##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 o
    
    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
    
    98-0372413(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)Suite 654  999 Canada PlaceVancouver, British Columbia, Canada
    
    V6C 3E1(Address of principal executive office)
    
    (zip code)
 (604) 688-8323  (registrants telephone number, including area code)
 No Changes  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 oYes oNo
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 oYes þ No




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##### 



TABLE OF CONTENTS
 PagePART IFinancial InformationItem 1 Financial StatementsUnaudited Condensed Consolidated Balance Sheets as at June 30, 2009 and
December 31, 2008
    
    
    3Unaudited Condensed Consolidated Statements of Operations, Comprehensive Loss
and Accumulated Deficit for the Three-Month and Six-Month Periods Ended
June 30, 2009 and 2008
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three-Month
and Six-Month Periods Ended June 30, 2009 and 2008
    
    
    5Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    41PART IIOther InformationItem 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 3. Defaults Upon Senior Securities
    
    
    42Item 4. Submission of Matters to a Vote of Security Holders
    
    
    42Item 5. Other Information
    
    
    43Item 6. Exhibits
    
    
    43Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Part I  Financial Information
 
 Item 1 Financial Statements
 IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Balance Sheets
  June 30,
    
    
    December 31,2009
    
    
    2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    16,135
    
    
    $
    38,477Accounts receivable
    
    
    5,118
    
    
    
    3,802Prepaid and other current assets
    
    
    1,483
    
    
    
    1,487Derivative instruments
    
    
    
    
    
    
    1,459Assets of discontinued operations
    
    
    63,436
    
    
    
    2,72786,172
    
    
    
    47,952Oil and gas properties and development costs, net
    
    
    144,335
    
    
    
    143,974Intangible assets  HTLTM technology
    
    
    92,153
    
    
    
    92,153Long term assets
    
    
    403
    
    
    
    152Assets of discontinued operations
    
    
    
    
    
    
    33,044$
    323,063
    
    
    $
    317,275Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    7,263
    
    
    $
    9,219Income tax payable
    
    
    
    
    
    
    650Debt  current portion
    
    
    
    
    
    
    412Derivative instruments
    
    
    245
    
    
    
    Asset retirement obligations  current portion
    
    
    1,974
    
    
    
    Liabilities of discontinued operations  current portion
    
    
    7,337
    
    
    
    6,07416,819
    
    
    
    16,355Long term debt
    
    
    39,792
    
    
    
    37,855Asset retirement obligations
    
    
    190
    
    
    
    1,928Long term obligation
    
    
    1,900
    
    
    
    1,900Future income tax liability
    
    
    29,600
    
    
    
    Liabilities of discontinued operations
    
    
    
    
    
    
    1,81088,301
    
    
    
    59,848Commitments and contingencies (Note 7)Going concern and basis of presentation (Note 1)Shareholders Equity:Share capital, issued 279,381,187 common shares
    
    
    413,857
    
    
    
    413,857Purchase warrants
    
    
    18,805
    
    
    
    18,805Contributed surplus
    
    
    17,849
    
    
    
    16,862Convertible note
    
    
    2,086
    
    
    
    2,086Accumulated deficit
    
    
    (217,835
    )
    
    
    (194,183
    )234,762
    
    
    
    257,427$
    323,063
    
    
    $
    317,275
   3




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##### Table of Contents



IVANHOE
ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Operations,
 Comprehensive Loss and Accumulated Deficit
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueOil revenue
    
    $
    6,009
    
    
    $
    11,746
    
    
    $
    11,742
    
    
    $
    22,635Loss on derivative instruments
    
    
    (1,173
    )
    
    
    (15,009
    )
    
    
    (1,092
    )
    
    
    (17,691
    )Interest income
    
    
    8
    
    
    
    14
    
    
    
    18
    
    
    
    424,844
    
    
    
    (3,249
    )
    
    
    10,668
    
    
    
    4,986ExpensesOperating costs
    
    
    2,444
    
    
    
    5,303
    
    
    
    5,145
    
    
    
    9,613General and administrative
    
    
    3,834
    
    
    
    3,835
    
    
    
    9,714
    
    
    
    7,299Business and technology development
    
    
    1,766
    
    
    
    1,445
    
    
    
    3,803
    
    
    
    2,919Depletion and depreciation
    
    
    6,045
    
    
    
    6,431
    
    
    
    12,000
    
    
    
    13,340Foreign exchange loss
    
    
    2,680
    
    
    
    197
    
    
    
    1,686
    
    
    
    321Interest expense and financing costs
    
    
    158
    
    
    
    373
    
    
    
    335
    
    
    
    75716,927
    
    
    
    17,584
    
    
    
    32,683
    
    
    
    34,249Loss from continuing operations before income taxes
    
    
    (12,083
    )
    
    
    (20,833
    )
    
    
    (22,015
    )
    
    
    (29,263
    )(Provision for) recovery of income taxesCurrent
    
    
    639
    
    
    
    
    
    
    
    (1,006
    )
    
    
    Future
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    2,286639
    
    
    
    2,286
    
    
    
    (1,006
    )
    
    
    2,286Net loss from continuing operations
    
    
    (11,444
    )
    
    
    (18,547
    )
    
    
    (23,021
    )
    
    
    (26,977
    )Net income (loss) from discontinued operations
    
    
    66
    
    
    
    (3,184
    )
    
    
    (631
    )
    
    
    (3,298
    )Net loss and comprehensive loss
    
    
    (11,378
    )
    
    
    (21,731
    )
    
    
    (23,652
    )
    
    
    (30,275
    )Accumulated deficit, beginning of period
    
    
    (206,457
    )
    
    
    (168,534
    )
    
    
    (194,183
    )
    
    
    (159,990
    )Accumulated deficit, end of period
    
    $
    (217,835
    )
    
    $
    (190,265
    )
    
    $
    (217,835
    )
    
    $
    (190,265
    )Net loss per shareNet Loss from continuing operations, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )
    
    $
    (0.11
    )Net Income (Loss) from discontinued operations, basic and diluted
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    (0.00
    )
    
    
    (0.01
    )Net loss per share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.12
    )Weighted average number of Shares (in thousands)Basic and diluted
    
    
    279,381
    
    
    
    245,250
    
    
    
    279,381
    
    
    
    245,063
   4




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##### Table of Contents



IVANHOE
ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating ActivitiesNet loss
    
    $
    (11,378
    )
    
    $
    (21,731
    )
    
    $
    (23,652
    )
    
    $
    (30,275
    )Net (income) loss from discontinued operations
    
    
    (66
    )
    
    
    3,184
    
    
    
    631
    
    
    
    3,298Items not requiring use of cash:Depletion and depreciation
    
    
    6,045
    
    
    
    6,431
    
    
    
    12,000
    
    
    
    13,340Stock based compensation
    
    
    526
    
    
    
    793
    
    
    
    987
    
    
    
    1,911Unrealized loss on derivative instruments
    
    
    1,249
    
    
    
    12,878
    
    
    
    1,704
    
    
    
    14,836Unrealized foreign exchange loss
    
    
    2,620
    
    
    
    
    
    
    
    1,646
    
    
    
    Future income tax recovery
    
    
    
    
    
    
    (2,286
    )
    
    
    
    
    
    
    (2,286
    )Other
    
    
    72
    
    
    
