.7 million higher compared to the foreign currency exchange gains of
$1.3 million incurred during the same period in 2013. The decrease is primarily due to the revaluation of the Cdn$73.3 million
of Convertible Debentures. The Canadian dollar weakened in relation to the US dollar more in the first quarter of 2014 than it
did in the same period in 2013, resulting in increased gains on translation of the US dollar Convertible Debentures in the first
quarter of 2014 compared to same period in 2013. This was partially offset by Ivanhoe holding more Canadian dollar cash in the
first quarter of 2014 than it did in the same period in 2013, resulting in increased losses on translation of the Canadian dollar
cash in the first quarter of 2014 compared to same period in 2013.



Finance

Finance expense consists of interest expense
and the unwinding of the discount rate for decommissioning obligations.



Finance expense for the three months ended
March 31, 2014 was $1.0 million, which was $0.5 million higher compared to finance expense of $0.5 million incurred during the
same period in 2013. The increase is primarily due to a lower allocation of interest expense to capital projects mainly resulting
from Ivanhoe suspending activity on its current Tamarack oil sands project in the first quarter of 2014.



Recovery of Income Taxes

The deferred income tax recovery for the three
months ended March 31, 2014 was nil, which was $0.9 million lower compared to a recovery of $0.9 million incurred during the same
period in 2014. The decrease is primarily due to the impact of no additional deferred income tax recoveries being recognized for
net operating losses.



Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.



LIQUIDITY AND CAPITAL RESOURCES

Contractual Obligations and Commitments

The following information about our contractual
obligations and other commitments summarizes certain liquidity and capital resource requirements. The information presented in
the table below does not include planned, but not legally committed, capital expenditures or obligations that are discretionary
and/or being performed under contracts which are cancelable with a 30 day notification period.



|                                   |  | Total  |  | 2014  |  | 2015  |  | 2016   |  | 2017 |  | After
    2017
|---------------------------------- |  | ------ |  | ----- |  | ----- |  | ------ |  | ---- |  | --------------
|Long
    term debt(1)              |  | 66,316 |  | -     |  | -     |  | 66,316 |  | -    |  | -             
|Interest
    on long term debt(1)  |  | 9,517  |  | 3,813 |  | 3,813 |  | 1,891  |  | -    |  | -             
|Decommissioning
    obligations(2) |  | 4,076  |  | -     |  | -     |  | 192    |  | -    |  | 3,884         
|Leases                             |  | 2,741  |  | 741   |  | 808   |  | 686    |  | 348  |  | 158           
|Total                              |  | 82,650 |  | 4,554 |  | 4,621 |  | 69,085 |  | 348  |  | 4,042         

| | (1) | Long
                                         term debt is denominated in Canadian dollars and has been translated to US dollars at
                                         an exchange rate of approximately CDN= 0.9046
                                         USD.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Represents undiscounted decommissioning
                                         obligations after inflation. The discounted value of these estimated obligations ($2.5
                                         million) is provided for in the consolidated financial statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Long Term Debt and Interest

As described in the financial statements included
in the 2013 Form 10-K, the Company issued Cdn$73.3 million of Convertible Debentures maturing on June 30, 2016. The Convertible
Debentures bear interest at an annual rate of 5.75%, payable semi-annually on the last day of June and December of each year.



15







Decommissioning Provisions

The Company is required to remedy the effect
of our activities on the environment at our operating sites by dismantling and removing production facilities and remediating
any damage caused. At March 31, 2014, Ivanhoe estimated the total undiscounted, inflated cost to settle its long term decommissioning
obligations in Canada, for the feedstock test facility in the US and in Ecuador was $4.1 million. These costs are expected to
be incurred in 2016-2032, 2029 and 2038, respectively.



Leases

The Company has long term leases for office
space and vehicles, which expire between 2014 and 2018.



Other

Should Ivanhoe receive government and other
approvals necessary to develop the northern border of one of the Tamarack Project leases, the Company will be required to make
a cash payment to Talisman Energy Canada of up to Cdn$15.0 million, as a conditional, final payment for the 2008 purchase transaction.
This particular geographical area of the lease is not currently part of the project for which the Company has requested approval
from the Alberta Energy Regulator (“AER”).



From time to time,Ivanhoe enters into
consulting agreements whereby a success fee may be payable if and when either a definitive agreement is signed or certain other
contractual milestones are met. Under the agreements, the consultant may receive cash, common shares, stock options or some combination
thereof. Similarly, agreements entered into by the Company may contain cancellation fees or liquidated damages provisions for
early termination.  These fees are not considered to be material.



