##### 



---

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



| |       |  |                                                                                                                                                              
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | [X]   |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 2001                   
|
| | or   
|
| | [   ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ________________ to ________________
|
| |       |  | Commission file number 000-30586                                                                                                                             

IVANHOE ENERGY INC.(Exact name of registrant as specified in its charter)

|                                                                            |  |                                                   
|--------------------------------------------------------------------------- |  | --------------------------------------------------
|Yukon, Canada(State or other jurisdiction of
incorporation or organization) |  | Not applicable(I.R.S. Employer
Identification No.)

Suite 654  World Trade Centre
999 Canada Place
Vancouver, British Columbia, Canada
V6C 3E1(Address of principal executive office)

(604) 688-8323(Registrants telephone number, including area code)

Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report: 
Former address: 9th Floor, 200 Burrard Street, Vancouver, British
Columbia, Canada, V6C 3L6; no other changes.

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.

Yes    [X]                No    [    ]

The number of shares of the registrants capital stock outstanding as of
September 30, 2001 was 128,006,154 Common Shares, no par value.



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Page 1 of 11



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TABLE OF CONTENTS

|        |  |                                                                                                                                              |  |     
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                                              |  | Page
|        |  |                                                                                                                                              |  |     
|PART I  |  | Financial Information                                                                                                                        |  |     
|       
|Item 1  |  | Financial Statement                                                                                                                          |  |     
|       
|        |  | Condensed Consolidated Balance Sheets at
September 30, 2001 (unaudited) and December 31, 2000                                                |  | 3   
|       
|        |  | Unaudited Condensed Consolidated Statements of Loss and
Deficit for the Three Month and Nine Month Periods Ended
September 30, 2001 and 2000 |  | 4   
|       
|        |  | Unaudited Condensed Consolidated Statements of Cash Flow
for the Three Month and Nine Month Periods Ended
September 30, 2001 and 2000        |  | 5   
|       
|        |  | Notes to the Unaudited Condensed Consolidated Financial
Statements                                                                           |  | 6   
|       
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations                                                        |  | 7   
|       
|PART II |  | Other Information                                                                                                                            |  |     
|       
|Item 1. |  | Legal Proceedings                                                                                                                            |  | 11  
|       
|Item 2. |  | Changes in Securities and Use of Proceeds                                                                                                    |  | 11  
|       
|Item 3. |  | Defaults Upon Senior Securities                                                                                                              |  | 11  
|       
|Item 4. |  | Submission of Matters To a Vote of Securityholders                                                                                           |  | 11  
|       
|Item 5. |  | Other Information                                                                                                                            |  | 11  
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                             |  | 11  

Page 2 of 11



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##### 



Part I  Financial Information

Item 1   Financial Statements

IVANHOE ENERGY INC.
Condensed Consolidated Balance Sheets
(stated in thousands of U.S. Dollars)

|                                                                                                      |  |                    |         |                   |  |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | - | ------ | -
|                                                                                                      |  | September 30, 2001 |         | December 31, 2000
|                                                                                                      |  |                    |         |                  
|                                                                                                      |  | (unaudited)        |         | (audited)        
|Assets                                                                                                |  |                    |         |                   |  |   |        |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Current Assets                                                                                        |  |                    |         |                   |  |   |        |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Cash                                                                                                  |  | $                  | 1,315   |                   |  | $ | 29,694 |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Accounts receivable                                                                                   |  |                    | 2,418   |                   |  |   | 4,532  |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Other current assets                                                                                  |  |                    | 719     |                   |  |   | 872    |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|                                                                                                      |  |                    | 4,452   |                   |  |   | 35,098 |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Property, Plant and Equipment                                                                         |  |                    | 85,575  |                   |  |   | 64,702 |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|                                                                                                      |  | $                  | 90,027  |                   |  | $ | 99,800 |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|Liabilities and Stockholders Equity                                                                  |  |                    |         |                   |  |   |        |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Current Liabilities                                                                                   |  |                    |         |                   |  |   |        |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Accounts payable and accrued liabilities                                                              |  | $                  | 6,116   |                   |  | $ | 2,951  |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Demand loan from related party                                                                        |  |                    | 1,000   |                   |  |   |       |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Convertible debentures                                                                                |  |                    | 1,000   |                   |  |   | 1,000  |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|                                                                                                      |  |                    | 8,116   |                   |  |   | 3,951  |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|Provision for site restoration                                                                        |  |                    | 95      |                   |  |   | 11     |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|Shareholders Equity