    202
    
    
    
    164
    
    
    
    317Changes in non-cash working capital items
    
    
    (3,985
    )
    
    
    1,255
    
    
    
    (3,277
    )
    
    
    1,255Net cash provided by (used in)
operating activities from continuing operations
    
    
    (4,917
    )
    
    
    726
    
    
    
    (9,797
    )
    
    
    2,396Net cash provided by operating activities from discontinued operations
    
    
    2,031
    
    
    
    1,900
    
    
    
    2,823
    
    
    
    3,247Net cash provided by (used in) operating activities
    
    
    (2,886
    )
    
    
    2,626
    
    
    
    (6,974
    )
    
    
    5,643Investing ActivitiesCapital investments
    
    
    (6,692
    )
    
    
    (1,880
    )
    
    
    (11,900
    )
    
    
    (4,720
    )Advance repayments
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    100Other
    
    
    (153
    )
    
    
    (74
    )
    
    
    (153
    )
    
    
    (103
    )Changes in non-cash working capital items
    
    
    35
    
    
    
    (1,040
    )
    
    
    (672
    )
    
    
    (2,434
    )Net cash used in investing activities from continuing operations
    
    
    (6,810
    )
    
    
    (2,894
    )
    
    
    (12,725
    )
    
    
    (7,157
    )Net cash used in investing activities from discontinued operations
    
    
    (233
    )
    
    
    (974
    )
    
    
    (586
    )
    
    
    (3,194
    )Net cash used in investing activities
    
    
    (7,043
    )
    
    
    (3,868
    )
    
    
    (13,311
    )
    
    
    (10,351
    )Financing ActivitiesProceeds from exercise of options and warrants
    
    
    
    
    
    
    686
    
    
    
    
    
    
    
    686Proceeds from debt obligations, net of financing costs
    
    
    
    
    
    
    4,772
    
    
    
    
    
    
    
    4,772Payments of debt obligations
    
    
    
    
    
    
    (615
    )
    
    
    (416
    )
    
    
    (1,230
    )Payments of deferred financing costs
    
    
    
    
    
    
    (1,481
    )
    
    
    
    
    
    
    (2,065
    )Other
    
    
    (25
    )
    
    
    
    
    
    
    (100
    )
    
    
    Changes in non-cash working capital items
    
    
    (3
    )
    
    
    703
    
    
    
    (26
    )
    
    
    703Net cash provided by (used in)
financing activities from continuing operations
    
    
    (28
    )
    
    
    4,065
    
    
    
    (542
    )
    
    
    2,866Net cash provided by financing activities from discontinued operations
    
    
    
    
    
    
    700
    
    
    
    
    
    
    
    700Net cash provided by (used in) financing activities
    
    
    (28
    )
    
    
    4,765
    
    
    
    (542
    )
    
    
    3,566Foreign Exchange Loss on Cash and Cash
Equivalents Held in a Foreign Currency
    
    
    (4
    )
    
    
    
    
    
    
    (35
    )
    
    
    Increase (Decrease) in Cash and Cash Equivalents, for the period
    
    
    (9,961
    )
    
    
    3,523
    
    
    
    (20,862
    )
    
    
    (1,142
    )Cash and cash equivalents, beginning of period
    
    
    28,364
    
    
    
    6,691
    
    
    
    39,265
    
    
    
    11,356Cash and Cash Equivalents, end of period
    
    $
    18,403
    
    
    $
    10,214
    
    
    $
    18,403
    
    
    $
    10,214Cash and cash equivalents, end of period  continuing operations
    
    $
    16,135
    
    
    $
    8,732
    
    
    $
    16,135
    
    
    $
    8,732Cash and cash equivalents, end of period  discontinued operations
    
    $
    2,268
    
    
    $
    1,482
    
    
    $
    2,268
    
    
    $
    1,482
   5




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##### Table of Contents



Notes to the Unaudited Condensed Consolidated Financial Statements
June 30, 2009
 1. GOING CONCERN AND BASIS OF PRESENTATION
 Company Ivanhoe Energy GAAP
  2. CHANGES IN ACCOUNTING POLICIES
 2009 Accounting Changes
 CICA S.3064 S.3062
    6




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##### Table of Contents



Impact of New and Pending Canadian GAAP Accounting Standards
 EIC
 AcSB S.1582
 S.1601 S.1602 S.1600
   7




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##### Table of Contents



3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at June 30, 2009Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    144,406
    
    
    $
    
    
    
    $
    
    
    
    $
    144,406Unproved
    
    
    87,443
    
    
    
    2,959
    
    
    
    4,439
    
    
    
    
    
    
    
    
    
    
    
    94,84187,443
    
    
    
    2,959
    
    
    
    148,845
    
    
    
    
    
    
    
    
    
    
    
    239,247Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (92,231
    )
    
    
    
    
    
    
    
    
    
    
    (92,231
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )87,443
    
    
    
    2,959
    
    
    
    40,064
    
    
    
    
    
    
    
    
    
    
    
    130,466Development Costs:Feasibility studies and other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    955
    
    
    
    955GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,280
    
    
    
    10,280Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,222
    
    
    
    11,222Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,084
    )
    
    
    (9,084
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,373
    
    
    
    13,373Furniture and equipment
    
    
    13
    
    
    
    135
    
    
    
    120
    
    
    
    923
    
    
    
    21
    
    
    
    1,212Accumulated depreciation
    
    
    (7
    )
    
    
    (36
    )
    
    
    (83
    )
    
    
    (572
    )
    
    
    (18
    )
    
    
    (716
    )6
    
    
    
    99
    
    
    
    37
    
    
    
    351
    
    
    
    3
    
    
    
    496$
    87,449
    
    
    $
    3,058
    
    
    $
    40,101
    
    
    $
    351
    
    
    $
    13,376
    
    
    $
    144,335
 As at December 31, 2008Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    141,089
    
    
    $
    
    
    
    $
    
    
    
    $
    141,089Unproved
    
    
    81,090
    
    
    
    1,454
    
    
    
    5,233
    
    
    
    
    
    
    
    
    
    
    
    87,77781,090
    
    
    
    1,454
    
    
    
    146,322
    
    
    
    
    
    
    
    
    
    
    
    228,866Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (81,717
    )
    
    
    
    
    
    
    
    
    
    
    (81,717
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )81,090
    
    
    
    1,454
    
    
    
    48,055
    
    
    
    
    
    
    
    
    
    
    
    130,599Development Costs:Feasibility studies and other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    801
    
    
    
    801GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,770
    
    
    
    8,770Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,036
    
    
    
    11,036Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,713
    )
    
    
    (7,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,894
    
    
    
    12,894Furniture and equipment
    
    
    20
    
    
    
    90
    
    
    
    120
    
    
    
    13
    
    
    
    406
    
    
    
    649Accumulated depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (79
    )
    
    
    (6
    )
    
    
    (77
    )
    
    
    (168
    )14
    
    
    
    90
    
    
    
    41
    
    
    
    7
    
    
    
    329
    
    
    
    481$
    81,104
    
    
    $
    1,544
    
    
    $
    48,096
    
    
    $
    7
    
    
    $
    13,223
    
    
    $
    143,974
   8




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##### Table of Contents



4. INTANGIBLE ASSETS  HTL TM TECHNOLOGY
 RTP TM Process TM TM HTL TM Technology HTL TM TM TM
 TM
 5. LONG TERM DEBT
  June 30,
    