The Company may provide indemnities to third
parties, in the ordinary course of business, that are customary in certain commercial transactions, such as purchase and sale
agreements. The terms of these indemnities will vary based upon the contract, the nature of which prevents Ivanhoe from making
a reasonable estimate of the maximum potential amounts that may be required to be paid. The Company’s management is of the
opinion that any resulting settlements relating to indemnities are not likely to be material.



In the ordinary course of business, the Company
is subject to legal proceedings being brought against it. While the final outcome of these proceedings is uncertain, the Company
believes that these proceedings, in the aggregate, are not reasonably likely to have a material effect on its financial position
or earnings.



Sources and Uses of Cash

The Company’s cash flows from operating,
investing and financing activities, as reflected in the unaudited condensed consolidated statements of cash flows, are summarized
in the following table:



|                                                    |  |  | Three
    months ended March 31,
|--------------------------------------------------- |  |  | --------------------------------
|                                                    |  |  |                                 
|Cash
    used in operating activities               |  |  |                                 
|Cash
    (used in) provided by investing activities |  |  |                                 
|Cash
    provided by (used in) financing activities |  |  |                                 



Liquidity

Ivanhoe’s existing financial resources
are insufficient to fund the future capital expenditures necessary to advance the development of our existing projects and to
maintain the Company’s business activities at their current level. In the near term, the Company will require other sources
of financing in order to continue operating its business as currently constituted. Ivanhoe intends to finance its future funding
requirements through a combination of partnering with strategic investors and/or public and private debt and equity markets, either
at the parent company level or at the project level, and through the sale of interests in existing oil properties. There is no
assurance that the Company will be able to obtain such financing, or obtain it on favorable terms.



These activities include discussions with a
large international oil company for the creation of a joint financial participation arrangement in respect of its Pungarayacu
project in Ecuador. The transaction contemplated by these discussions, if and when consummated, would be expected to generate
additional cash. While progress in reaching the transaction objective has been made by the potential transaction participants,
there is no assurance that the objective can be achieved, or achieved in a timely manner or that such participation will be approved
by regulatory authorities in Ecuador. Without timely access to a sufficient source of financing to enable the Company to make
its planned capital expenditures and otherwise fund the cost of carrying on its business, the Company may have to significantly
curtail its existing business activities and may be unable to continue as a going concern.

16









Operating Activities

Net cash used in operating activities for the
three months ended March 31, 2014 was $8.7 million, which was $9.9 million lower compared to net cash used in operating activities
of $18.6 million incurred during the same period in 2013. The decrease is primarily due to $5.1 million in decreased cash G&A
expenses as discussed above which excludes non-cash share-based compensation expense, $2.1 million in transaction costs and $1.8
million in income tax payments related to discontinued operations incurred in three months ended March 31, 2013 not recurring
in the same period in 2014 and $0.9 million in other net changes impacting operating activities.



Capital Structure

|                         | As
    at March 31, 2014 |  | As
    at December 31, 2013
|------------------------ | ------------------------ |  | ---------------------------
|Long
    term debt       | 61,118                   |  | 28.4%                      
|Shareholders’
    equity | 152,986                  |  | 71.6%                      
|Total
    capital        | 215,104                  |  | 100.0%                     



On September 6, 2013, the Company received
a notification letter from the Listing Qualifications Department of the NASDAQ notifying the Company that the Company did not
meet the minimum bid price requirements set forth in the NASDAQ Listing Rules and that the Company could regain compliance if
at any time prior to March 5, 2014 the closing bid price of the Company’s common shares was at least $1.00 for a minimum
of 10 consecutive business days. For additional information, refer to the Form 8-K filed on September 12, 2013. On February 18,
2014, the Company applied to the NASDAQ for an additional compliance period of 180 days, which was granted and will expire on
September 2, 2014.



OUTLOOK

Corporate

Management’s plans for financing future
expenditures include traditional project financing, debt and mezzanine financing, the sale of non-core assets or the sale of equity
securities as well as the potential for partnerships or other arrangements with strategic investors. However, no assurances can
be given that Ivanhoe will be able to arrange such financing, to enter into one or more strategic business alliances with third
parties or that the Company will be able to sell non-core assets on acceptable terms or raise sufficient additional capital. If
the Company is unable to enter into such business alliances or obtain adequate additional financing, the Company may be required
to abandon assets and otherwise curtail its operations.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

There has been no material change in the Company’s assessment
of its sensitivity to market risk since its presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures
About Market Risk” in the 2013 Form 10-K.



ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, including its
Executive Chairman and its Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2014. Based upon
this evaluation, management concluded that these controls and procedures were (1) designed to ensure that material information
relating to the Company is made known to the Company’s Executive Chairman and its Chief Financial Officer as appropriate
to allow timely decisions regarding disclosure and (2) effective, in that they provide reasonable assurance that information required
to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms.



It should be noted that while the Company’s
Executive Chairman and its Chief Financial Officer believe that the Company’s disclosure controls and procedures provide
a reasonable level of assurance that they are effective, they do not expect that the Company’s disclosure controls and procedures
or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived
or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

17









There were no changes in the Company’s
internal control over financial reporting in the quarter ended March 31, 2014, that have materially affected, or are reasonably
likely to have a material effect on the Company’s internal control over financial reporting.





PART II OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS

Cotundo Minerales S.A.



On August 9, 2013, Cotundo Minerales S.A. (“Cotundo”)
served us with a notice of claim against the Company, two of its subsidiaries, and Company board member Robert Friedland, filed
in the Supreme Court of British Columbia. The Company and its two subsidiaries were served on August 9, 2013. The Company and
its two subsidiaries filed a response on September 24, 2013. The suit alleges that the Company misused confidential information
provided to it by Cotundo related to the Pungarayacu heavy oil field in Ecuador. Cotundo seeks damages in the form of lost profits,
an imposition of a trust in favor of Cotundo, a transfer of Ivanhoe’s interest in the Pungarayacu field to Cotundo, interest,
and costs. To date, there have been no discovery requests.



The plaintiff and claims in the recent lawsuit by Cotundo overlap
with those from a previous lawsuit filed against the Company, its subsidiaries, Mr. Friedland and others in the United States
District Court for the District of Colorado on November 20, 2008. That case was dismissed by the trial court for lack of personal
jurisdiction, and that dismissal was affirmed by the United States Court of Appeals for the Tenth Circuit on July 12, 2012. The
plaintiffs filed a writ of certiorari with the United States Supreme Court, which was denied on January 14, 2013. Both the district
court and the appellate court in the prior case awarded fees and costs to the Ivanhoe defendants.



The likelihood of loss or gain resulting from this dispute, and
the estimated amount of ultimate loss or gain, are not determinable or reasonably estimable at this time. The Company believes
that the plaintiff’s claims have no merit.



GAR Energy



For details regarding this lawsuit see “GAR Energy”
in Item 3 of the 2013 Form 10-K, which is incorporated herein by reference.



An evidentiary hearing on the merits (trial) in the ensuing arbitration
was held September 9-13, 2013. On March 14, 2014 the Company received the decision from the arbitrators. The panel awarded a take-nothing
judgment against the plaintiffs and in favor of the Company, meaning that the Company prevailed entirely on the merits. The Consulting
Agreement with GAR contained a clause that the prevailing party will be entitled to reasonable attorney’s fees and so the
Company filed a motion on April 4, 2014 with the arbitrators requesting recovery of some of its attorneys’ fees in defending
the case.



ITEM 1A: RISK FACTORS

Ivanhoe is exposed in varying degrees to normal
market risks inherent in the oil and gas industry, including commodity price risk, foreign currency exchange rate risk, credit
risk, interest rate risk and liquidity risk. The Company recognizes these risks and manages its operations to minimize the exposure
to the extent practicable. There have not been any significant changes to the Company’s exposure to risks, or processes
to manage these risks as described in the Company’s 2013 Form 10-K.



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ITEM 6. EXHIBITS

|Exhibit   Number | Description
    of Document                                                                                | 
|---------------- | ---------------------------------------------------------------------------------------------------------- | 
|                
|31.1             | Certification
    by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 
|31.2             | Certification
    by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 
|32.1             | Certification
    by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 
|32.2             | Certification
    by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 



SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.



IVANHOE ENERGY INC.





|    |                               
|--- | ------------------------------
|By: | /s/
    Gerald D. Schiefelbein
|    | Gerald
    D. Schiefelbein    
|    | Chief
    Financial Officer   







Date: 	May 12, 2014

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