Share capital, issued 128,006,000
common shares;

December 31, 2000
126,874,000 |  |                    | 101,715 |                   |  |   | 98,211 |  
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Deficit                                                                                               |  |                    | (19,899 | )                 |  |   | (2,373 | )
|                                                                                                      |  |                    |         |                   |  |   |        |  
|                                                                                                      |  |                    | 81,816  |                   |  |   | 95,838 |  
|                                                                                                      |  |                    |         |                   |  |   |        |  
|                                                                                                      |  | $                  | 90,027  |                   |  | $ | 99,800 |  
|                                                                                                      |  |                    |         |                   |  |   |        |  

(see accompanying notes)

Page 3 of 11



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##### 



IVANHOE ENERGY INC.
Unaudited Condensed Consolidated Statements of Loss and Deficit
(stated in thousands of U.S. Dollars)

|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------ |  | ------------------- | ------- | ------------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                 |  | Three Months        |         | Nine Months        
|                                                 |  | Ended September 30, |         | Ended September 30,
|                                                 |  |                     |         |                    
|                                                 |  | 2001                |         | 2000                |  | 2001 |         | 2000
|                                                 |  |                     |         |                     |  |      |         |     
|Revenue                                         
|                                                
|                                                
|                                                
|                                                
|Petroleum revenue                                |  | $                   | 2,708   |                     |  | $    | 145     |      |  | $ | 7,141   |   |  | $ | 145     |  
|                                                
|                                                
|                                                
|                                                
|Interest income                                  |  |                     | 26      |                     |  |      | 289     |      |  |   | 512     |   |  |   | 474     |  
|                                                
|                                                
|                                                
|                                                
|Gain on Russia projects                          |  |                     |        |                     |  |      | 12,220  |      |  |   |        |   |  |   | 12,235  |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                 |  |                     | 2,734   |                     |  |      | 12,654  |      |  |   | 7,653   |   |  |   | 12,854  |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Expenses                                        
|                                                
|                                                
|                                                
|                                                
|Operating costs                                  |  |                     | 1,198   |                     |  |      | 267     |      |  |   | 3,213   |   |  |   | 267     |  
|                                                
|                                                
|                                                
|                                                
|Project identification costs                     |  |                     | 929     |                     |  |      | 545     |      |  |   | 4,381   |   |  |   | 2,243   |  
|                                                
|                                                
|                                                
|                                                
|General and administrative                       |  |                     | 507     |                     |  |      | 868     |      |  |   | 1,896   |   |  |   | 3,374   |  
|                                                
|                                                
|                                                
|                                                
|Depletion and depreciation                       |  |                     | 770     |                     |  |      | 31      |      |  |   | 1,689   |   |  |   | 52      |  
|                                                
|                                                
|                                                
|                                                
|Provision for impairment                         |  |                     | 9,000   |                     |  |      |        |      |  |   | 14,000  |   |  |   |        |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                 |  |                     | 12,404  |                     |  |      | 1,711   |      |  |   | 25,179  |   |  |   | 5,936   |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Net Income (Loss)                                |  |                     | (9,670  | )                   |  |      | 10,943  |      |  |   | (17,526 | ) |  |   | 6,918   |  
|                                                
|                                                
|                                                
|                                                
|Deficit, beginning of period                     |  |                     | (10,229 | )                   |  |      | (11,826 | )    |  |   | (2,373  | ) |  |   | (7,801  | )
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Deficit, end of period                           |  | $                   | (19,899 | )                   |  | $    | (883    | )    |  | $ | (19,899 | ) |  | $ | (883    | )
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Net Income (Loss) per Share                     
|                                                
|                                                
|                                                
|                                                
|Basic                                            |  | $                   | (0.08   | )                   |  | $    | 0.09    |      |  | $ | (0.14   | ) |  | $ | 0.06    |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Diluted                                          |  |                     |         |                     |  | $    | 0.09    |      |  |   |         |   |  | $ | 0.06    |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Weighted Average Number of Shares (in thousands)
|                                                
|                                                
|                                                
|                                                
|Basic                                            |  |                     | 127,981 |                     |  |      | 120,656 |      |  |   | 127,436 |   |  |   | 117,723 |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Diluted                                          |  |                     |         |                     |  |      | 129,033 |      |  |   |         |   |  |   | 125,464 |  
|                                                 |  |                     |         |                     |  |      |         |      |  |   |         |   |  |   |         |  