    
    December 31,2009
    
    
    2008Variable rate bank note (4.36% at June 30, 2009) due September 2010
    
    $
    7,000
    
    
    $
    7,000Non-interest bearing promissory note, final payment February 2009
    
    
    
    
    
    
    416Convertible note (4.25% at June 30, 2009) due July 2011
    
    
    34,409
    
    
    
    32,78741,409
    
    
    
    40,203Less:Unamortized discount
    
    
    (1,268
    )
    
    
    (4
    )Unamortized deferred financing costs
    
    
    (349
    )
    
    
    (1,932
    )Current maturities
    
    
    
    
    
    
    (412
    )(1,617
    )
    
    
    (2,348
    )$
    39,792
    
    
    $
    37,855
  2010
    
    $
    7,0002011
    
    
    34,409$
    41,409
  9




---



##### Table of Contents



6. ASSET RETIREMENT OBLIGATIONS
 TM CDF TM FTF
 As at
    
    
    As atJune 30,
    
    
    December, 312009
    
    
    2008Carrying balance, beginning of year
    
    $
    1,928
    
    
    $
    739Liabilities incurred
    
    
    185
    
    
    
    Accretion expense
    
    
    51
    
    
    
    76Revisions in estimated cash flows
    
    
    
    
    
    
    1,113Carrying balance, end of period
    
    
    2,164
    
    
    
    1,928Less: current portion
    
    
    (1,974
    )
    
    
    Carrying balance, end of period
    
    $
    190
    
    
    $
    1,928
 7. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 CNPC Mitsubishi
 Zitong Partners Phase 2
 Long Term Obligation
 TM TM
 Income Taxes
  Pan-China
  10




---



##### Table of Contents



Other Commitments
  Talisman
  8. SHARE CAPITAL AND WARRANTS
  Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock OptionsWtd. AvgNumber
    
    
    
    
    
    Purchase
    
    
    Contributed
    
    
    Convertible
    
    
    Number
    
    
    Exercise Price(thousands)
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Note
    
    
    (thousands)
    
    
    Cdn.$Balance December 31, 2008
    
    
    279,381
    
    
    $
    413,857
    
    
    $
    18,805
    
    
    $
    16,862
    
    
    $
    2,086
    
    
    
    11,913
    
    
    $
    2.32Options:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    550
    
    
    $
    1.51Cancelled/forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167
    )
    
    $
    2.16Compensation calculated
for stock option grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    987
    
    
    
    
    
    
    
    Balance June 30, 2009
    
    
    279,381
    
    
    $
    413,857
    
    
    $
    18,805
    
    
    $
    17,849
    
    
    $
    2,086
    
    
    
    12,296
    
    
    $
    2.29
   11




---



##### Table of Contents



Purchase WarrantsPrice per
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    CashYear of
    
    Special
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    Price per
    
    
    Value onIssue
    
    Warrant
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share
    
    
    Exercise(thousands)
    
    
    ($U.S. 000)
    
    
    
    
    
    
    
    
    ($U.S. 000)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    May 2011
    
    Cdn. $2.93
    (1)
    
    
    28,73311,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    $
    18,805
    
    
    
    
    
    
    
    
    
    
    $
    28,733
 (1)
    
    Each common share purchase warrant originally entitled the holder to purchase one
common share at a price of $2.63 per share until the fifth anniversary date of the closing of the
transaction. In September 2006, these warrants were listed on the Toronto Stock Exchange and the
exercise price was changed to Cdn.$2.93. 9. SEGMENT INFORMATION
  Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
 MOU
  Corporate
 ,
  12




---



##### Table of Contents



Three-Month Period Ended June 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    6,009
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,009Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,173
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,173
    )Interest income
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    8
    
    
    
    
    
    
    
    4,838
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    4,844ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    2,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,444General and administrative
    
    
    196
    
    
    
    459
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    2,549
    
    
    
    3,834Business and technology development
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,673
    
    
    
    
    
    
    
    1,766Depletion and depreciation
    
    
    1
    
    
    
    22
    
    
    
    5,242
    
    
    
    
    
    
    
    744
    
    
    
    36
    
    
    
    6,045Foreign exchange loss
    
    
    (5
    )
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    2,670
    
    
    
    2,680Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    26
    
    
    
    1
    
    
    
    158285
    
    
    
    481
    
    
    
    8,462
    
    
    
    
    
    
    
    2,443
    
    
    
    5,256
    
    
    
    16,927Loss from continuing operations
before income taxes
    
    
    (285
    )
    
    
    (481
    )
    
    
    (3,624
    )
    
    
    
    
    
    
    (2,443
    )
    
    
    (5,250
    )
    
    
    (12,083
    )Current recovery of income taxes
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    639Net loss from continuing operations
    
    
    (285
    )
    
    
    (481
    )
    
    
    (2,985
    )
    
    
    
    
    
    
    (2,443
    )
    
    
    (5,250
    )
    
    
    (11,444
    )Net income from
continued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Net income (loss) and
comprehensive income (loss)
    
    $
    (285
    )
    
    $
    (481
    )
    
    $
    (2,985
    )
    
    $
    66
    
    
    $
    (2,443
    )
    
    $
    (5,250
    )
    
    $
    (11,378
    )Capital Investments
    
    $
    4,009
    
    
    $
    895
    
    
    $
    1,368
    
    
    $
    
    
    
    $
    420
    
    
    $
    
    
    
    $
    6,692
  13




---



##### Table of Contents



Six-Month Period Ended June 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    11,742
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,742Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,092
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,092
    )Interest income
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    18
    
    
    
    
    
    
    
    10,654
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    10,668ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    5,145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,145General and administrative
    
    
    334
    
    
    
    977
    
    
    
    1,027
    
    
    
    
    
    
    
    
    
    
    
    7,376
    
    
    
    9,714Business and technology development
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,416
    
    
    
    
    
    
    
    3,803Depletion and depreciation
    
    
    2
    
    
    
    36
    
    
    
    10,516
    
    
    
    
    
    
    
    1,373
    
    
    
    73
    
    
    
    12,000Foreign exchange loss
    
    
    (5
    )
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    1,655
    
    
    
    1,686Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    51
    
    
    
    5
    
    
    
    335718
    
    
    
    1,013
    
    
    
    17,003
    
    
    
    
    
    
    
    4,840
    
    
    
    9,109
    
    
    
    32,683Loss from continuing operations
before income taxes
    
    
    (718
    )
    
    
    (1,013
    )
    
    
    (6,349
    )
    
    
    
    
    
    
    (4,840
    )
    
    
    (9,095
    )
    
    
    (22,015
    )Current provision for income taxes
    
    
    
    
    
    
    
    
    
    
    (997
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (1,006
    )Net loss from continuing operations
    
    
    (718
    )
    
    
    (1,013
    )
    
    
    (7,346
    )
    
    
    
    
    
    
    (4,840
    )
    
    
    (9,104
    )
    
    
    (23,021
    )Net loss from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (631
    )
    
    
    
    
    
    
    
    
    
    
    (631
    )Net loss and
comprehensive loss
    
    $
    (718
    )
    
    $
    (1,013
    )
    
    $
    (7,346
    )
    
    $
    (631
    )
    
    $
    (4,840
    )
    
    $
    (9,104
    )
    
    $
    (23,652
    )Capital Investments
    
    $
    6,077
    
    
    $
    1,551
    
    
    $
    2,524
    
    
    $
    
    
    
    $
    1,694
    
    
    $
    54
    
    
    $
    11,900Identifiable Assets:As at June 30, 2009
    
    $
    87,528
    
    
    $
    3,661
    
    
    $
    54,417
    
    
    $
    65,144
    
    
    $
    105,853
    
    
    $
    6,460
    
    
    $
    323,063As at December 31, 2008
    
    $
    81,126
    
    
    $
    1,766
    
    
    $
    64,901
    
    
    $
    37,480
    
    
    $
    105,587
    
    
    $
    26,415
    
    
    $
    317,275
  14




---



##### Table of Contents



Three-Month Period Ended June 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    11,746
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,746Loss on derivative
instruments
    
    
    
    
    
    
    
    
    
    
    (15,009
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,009
    )Interest income
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    14
    
    
    
    
    
    
    
    (3,252
    )
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3,249
    )ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    5,303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,303General and
administrative
    
    
    469
    
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    2,808
    
    
    
    3,835Business and
technology development
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,328
    
    
    
    
    
    
    
    1,445Depletion and
depreciation
    
    
    
    
    
    
    
    
    
    
    5,794
    
    
    
    
    
    
    
    635
    
    
    
    2
    
    
    
    6,431Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    197Interest expense and
financing costs
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    23
    
    
    
    201
    
    
    
    373586
    
    
    
    
    
    
    
    11,944
    
    
    
    
    
    
    
    1,986
    
    
    
    3,068
    
    
    
    17,584Loss from continuing
operations before
income taxes
    
    
    (586
    )
    
    
    
    
    
    
    (15,196
    )
    
    
    
    
    
    
    (1,986
    )
    
    
    (3,065
    )
    
    
    (20,833
    )Future recovery of
income taxes
    
    
    
    
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,286Net loss from
continuing operations
    
    
    (586
    )
    
    
    
    
    
    
    (12,910
    )
    
    
    
    
    
    
    (1,986
    )
    
    
    (3,065
    )
    
    
    (18,547
    )Net loss from
discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,184
    )
    
    
    
    
    
    
    
    
    
    
    (3,184
    )Net loss and
comprehensive loss
    
    $
    (586
    )
    
    $
    
    
    
    $
    (12,910
    )
    
    $
    (3,184
    )
    
    $
    (1,986
    )
    
    $
    (3,065
    )
    
    $
    (21,731
    )Capital Investments
    
    $
    
    
    
    $
    
    
    
    $
    1,646
    
    
    $
    
    
    
    $
    231
    
    
    $
    3
    
    
    $
    1,880
 Six-Month Period Ended June 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    22,635
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,635Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (17,691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,691
    )Interest income
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    42
    
    
    
    
    
    
    
    4,969
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    4,986ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    9,613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,613General and administrative
    
    
    749
    
    
    
    1
    
    
    
    992
    
    
    
    
    
    
    
    
    
    
    
    5,557
    
    
    
    7,299Business and technology development
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,771
    
    
    
    
    
    
    
    2,919Depletion and depreciation
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    1,337
    
    
    
    3
    
    
    
    13,340Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    271
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    321Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    473
    
    
    
    
    
    
    
    32
    
    
    
    252
    
    
    
    757897
    
    
    
    1
    
    
    
    23,349
    
    
    
    
    
    
    
    4,140
    
    
    
    5,862
    
    
    
    34,249Loss from continuing operations
before income taxes
    
    
    (897
    )
    
    
    (1
    )
    
    
    (18,380
    )
    
    
    
    
    
    
    (4,140
    )
    
    
    (5,845
    )
    
    
    (29,263
    )Future recovery of income taxes
    
    
    
    
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,286Net loss from
continuing operations
    
    
    (897
    )
    
    
    (1
    )
    
    
    (16,094
    )
    
    
    
    
    
    
    (4,140
    )
    
    
    (5,845
    )
    
    
    (26,977
    )Net loss from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,298
    )
    
    
    
    
    
    
    
    
    
    
    (3,298
    )Net loss and comprehensive loss
    
    $
    (897
    )
    
    $
    (1
    )
    
    $
    (16,094
    )
    
    $
    (3,298
    )
    
    $
    (4,140
    )
    
    $
    (5,845
    )
    
    $
    (30,275
    )Capital Investments
    
    $
    
    
    
    $
    
    
    
    $
    3,771
    
    
    $
    
    
    
    $
    946
    
    
    $
    3
    
    
    $
    4,720
  15




---



##### Table of Contents



10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  As at June 30, 2009FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    16,135
    
    
    $
    
    
    
    $
    16,135Accounts receivable
    
    
    5,118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,118Derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,263
    )
    
    
    (7,263
    )Derivative instruments
    
    
    
    
    
    
    
    
    
    
    (245
    )
    
    
    
    
    
    
    (245
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,792
    )
    
    
    (39,792
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    5,118
    
    
    $
    
    
    
    $
    15,890
    
    
    $
    (48,955
    )
    
    $
    (27,947
    )
 As at December 31, 2008FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    38,477
    
    
    $
    
    
    
    $
    38,477Accounts receivable
    
    
    3,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,802Derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    1,459Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,219
    )
    
    
    (9,219
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,267
    )
    
    
    (38,267
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    3,802
    
    
    $
    
    
    
    $
    39,936
    
    
    $
    (49,386
    )
    
    $
    (5,648
    )
 Financial Risk Factors
  11. CAPITAL MANAGEMENT
   16




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##### Table of Contents



12. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Supplemental Cash Flow InformationCash paid during the period forIncome taxes
    
    $
    1,647
    
    
    $
    
    
    
    $
    1,655
    
    
    $
    6Interest
    
    $
    64
    
    
    $
    239
    
    
    $
    1,195
    
    
    $
    605Changes in non-cash working capital itemsOperating ActivitiesAccounts receivable
    
    $
    (697
    )
    
    $
    (651
    )
    
    $
    (1,361
    )
    
    $
    (1,611
    )Prepaid and other current assets
    
    
    (56
    )
    
    
    59
    
    
    
    (22
    )
    
    
    156Accounts payable and accrued liabilities
    
    
    (946
    )
    
    
    1,847
    
    
    
    (1,244
    )
    
    
    2,710Income tax payable
    
    
    (2,286
    )
    
    
    
    
    
    
    (650
    )
    
    
    (3,985
    )
    
    
    1,255
    
    
    
    (3,277
    )
    
    
    1,255Investing ActivitiesAccounts receivable
    
    
    9
    
    
    
    (5
    )
    
    
    46
    
    
    
    32Prepaid and other current assets
    
    
    33
    
    
    
    31
    
    
    
    26
    
    
    
    10Accounts payable and accrued liabilities
    
    
    (7
    )
    
    
    (1,066
    )
    
    
    (744
    )
    
    
    (2,476
    )35
    
    
    
    (1,040
    )
    
    
    (672
    )
    
    
    (2,434
    )Financing ActivitiesAccounts payable and accrued liabilities
    
    
    (3
    )
    
    
    703
    
    
    
    (26
    )
    