(see accompanying notes)

Page 4 of 11



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IVANHOE ENERGY INC.
Unaudited Condensed Consolidated Statements of Cash Flow
(stated in thousands of U.S. Dollars)

|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------- | ------ | ------------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three Months        |        | Nine Months        
|                                                             |  | Ended September 30, |        | Ended September 30,
|                                                             |  |                     |        |                    
|                                                             |  | 2001                |        | 2000                |  | 2001 |         | 2000
|                                                             |  |                     |        |                     |  |      |         |     
|Operating Activities                                        
|                                                            
|                                                            
|                                                            
|                                                            
|Net income (loss)                                            |  | $                   | (9,670 | )                   |  | $    | 10,943  |      |  | $ | (17,526 | ) |  | $ | 6,918   |  
|                                                            
|                                                            
|                                                            
|                                                            
|Items not requiring use of cash                             
|                                                            
|                                                            
|                                                            
|                                                            
|Gain on Russian projects                                     |  |                     |       |                     |  |      | (12,220 | )    |  |   |        |   |  |   | (12,235 | )
|Depletion and depreciation                                   |  |                     | 770    |                     |  |      | 31      |      |  |   | 1,689   |   |  |   | 52      |  
|                                                            
|                                                            
|                                                            
|                                                            
|Provision for impairment                                     |  |                     | 9,000  |                     |  |      |        |      |  |   | 14,000  |   |  |   |        |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |  |                     | 100    |                     |  |      | (1,246  | )    |  |   | (1,837  | ) |  |   | (5,265  | )
|                                                            
|                                                            
|                                                            
|                                                            
|Changes in non-cash working capital items                    |  |                     | 2,441  |                     |  |      | (2,902  | )    |  |   | 5,633   |   |  |   | (1,857  | )
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                             |  |                     | 2,541  |                     |  |      | (4,148  | )    |  |   | 3,796   |   |  |   | (7,122  | )
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Investing Activities                                        
|                                                            
|                                                            
|                                                            
|                                                            
|Capital expenditures                                         |  |                     | (7,766 | )                   |  |      | (6,503  | )    |  |   | (33,502 | ) |  |   | (19,588 | )
|                                                            
|                                                            
|                                                            
|                                                            
|Recovery from Russia projects                                |  |                     |       |                     |  |      | 29,219  |      |  |   |        |   |  |   | 29,985  |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                             |  |                     | (7,766 | )                   |  |      | 22,716  |      |  |   | (33,502 | ) |  |   | 10,397  |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Financing
Activities                                        
|Shares issued on exercise of warrants and
options            |  |                     | 98     |                     |  |      | 99      |      |  |   | 327     |   |  |   | 8,400   |  
|                                                            
|                                                            
|                                                            
|                                                            
|Shares issued on private placements                          |  |                     |       |                     |  |      |        |      |  |   |        |   |  |   | 14,014  |  
|                                                            
|                                                            
|                                                            
|                                                            
|Proceeds from demand loan                                    |  |                     | 1,000  |                     |  |      |        |      |  |   | 1,000   |   |  |   |        |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                             |  |                     | 1,098  |                     |  |      | 99      |      |  |   | 1,327   |   |  |   | 22,414  |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Increase (decrease) in cash for the period                   |  |                     | (4,127 | )                   |  |      | 18,667  |      |  |   | (28,379 | ) |  |   | 25,689  |  
|                                                            
|                                                            
|                                                            
|                                                            
|Cash, beginning of period                                    |  |                     | 5,442  |                     |  |      | 9,659   |      |  |   | 29,694  |   |  |   | 2,637   |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Cash, end of period                                          |  | $                   | 1,315  |                     |  | $    | 28,326  |      |  | $ | 1,315   |   |  | $ | 28,326  |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Supplementary
Information    Regarding Non-Cash Transactions
|                                                            
|                                                            
|                                                            
|                                                            
|Investing Activities                                        
|                                                            
|                                                            
|                                                            
|                                                            
|Overriding Royalty Rights                                    |  | $                   |       |                     |  | $    | 917     |      |  | $ | 2,978   |   |  | $ | 917     |  
|                                                            
|                                                            
|                                                            
|                                                            
|Accounts Receivable                                          |  |                     |       |                     |  |      |        |      |  |   | 200     |   |  |   |        |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                             |  | $                   |       |                     |  | $    | 917     |      |  | $ | 3,178   |   |  | $ | 917     |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Financing Activities                                        
|                                                            
|                                                            
|                                                            
|                                                            
|Share capital issued                                         |  | $                   |       |                     |  | $    |        |      |  | $ | 3,178   |   |  | $ | 917     |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Included in the above are the following:                     |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                            
|                                                            
|                                                            
|                                                            
|Interest paid                                                |  | $                   | 27     |                     |  | $    | 31      |      |  | $ | 84      |   |  | $ | 90      |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|Decrease (increase) in non-cash working capital items       
|                                                            
|                                                            
|                                                            
|                                                            
|Accounts receivable                                          |  | $                   | 719    |                     |  | $    | (2,156  | )    |  | $ | 2,314   |   |  | $ | (1,889  | )
|                                                            
|                                                            
|                                                            
|                                                            
|Other current assets                                         |  |                     | 102    |                     |  |      | (200    | )    |  |   | 153     |   |  |   | (81     | )
|                                                            
|                                                            
|                                                            
|                                                            
|Accounts payable and accrued liabilities                     |  |                     | 1,619  |                     |  |      | (546    | )    |  |   | 3,165   |   |  |   | 113     |  
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  
|                                                             |  | $                   | 2,441  |                     |  | $    | (2,902  | )    |  | $ | 5,633   |   |  | $ | (1,857  | )
|                                                             |  |                     |        |                     |  |      |         |      |  |   |         |   |  |   |         |  

(see accompanying notes)

Page 5 of 11



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##### 



Notes to the Condensed Consolidated Financial Statements
June 30, 2001
(all amounts expressed in United States dollars)
(Unaudited)



|1. |  | The unaudited condensed consolidated financial statements have been
prepared on a basis consistent with the accounting principles and policies
reflected in the December 31, 2000 consolidated financial statements. The
December 31, 2000 balance sheet was derived from the audited consolidated
financial statements, but does not include all disclosures required by
accounting principles generally accepted in Canada and in the U.S. All
adjustments which are, in the opinion of management, necessary for a fair
presentation of the Companys financial position as at September 30, 2001 and
December 31, 2000 and the results of operations and cash flows for the three
month and nine month periods ended September 30, 2001 and 2000 have been
included. The results of operations and cash flows are not necessarily
indicative of the results for a full year.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts and other
disclosure in these condensed consolidated financial statements. Actual
results may differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|2. |  | The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) in Canada
which conform in all material respects to GAAP in the U.S. except:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The amount reported for property, plant and equipment and
share capital, as at September 30, 2001 and December 31, 2000, would
each be increased by $1.4 million to reflect the ascribed value,
under U.S. GAAP, placed on shares issued to acquire royalty rights.
This adjustment has no impact on operations or cash flows presented.                                                                                                                    
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Deficit and share capital, as presented at September 30, 2001
and December 31, 2000, would each be increased by $74.5 million to
reflect a transfer of deficit to share capital in 1999, which is not
recognized under U.S. GAAP.                                                                                                                                                                                                                           
|
| |  | The weighted average number of shares outstanding for the
nine months ended September 30, 2000 would be decreased to
111,540,000 to reflect the balance of shares held in escrow, during
that period, in connection with the Companys IPO in 1997. There is
no material change in the earnings per share, under U.S. GAAP, from
that reported for the nine months ended September 30, 2000. The
balance of shares held in escrow was released in June 2000.