    
    703$
    (3,953
    )
    
    $
    918
    
    
    $
    (3,975
    )
    
    $
    (476
    )
  13. INCOME TAXES
 Circular
  14. SUBSEQUENT EVENT AND DISCONTINUTED OPERATIONS
   17




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueOil and gas revenue
    
    $
    2,933
    
    
    $
    6,232
    
    
    $
    4,899
    
    
    $
    10,387Gain (loss) on derivative instruments
    
    
    3
    
    
    
    (5,778
    )
    
    
    189
    
    
    
    (7,042
    )Interest income
    
    
    5
    
    
    
    22
    
    
    
    8
    
    
    
    652,941
    
    
    
    476
    
    
    
    5,096
    
    
    
    3,410ExpensesOperating costs
    
    
    941
    
    
    
    1,311
    
    
    
    1,968
    
    
    
    2,393General and administrative
    
    
    63
    
    
    
    520
    
    
    
    130
    
    
    
    882Depletion and depreciation
    
    
    1,792
    
    
    
    1,698
    
    
    
    3,469
    
    
    
    3,154Interest expense and financing costs
    
    
    79
    
    
    
    131
    
    
    
    160
    
    
    
    2792,875
    
    
    
    3,660
    
    
    
    5,727
    
    
    
    6,708Net Income (Loss)
    
    $
    66
    
    
    $
    (3,184
    )
    
    $
    (631
    )
    
    $
    (3,298
    )
  June 30,
    
    
    December 31,2009
    
    
    2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    2,268
    
    
    $
    787Accounts receivable
    
    
    1,561
    
    
    
    1,068Prepaid and other current assets
    
    
    111
    
    
    
    172Derivative instruments
    
    
    
    
    
    
    7003,940
    
    
    
    2,727Oil and gas properties and equipment, net
    
    
    29,479
    
    
    
    32,577Future income tax assets
    
    
    29,600
    
    
    
    Long term assets
    
    
    417
    
    
    
    467$
    63,436
    
    
    $
    35,771LiabilitiesCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    278
    
    
    $
    874Debt  current portion
    
    
    5,200
    
    
    
    5,2005,478
    
    
    
    6,074Asset retirement obligations
    
    
    1,859
    
    
    
    1,810$
    7,337
    
    
    $
    7,884
  18




---



##### Table of Contents



15. ADDITIONAL DISCLOSURE REQUIRED UNDER U.S. GAAP
  Condensed Consolidated Balance Sheets
  As at June 30, 2009
    
    
    As at December 31, 2008Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPAssetsCurrent Assets:Cash and cash equivalents
    
    $
    16,135
    
    
    $
    
    
    
    
    
    
    
    $
    16,135
    
    
    $
    38,477
    
    
    $
    
    
    
    
    
    
    
    $
    38,477Accounts receivable
    
    
    5,118
    
    
    
    
    
    
    
    
    
    
    
    5,118
    
    
    
    3,802
    
    
    
    
    
    
    
    
    
    
    
    3,802Prepaid and other current assets
    
    
    1,483
    
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1,487
    
    
    
    
    
    
    
    
    
    
    
    1,487Derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    
    
    
    
    1,459Assets of discontinued operations
    
    
    63,436
    
    
    
    (22,642
    )
    
    (xii)
    
    
    40,794
    
    
    
    2,727
    
    
    
    
    
    
    
    
    
    
    
    2,727Total Current Assets
    
    
    86,172
    
    
    
    (22,642
    )
    
    
    
    
    
    
    63,530
    
    
    
    47,952
    
    
    
    
    
    
    
    
    
    
    
    47,952Oil and gas properties
and development costs, net
    
    
    144,335
    
    
    
    (38,500
    )
    
    (v)
    
    
    
    
    120,411
    
    
    
    143,974
    
    
    
    (38,500
    )
    
    
    (v)
    
    
    
    114,38516,283
    
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    9,929
    
    
    (vi)(1,169
    )
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    (1,018
    )
    
    (vii)(538
    )
    
    (viii)Intangible assets  technology
    
    
    92,153
    
    
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    92,153
    
    
    
    
    
    
    
    
    
    
    
    92,153Long term assets
    
    
    403
    
    
    
    349
    
    
    (xi)
    
    
    752
    
    
    
    152
    
    
    
    451
    
    
    (xi)
    
    
    603Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,044
    
    
    
    (24,890
    )
    
    (xii)
    
    
    8,154Total Assets
    
    $
    323,063
    
    
    $
    (46,217
    )
    
    
    
    
    
    $
    276,846
    
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    
    
    $
    263,247Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
and accrued liabilities
    
    $
    7,263
    
    
    $
    
    
    
    
    
    
    
    $
    7,263
    
    
    $
    9,219
    
    
    $
    
    
    
    
    
    
    
    $
    9,219Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    650Debt  current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    412Derivative instruments
    
    
    245
    
    
    
    3,726
    
    
    (iii)
    
    
    3,971
    
    
    
    
    
    
    
    1,121
    
    
    (iii)
    
    
    1,121Asset
retirement obligation  current portion
    
    
    1,974
    
    
    
    
    
    
    
    
    
    
    
    1,974
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities of discontinued
operations  current portion
    
    
    7,337
    
    
    
    
    
    
    
    
    
    
    
    7,337
    
    
    
    6,074
    
    
    
    
    
    
    
    
    
    
    
    6,074Total Current Liabilities
    
    
    16,819
    
    
    
    3,726
    
    
    
    
    
    
    
    20,545
    
    
    
    16,355
    
    
    
    1,121
    
    
    
    
    
    
    
    17,476Long term debt
    
    
    39,792
    
    
    
    349
    
    
    (xi)
    
    
    41,409
    
    
    
    37,855
    
    
    
    451
    
    
    (xi)
    
    
    40,3921,548
    
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    (viii)(280
    )
    
    (viii)Asset retirement obligations
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    1,928
    
    
    
    
    
    
    
    
    
    
    
    1,928Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900Future income tax liability
    
    
    29,600
    
    
    
    
    
    
    
    
    
    
    
    29,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,810
    
    
    
    
    
    
    
    
    
    
    
    1,810Total Liabilities
    
    
    88,301
    
    
    
    5,343
    
    
    
    
    
    
    
    93,644
    
    
    
    59,848
    
    
    
    3,658
    
    
    
    
    
    
    
    63,506Shareholders Equity:Share capital
    
    
    413,857
    
    
    
    74,455
    
    
    (i)
    
    
    
    
    502,372
    
    
    
    413,857
    
    
    
    74,455
    
    
    
    (i)
    
    
    
    502,372(498
    )
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    (ii)1,358
    
    
    (iv)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (iv)13,200
    
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (iii)Purchase warrants
    
    
    18,805
    
    
    
    (18,805
    )
    
    (iii)
    
    
    
    
    
    
    18,805
    
    
    
    (18,805
    )
    
    (iii)
    
    
    Contributed surplus
    
    
    17,849
    
    
    
    (3,250
    )
    
    (ii)
    
    
    11,652
    
    
    
    16,862
    
    
    
    (3,250
    )
    
    (ii)
    
    
    10,665(2,947
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (2,947
    )
    
    (iii)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (viii)
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )
    
    (viii)
    
    
    Accumulated deficit
    
    
    (217,835
    )
    