Page 6 of 11



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##### 





|3. |  | Segmented information is as follows:
|-- |  | ------------------------------------

|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|-------------------------------------------- |  | ------------------------------------ | ------- | ----- |  | ----- | ------ |  |  | - | ------- | -
|                                             |  | Nine Months Ended September 30, 2001
|                                             |  |                                     
|                                             |  | United                               |         |       |  |       |        |  |  |  
|                                             |  | States                               |         | China |  | Total
|                                             |  |                                      |         |       |  |      
|Petroleum revenue                            |  | $                                    | 4,004   |       |  | $     | 3,137  |  |  | $ | 7,141   |  
|                                            
|                                            
|                                            
|                                            
|Interest income                              |  |                                      | 512     |       |  |       |       |  |  |   | 512     |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|                                             |  |                                      | 4,516   |       |  |       | 3,137  |  |  |   | 7,653   |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Operating costs                              |  |                                      | 1,522   |       |  |       | 1,691  |  |  |   | 3,213   |  
|                                            
|                                            
|                                            
|                                            
|Depletion and depreciation                   |  |                                      | 1,579   |       |  |       | 110    |  |  |   | 1,689   |  
|                                            
|                                            
|                                            
|                                            
|Provision for impairment                     |  |                                      | 14,000  |       |  |       |       |  |  |   | 14,000  |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|                                             |  |                                      | 17,101  |       |  |       | 1,801  |  |  |   | 18,902  |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Segmented income (loss) before the following |  | $                                    | (12,585 | )     |  | $     | 1,336  |  |  |   | (11,249 | )
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Project identification costs                 |  |                                      |         |       |  |       |        |  |  |   | (4,381  | )
|                                            
|                                            
|                                            
|                                            
|General and administrative                   |  |                                      |         |       |  |       |        |  |  |   | (1,896  | )
|                                            
|                                            
|                                            
|                                            
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Net Loss                                     |  |                                      |         |       |  |       |        |  |  | $ | (17,526 | )
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Identifiable Assets                         
|Oil & Gas                                    |  | $                                    | 47,898  |       |  | $     | 25,443 |  |  | $ | 73,341  |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|Gas-to-liquids                               |  |                                      |         |       |  |       |        |  |  |   | 16,686  |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  
|                                             |  |                                      |         |       |  |       |        |  |  | $ | 90,027  |  
|                                             |  |                                      |         |       |  |       |        |  |  |   |         |  



|4. |  | Subsequent Event.
|-- |  | -----------------



| |  | Subsequent to the end of the third quarter, the Company raised $18
million through the issue of 11.3 million Special Warrants, exchangeable
into 11.3 million common shares.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the Companys consolidated
financial statements contained herein and in the Form 10-K for the year ended
December 31, 2000, along with Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in such Form 10-K. Any terms
used but not defined in the following discussion have the same meaning given to
them in the Form 10-K.

Operations

Petroleum revenues for the three and nine month periods ended September 30,
2001 were $2.7 million and $7.1 million respectively. Production and revenue
commenced in the United States in the third quarter of 2000. For the quarter
ended September 30, 2001 the loss was $9.7 million ($0.08 per share) compared
to a profit of $10.9 million ($0.09 per share) for the third quarter of 2000.
Our net loss for the nine months ended September 30, 2001 amounted to $17.5
million ($0.14 per share), compared to a net income of $6.9 million ($0.06 per
share) during the same period of 2000. The loss for the nine month period ended
September 30, 2001 includes a provision for impairment of our U.S. properties,
resulting from a comparison of depletable capitalized oil and gas costs,
which include costs associated with drilling non-commercial wells, with the
recoverable value of proved reserves. The net income for the three month and
nine month periods ended September 30, 2000 includes a $12.2 million
gain recognized on settlement of our Russian projects.

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Production

Production and operating information for the three and nine month periods ended
September 30, 2001 is detailed below. While unit operating costs, engineering
support costs and depletion continue to improve, they remain high due to the
early development stage in all the properties. The three and nine month
periods presented include a favourable adjustment to production taxes at South
Midway. BOE represents barrels of oil equivalent.

In the U.S. we commenced production at South Midway and Spraberry during the
third quarter of 2000. In China during 2000 our projects were still in the
evaluation stage and all revenue earned was credited to our project costs.
With the decision in 2001 to proceed to the overall development on both Chinese
projects, all revenue earned on our pilot wells is now recorded as income, at
Dagang effective January 1, 2001, and at Daqing, effective March 1, 2001.

|                |  |               |         |       |  |       |                  |  |  |  |         |  |  |  |         | 
|--------------- |  | ------------- | ------- | ----- |  | ----- | ---------------- |  |  |  | ------- |  |  |  | ------- | 
|                |  | Nine Months   |         |       |  |       |                 
|                |  |               |         |       |  |       |                  |  | 
|                |  | United States |         | China |  | Total | ThreeMonthsTotal
|                |  |               |         |       |  |       |                  | 
|Net Production: |  |               |         |       |  |       |                  |  |  |  |         |  |  |  |         | 
|               
|               
|               
|               
|BOE             |  |               | 163,567 |       |  |       | 123,634          |  |  |  | 287,201 |  |  |  | 113,760 | 
|               
|               
|               
|               
|BOE/day         |  |               | 599     |       |  |       | 453              |  |  |  | 1,052   |  |  |  | 1,237   | 

|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  
|---------------------------- |  | - | ----- |  |  | ------- | ----- |  |  | - | ----- |  |  | - | ----- | -
|                             |  |   |       |  |  | Per BOE |       |  |  |  
|                             |  |  
|Petroleum revenue            |  | $ | 24.48 |  |  | $       | 25.37 |  |  | $ | 24.87 |  |  | $ | 23.81 |  
|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  
|Operating costs              |  |   | 6.56  |  |  |         | 9.78  |  |  |   | 7.95  |  |  |   | 7.76  |  
|                            
|                            
|                            
|                            
|Production taxes             |  |   | 0.80  |  |  |         |      |  |  |   | 0.46  |  |  |   | (0.04 | )
|                            
|                            
|                            
|                            
|Engineering support          |  |   | 1.95  |  |  |         | 3.90  |  |  |   | 2.79  |  |  |   | 2.81  |  
|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  
|                             |  |   | 9.31  |  |  |         | 13.68 |  |  |   | 11.20 |  |  |   | 10.53 |  
|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  
|Net Revenue before depletion |  |   | 15.17 |  |  |         | 11.69 |  |  |   | 13.67 |  |  |   | 13.28 |  
|                            
|                            
|                            
|                            
|Depletion                    |  |   | 8.65  |  |  |         | 0.89  |  |  |   | 5.31  |  |  |   | 5.75  |  
|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  
|Net Revenue from operations  |  | $ | 6.52  |  |  | $       | 10.80 |  |  | $ | 8.36  |  |  | $ | 7.53  |  
|                             |  |   |       |  |  |         |       |  |  |   |       |  |  |   |       |  

Provision for Impairment

The results for the nine months ended September 30, 2001, includes a provision
for impairment, on the carrying value of our U.S. properties.

We follow the full cost method of accounting for oil and gas operations whereby
all exploration and development expenditures are capitalized on a
country-by-country basis. As required by GAAP, on a country-by-country basis,
the accumulated capitalized costs, for evaluated projects, are compared to the
recoverable value of the proved reserves, using current unescalated product
prices. This ceiling test is applied quarterly and any resulting impairment
charged to earnings.

World oil prices declined sharply at the end of the third quarter. At our two
U.S. producing properties, the price realization reduced approximately 25%.
Application of the ceiling test at September 30, 2001, resulted in an
impairment of $9.0 million. During the second quarter, upon application of the
ceiling test, a $5 million impairment provision was recorded, primarily due to
capitalized costs

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associated with unsuccessful
exploration wells drilled in 2000 and 2001. This included non-commercial test
results for wells drilled at Magic Mountain, Belgian Anticline and Oro Fino, in
California, and our Flaugher #1 well, in Eastern Kentucky.

A ceiling test was also applied to costs capitalized in China and no impairment
provision was necessary.

Project Identification Costs

We incurred $4.4 million pursuing new projects during the first nine months of
2001, an increase of $2.2 million over the same period in 2000. Expenditures
increased during the latter half of 2000 and are continuing in to 2001 with our
increased activity in China, and developments of potential gas-to-liquids
(GTL) opportunities.

General and Administrative Costs

General and administrative costs during the nine months ended September 30,
2001 amounted to $1.9 million down $1.5 million from the $3.4 million incurred
during the same period in 2000. In 2000, substantial legal costs were incurred
in support of our Russian settlement.