    
    (112,987
    )
    
    
    
    
    
    
    (330,822
    )
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    
    
    (313,296
    )Total Shareholders Equity
    
    
    234,762
    
    
    
    (51,560
    )
    
    
    
    
    
    
    183,202
    
    
    
    257,427
    
    
    
    (57,686
    )
    
    
    
    
    
    
    199,741Total Liabilities
and Shareholders Equity
    
    $
    323,063
    
    
    $
    (46,217
    )
    
    
    
    
    
    $
    276,846
    
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    
    
    $
    263,247
  19




---



##### Table of Contents



Shareholders Equity
  APB FASB SFAS
 SFAS No. 133
  Oil and Gas Properties and Development Costs
     20




---



##### Table of Contents



Deferred Financing Costs
  Discontinued Operations
   21




---



##### Table of Contents



Condensed Consolidated Statements of Operations
  Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil revenue
    
    $
    6,009
    
    
    $
    
    
    
    
    
    
    
    $
    6,009
    
    
    $
    11,746
    
    
    $
    
    
    
    
    
    
    
    $
    11,746Loss on derivative instruments
    
    
    (1,173
    )
    
    
    (564
    )
    
    (iii)
    
    
    (1,737
    )
    
    
    (15,009
    )
    
    
    (12,204
    )
    
    (iii)
    
    
    (27,213
    )Interest income
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Total Revenue
    
    
    4,844
    
    
    
    (564
    )
    
    
    
    
    
    
    4,280
    
    
    
    (3,249
    )
    
    
    (12,204
    )
    
    
    
    
    
    
    (15,453
    )ExpensesOperating costs
    
    
    2,444
    
    
    
    
    
    
    
    
    
    
    
    2,444
    
    
    
    5,303
    
    
    
    
    
    
    
    
    
    
    
    5,303General and administrative
    
    
    3,834
    
    
    
    
    
    
    
    
    
    
    
    3,834
    
    
    
    3,835
    
    
    
    
    
    
    
    
    
    
    
    3,835Business and technology development
    
    
    1,766
    
    
    
    
    
    
    
    
    
    
    
    1,766
    
    
    
    1,445
    
    
    
    
    
    
    
    
    
    
    
    1,445Depletion and depreciation
    
    
    6,045
    
    
    
    (3,140
    )
    
    (ix)
    
    
    2,905
    
    
    
    6,431
    
    
    
    (678
    )
    
    (ix)
    
    
    5,753Foreign exchange loss
    
    
    2,680
    
    
    
    112
    
    
    (viii)
    
    
    2,792
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    197Interest expense and financing costs
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    373
    
    
    
    
    
    
    
    
    
    
    
    373Provision for impairment
of HTLTM development costs
    
    
    
    
    
    
    5
    
    
    (x)
    
    
    5
    
    
    
    
    
    
    
    128
    
    
    (x)
    
    
    128Total Expenses
    
    
    16,927
    
    
    
    (3,023
    )
    
    
    
    
    
    
    13,904
    
    
    
    17,584
    
    
    
    (550
    )
    
    
    
    
    
    
    17,034Loss from continuing operations before
income taxes
    
    
    (12,083
    )
    
    
    2,459
    
    
    
    
    
    
    
    (9,624
    )
    
    
    (20,833
    )
    
    
    (11,654
    )
    
    
    
    
    
    
    (32,487
    )(Provision for) recovery of income taxesCurrent
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    2,286639
    
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    2,286Net loss from continuing operations
    
    
    (11,444
    )
    
    
    2,459
    
    
    
    
    
    
    
    (8,985
    )
    
    
    (18,547
    )
    
    
    (11,654
    )
    
    
    
    
    
    
    (30,201
    )Net income (loss) from discontinued
operations
    
    
    66
    
    
    
    1,085
    
    
    (xii)
    
    
    1,151
    
    
    
    (3,184
    )
    
    
    404
    
    
    (xii)
    
    
    (2,780
    )Net Loss and Comprehensive Loss
    
    
    (11,378
    )
    
    
    3,544
    
    
    
    
    
    
    
    (7,834
    )
    
    
    (21,731
    )
    
    
    (11,250
    )
    
    
    
    
    
    
    (32,981
    )Accumulated Deficit, beginning of period
    
    
    (206,457
    )
    
    
    (116,531
    )
    
    
    
    
    
    
    (322,988
    )
    
    
    (168,534
    )
    
    
    (92,206
    )
    
    
    
    
    
    
    (260,740
    )Accumulated Deficit, end of period
    
    $
    (217,835
    )
    
    $
    (112,987
    )
    
    
    
    
    
    $
    (330,822
    )
    
    $
    (190,265
    )
    
    $
    (103,456
    )
    
    
    
    
    
    $
    (293,721
    )Net Loss per shareNet Loss from continuing operations,
basic and diluted
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.03
    )
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    
    
    
    
    $
    (0.12
    )Net Income (Loss) from discontinued
operations, basic and diluted
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    
    
    
    
    
    (0.01
    )Net Loss per share, basic and diluted
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.03
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )
    
    
    
    
    
    $
    (0.13
    )Weighted Average Number of
shares (in thousands)Basic and Diluted
    
    
    279,381
    
    
    
    
    
    
    
    
    
    
    
    279,381
    
    
    
    245,250
    
    
    
    
    
    
    
    
    
    
    
    245,250
  22




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##### Table of Contents



Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil revenue
    
    $
    11,742
    
    
    $
    
    
    
    
    
    
    
    $
    11,742
    
    
    $
    22,635
    
    
    $
    
    
    
    
    
    
    
    $
    22,635Loss on derivative instruments
    
    
    (1,092
    )
    
    
    (2,605
    )
    
    (iii)
    
    
    (3,697
    )
    
    
    (17,691
    )
    
    
    (15,371
    )
    
    (iii)
    
    
    (33,062
    )Interest income
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    42Total Revenue
    
    
    10,668
    
    
    
    (2,605
    )
    
    
    
    
    
    
    8,063
    
    
    
    4,986
    
    
    
    (15,371
    )
    
    
    
    
    
    
    (10,385
    )ExpensesOperating costs
    
    
    5,145
    
    
    
    
    
    
    
    
    
    
    
    5,145
    
    
    
    9,613
    
    
    
    
    
    
    
    
    
    
    
    9,613General and administrative
    
    
    9,714
    
    
    
    
    
    
    
    
    
    
    
    9,714
    
    
    
    7,299
    
    
    
    
    
    
    
    
    
    
    
    7,299Business and technology development
    
    
    3,803
    
    
    
    
    
    
    
    
    
    
    
    3,803
    
    
    
    2,919
    
    
    
    
    
    
    
    
    
    
    
    2,919Depletion and depreciation
    
    
    12,000
    
    
    
    (6,354
    )
    
    (ix)
    
    
    5,646
    
    
    
    13,340
    
    
    
    (1,556
    )
    
    (ix)
    
    
    11,784Foreign exchange loss
    
    
    1,686
    
    
    
    (280
    )
    
    (viii)
    
    
    1,406
    
    
    
    321
    
    
    
    
    
    
    
    
    
    
    
    321Interest expense and financing costs
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    757
    
    
    
    
    
    
    
    
    
    
    
    757Provision for impairment
of HTLTM development costs
    
    
    
    
    