Exploration and Development Activities

Exploration and development spending during the nine month period ended
September
30, 2001 was $33.5 million, an increase of $13.9 million over the $19.6 million
spent during the first nine months of 2000. The components included $25.7
million in the US, $4.9 million in China and $2.9 million for GTL.

The U.S. expenditures include our continuing development of our Spraberry and
South Midway fields, costs associated with lease acquisitions and evaluation of
our gas plays in East Texas and Kentucky, and exploration drilling. Drilling
in the U.S., in 2001, included 24 successful development wells and 6
exploration wells. At September 30, 2001 and currently, we have 30 producing
wells at Spraberry and 29 producing wells at South Midway. Of the six
exploration wells, two are potential gas discoveries and are currently being
tested; the remaining four were tested non-commercial and abandoned. Our North
West Lost Hills well, which spud during the third quarter, is currently
drilling at a depth of about 14,000 feet and is proceeding on schedule and
within budget to reach a planned depth of 20,000 feet during the first quarter
of 2002.

In October we commenced a cyclic steam injection program at the South Midway
field, initially covering four wells and expanding to the remaining 25 wells in
early 2002. Steam injection, which is a common practice in the area, reduces
the viscosity of the oil and results in an increase in daily production and
enhanced recovery of the oil-in-place.

In China our final pilot test well at Dagang was completed during early 2001
and preparation of our development plan has commenced. Late in the first
quarter we entered into agreements with Petro-China to begin evaluating a major
natural gas project in Chinas Sichuan Province, for the purposes of entering
into production sharing contracts. Evaluation of three blocks, covering more
than 2.2 million acres, commenced during the second quarter.

Gas-to-Liquids

Approximately $2.9 million was expended during the first nine months of 2001
finalizing feasibility studies and plans for two large GTL projects in the
Middle East, which are currently under negotiation.

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Liquidity and Capital Resources:

In 2001, we commenced an aggressive capital expenditure program. For the nine
months ended September 30, 2001 we expended $30 million for property
acquisition, and development of our oil and gas programs and $3 million for GTL
activities. During 2001, we have been successful in acquiring the rights to
significant exploration acreage in the U.S., continued our development of our
properties at Spraberry, South Midway and in China, and commenced negotiations
on two major GTL projects.

We have been successful in securing a 50% joint venture partner for our Bossier
gas prospect in East Texas. Under the terms of our joint venture agreement our
partner will be responsible to fund the drilling of the initial wells until
such time as they match our existing $10 million investment. In addition, we
have recently announced the closing of an $18 million private placement to
advance our deep-gas drilling program in California and for other general
corporate purposes.

Additional funding will be required to complete our capital program. We
expect to raise these funds through a combination of further financing and
joint venture partner participation. We cannot assure you that we will be
successful in raising the additional funds necessary or securing joint venture
partners to complete our program. If we are unsuccessful, we will have to
prioritize our activities, which may result in delaying and potentially losing
some valuable business opportunities.

Forward-Looking Statements

With the exception of historical information, certain matters discussed in this
Form 10-Q are forward looking statements that involve risks and uncertainties.
Although the company believes that its expectations are based on reasonable
assumptions, it can give no assurance that its goals will be achieved.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include, but are not limited to,
the timing and extent of changes in commodity prices for oil, gas and
electricity, competition, environmental risks, drilling and operating risks,
uncertainties about the estimates of reserves and the potential success of
gas-to-liquids technology, the prices of goods and services, the availability
of drilling rigs and other support services, legislative and/or California
Public Utilities Commission decisions and government regulations.

Page 10 of 11



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##### 



Part II.  Other Information

Item 1.    Legal Proceedings: None

Item 2.    Changes in Securities and Use of Proceeds: None

Item 3.    Defaults Upon Senior Securities: None

Item 4.    Submission of Matters To a Vote of Securityholders: None

Item 5.    Other Information: None

Item 6.    Exhibits and Reports on Form 8-K:



| |  |  | August 28, 2001, News Release  announcing Ivanhoes 
participation in deep gas well in California
| |  |  | --------------------------------------------------------------------------------------------------

SIGNATURES

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

IVANHOE ENERGY INC.

By: /s/ John OKeefe
Name: John OKeefe
Title: Executive Vice-President and
          Chief Financial Officer

Dated: November 13, 2001

Page 11 of 11