    
    151
    
    
    (x)
    
    
    151
    
    
    
    
    
    
    
    137
    
    
    (x)
    
    
    137Total Expenses
    
    
    32,683
    
    
    
    (6,483
    )
    
    
    
    
    
    
    26,200
    
    
    
    34,249
    
    
    
    (1,419
    )
    
    
    
    
    
    
    32,830Loss from continuing operations
before income taxes
    
    
    (22,015
    )
    
    
    3,878
    
    
    
    
    
    
    
    (18,137
    )
    
    
    (29,263
    )
    
    
    (13,952
    )
    
    
    
    
    
    
    (43,215
    )(Provision for) recovery of income
taxesCurrent
    
    
    (1,006
    )
    
    
    
    
    
    
    
    
    
    
    (1,006
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    2,286(1,006
    )
    
    
    
    
    
    
    
    
    
    
    (1,006
    )
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    2,286Net loss from continuing operations
    
    
    (23,021
    )
    
    
    3,878
    
    
    
    
    
    
    
    (19,143
    )
    
    
    (26,977
    )
    
    
    (13,952
    )
    
    
    
    
    
    
    (40,929
    )Net income (loss) from discontinued
operations
    
    
    (631
    )
    
    
    2,248
    
    
    (xii)
    
    
    1,617
    
    
    
    (3,298
    )
    
    
    751
    
    
    (xii)
    
    
    (2,547
    )Net Loss and Comprehensive Loss
    
    
    (23,652
    )
    
    
    6,126
    
    
    
    
    
    
    
    (17,526
    )
    
    
    (30,275
    )
    
    
    (13,201
    )
    
    
    
    
    
    
    (43,476
    )Accumulated Deficit, beginning of year
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    
    
    (313,296
    )
    
    
    (159,990
    )
    
    
    (90,255
    )
    
    
    
    
    
    
    (250,245
    )Accumulated Deficit, end of period
    
    $
    (217,835
    )
    
    $
    (112,987
    )
    
    
    
    
    
    $
    (330,822
    )
    
    $
    (190,265
    )
    
    $
    (103,456
    )
    
    
    
    
    
    $
    (293,721
    )Net Loss per shareNet Loss from continuing operations,
basic and diluted
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.06
    )
    
    
    
    
    
    $
    (0.17
    )Net Income (Loss) from discontinued
operations, basic and diluted
    
    
    (0.00
    )
    
    
    0.01
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    
    
    
    
    
    (0.01
    )Net Loss per share, basic and diluted
    
    $
    (0.08
    )
    
    $
    0.02
    
    
    
    
    
    
    $
    (0.06
    )
    
    $
    (0.12
    )
    
    $
    (0.06
    )
    
    
    
    
    
    $
    (0.18
    )Weighted Average Number
of shares (in thousands)Basic and Diluted
    
    
    279,381
    
    
    
    
    
    
    
    
    
    
    
    279,381
    
    
    
    245,063
    
    
    
    
    
    
    
    
    
    
    
    245,063
   23




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##### Table of Contents



Condensed Consolidated Statement of Cash Flow
  Additional U.S. GAAP Disclosures
  Level 1:
 Level 2:
 Level 3:
   As at June 30, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative instruments liabilities
    
    $
    3,726
    
    
    $
    245
    
    
    $
    
    
    
    $
    3,971
  Impact of New and Pending U.S. GAAP Accounting Standards
 TM Codification
 SFAS 167
  24




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##### Table of Contents



SFAS 140
  FSP 157-4
 FSP 107-1
     25




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##### Table of Contents



Three Months Ended June 30,2009
    
    
    2008Realized gains (losses) on derivative transactions
    
    $
    76
    
    
    $
    (2,131
    )Unrealized losses on derivative transactions
    
    
    (1,249
    )
    
    
    (12,878
    )$
    (1,173
    )
    
    $
    (15,009
    )
 Six Months Ended June 30,2009
    
    
    2008Realized gains (losses) on derivative transactions
    
    $
    612
    
    
    $
    (2,855
    )Unrealized losses on derivative transactions
    
    
    (1,704
    )
    
    
    (14,836
    )$
    (1,092
    )
    
    $
    (17,691
    )
    FSP FAS 157-2
   26




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
 TM TM TM
   SPECIAL NOTE TO CANADIAN INVESTORS
 SEC CSA National Instrument 51-101  Standards of
Disclosure for Oil and Gas Activities Special Note to Canadian
Investors
   Bbl
    
    = barrel
    
    Mboe/d
    
    = thousands of barrels of oil equivalent per dayBbls/d
    
    = barrels per day
    
    MMBbl
    
    = million barrelsBopd
    
    = barrels of oil per day
    
    MMBls/d
    
    = million barrels per dayBoe
    
    = barrel of oil equivalent
    
    Mcf
    
    = thousand cubic feetBoe/d
    
    = barrels of oil equivalent per day
    
    Mcf/d
    
    = thousand cubic feet per dayMBbl
    
    = thousand barrels
    
    MMBtu
    
    = million British thermal unitsMBbls/d
    
    = thousand barrels per day
    
    MMcf
    
    = million cubic feetMboe
    
    = thousands of barrels of oil equivalent
    
    MMcf/d
    
    = million cubic feet per day
  27




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##### Table of Contents



www.ivanhoeenergy.com www.sec.gov www.sedar.com
 Ivanhoe Energys Business
 TM
  TM TM
 TM
  Oil and Gas
 Integrated
 TM
 Conventional
   28




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##### Table of Contents



Business and Technology Development
   Corporate
 ,
    Corporate Strategy
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
       29




---



##### Table of Contents



Ivanhoes Value Proposition
 TM
   1.
    
    Virtual elimination of external energy requirements for steam generation and/or power
for upstream operations.2.
    
    Elimination of the need for diluent or blend oils for transport.3.
    
    Capture of the majority of the heavy versus light oil value differential.4.
    
    Relatively small minimum economic scale of operations suited for field upgrading and
for smaller field developments.
 TM
 TM
 Implementation Strategy
   Execute . TM
 Additional projects . TM
 Advance the technology . TM TM FTF
 Finance initial projects.
 Build internal capabilities. TM TM
  30




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##### Table of Contents



Executive Overview of 2009 Results
  Three-Month Periods ended June 30,
    
    
    Six-Month Periods ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Oil revenues
    
    $
    6,009
    
    
    $
    11,746
    
    
    $
    11,742
    
    
    $
    22,635Net loss from continuing operations
    
    $
    (11,444
    )
    
    $
    (18,547
    )
    
    $
    (23,021
    )
    
    $
    (26,977
    )Net loss from continuing operations
per share  basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )
    
    $
    (0.11
    )Net loss and comprehensive loss
    
    $
    (11,378
    )
    
    $
    (21,731
    )
    
    $
    (23,652
    )
    
    $
    (30,275
    )Net loss per share  basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.12
    )Average production (Boe/d)
    
    
    1,405
    
    
    
    1,280
    
    
    
    1,431
    
    
    
    1,327Net operating revenue per Boe
    
    $
    27.88
    
    
    $
    55.30
    
    
    $
    25.46
    
    
    $
    53.93Cash flow provided by (used in) operating activities
from continuing operations
    
    $
    (4,917
    )
    
    $
    726
    
    
    $
    (9,797
    )
    
    $
    2,396Cash flow provided by (used in) operating activities
    
    $
    (2,886
    )
    
    $
    2,626
    
    
    $
    (6,974
    )
    
    $
    5,643Capital investments
    
    $
    (6,692
    )
    
    $
    (1,880
    )
    
    $
    (11,900
    )
    
    $
    (4,720
    )
  31




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##### Table of Contents



Financial Results  Change in Net Loss
  Three-Month Periods Ended June 30,
    
    
    Six-Month Periods Ended June 30,Favorable
    
    
    
    
    
    
    
    
    
    
    Favorable(Unfavorable)
    
    
    
    
    
    
    
    
    
    
    (Unfavorable)2009
    
    
    Variances
    
    
    2008
    
    
    2009
    
    
    Variances
    
    
    2008Summary of Net Loss
by Significant Components:Oil Revenues:
    
    $
    6,009
    
    
    
    
    
    
    $
    11,746
    
    
    $
    11,742
    
    
    
    
    
    
    $
    22,635Production volumes
    
    
    
    
    
    $
    1,132
    
    
    
    
    
    
    
    
    
    
    $
    1,587Oil prices
    
    
    
    
    
    
    (6,869
    )
    
    
    
    
    
    
    
    
    
    
    (12,480
    )Realized gain (loss)
on derivative instruments
    
    
    76
    
    
    
    2,207
    
    
    
    (2,131
    )
    
    
    612
    
    
    
    3,467
    
    
    
    (2,855
    )Operating costs
    
    
    (2,444
    )
    
    
    2,859
    
    
    
    (5,303
    )
    
    
    (5,145
    )
    
    
    4,468
    
    
    
    (9,613
    )General and administrative, less
stock based compensation
    
    
    (3,332
    )
    
    
    (48
    )
    
    
    (3,284
    )
    
    
    (8,779
    )
    
    
    (2,938
    )
    
    
    (5,841
    )Business and technology development,
less stock based compensation
    
    
    (1,742
    )
    
    
    (539
    )
    
    
    (1,203
    )
    
    
    (3,751
    )
    
    
    (1,285
    )
    
    
    (2,466
    )Current (provision for)
recovery of income taxes
    
    
    639
    
    
    
    639
    
    
    
    
    
    
    
    (1,006
    )
    
    
    (1,006
    )
    
    
    Foreign exchange loss
    
    
    (2,680
    )
    
    
    (2,483
    )
    
    
    (197
    )
    
    
    (1,686
    )
    
    
    (1,365
    )
    
    
    (321
    )Net interest
    
    
    (81
    )
    
    
    94
    
    
    
    (175
    )
    
    
    (164
    )
    
    
    273
    
    
    
    (437
    )Unrealized loss
on derivative instruments
    
    
    (1,249
    )
    
    
    11,629
    
    
    
    (12,878
    )
    
    
    (1,704
    )
    
    
    13,132
    
    
    
    (14,836
    )Depletion and depreciation
    
    
    (6,045
    )
    
    
    386
    
    
    
    (6,431
    )
    
    
    (12,000
    )
    
    
    1,340
    
    
    
    (13,340
    )Stock based compensation
    
    
    (526
    )
    
    
    267
    
    
    
    (793
    )
    
    
    (987
    )
    
    
    924
    
    
    
    (1,911
    )Future income tax recovery
    
    
    
    
    
    
    (2,286
    )
    
    
    2,286
    
    
    
    
    
    
    
    (2,286
    )
    
    
    2,286Discontinued operations
    
    
    66
    
    
    
    3,250
    
    
    
    (3,184
    )
    
    
    (631
    )
    
    
    2,667
    
    
    
    (3,298
    )Other
    
    
    (69
    )
    
    
    115
    
    
    
    (184
    )
    
    
    (153
    )
    
    
    125
    
    
    
    (278
    )Net Loss
    
    $
    (11,378
    )
    
    $
    10,353
    
    
    $
    (21,731
    )
    
    $
    (23,652
    )
    
    $
    6,623
    
    
    $
    (30,275
    )
     32




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##### Table of Contents



Revenues and Operating Costs
 China
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Production:Boe
    
    
    127,881
    
    
    
    116,507
    
    
    
    258,959
    
    
    
    241,478Boe/day for the period
    
    
    1,405
    
    
    
    1,280
    
    
    
    1,431
    
    
    
    1,327
 Per Boe
    
    

Per BoeOil revenue
    
    $
    46.99
    
    
    $
    100.82
    
    
    $
    45.34
    
    
    $
    93.74Field operating costs
    
    
    16.74
    
    
    
    22.06
    
    
    
    17.86
    
    
    
    19.42Windfall Levy
    
    
    1.71
    
    
    
    21.92
    
    
    
    1.33
    
    
    
    19.11Engineering and support costs
    
    
    0.66
    
    
    
    1.54
    
    
    
    0.69
    
    
    
    1.2819.11
    
    
    
    45.52
    
    
    
    19.88
    
    
    
    39.81Net operating revenue
    
    
    27.88
    
    
    
    55.30
    
    
    
    25.46
    
    
    
    53.93Depletion
    
    
    40.99
    
    
    
    49.72
    
    
    
    40.60
    
    
    
    49.69Net revenue (loss) from operations
    
    $
    (13.11
    )
    
    $
    5.58
    
    
    $
    (15.14
    )
    
    $
    4.24
  
    
    Production Volumes
 Three-Month Periods Ended June 30,
    
    
    Six-Month Periods Ended June 30,Net Boes
    
    
    Percentage
    
    

Net Boes
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    ChangeChina:Dagang
    
    
    123,894
    
    
    
    111,662
    
    
    
    11
    %
    
    
    252,372
    
    
    
    231,490
    
    
    
    9
    %Daqing
    
    
    3,987
    
    
    
    4,845
    
    
    
    -18
    %
    
    
    6,587
    
    
    
    9,988
    
    
    
    -34
    %127,881
    
    
    
    116,507
    
    
    
    10
    %
    
    
    258,959
    
    
    
    241,478
    
    
    
    7
    %
   
    
    Oil Prices
   33




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##### Table of Contents



Three Months Ended

    
    
    
    
    
    Favorable
    
    
    Three Months EndedJune 30,

    
    
    
    
    
    (Unfavorable)
    
    
    June 30,2009

    
    
    
    
    
    Variances
    
    
    2008$
    76
    
    
    
    
    
    $
    2,207
    
    
    $
    (2,131
    )Six Months Ended

    
    
    
    
    
    Favorable
    
    
    Six Months EndedJune 30,

    
    
    
    
    
    (Unfavorable)
    
    
    June 30,2009

    
    
    
    
    
    Variances
    
    
    2008$
    612
    
    
    
    
    
    $
    3,467
    
    
    $
    (2,855
    )
 
    
    Operating Costs
  General and Administrative
  Three months
    
    
    Six MonthsEnded
    
    
    Ended2009 vs.
    
    
    2009 vs.2008
    
    
    2008Favorable (unfavorable) variances:Oil Activities:Canada
    
    $
    273
    
    
    $
    415Ecuador
    
    
    (459
    )
    
    
    (976
    )China
    
    
    (72
    )
    
    
    (35
    )Corporate
    
    
    259
    
    
    
    (1,819
    )1
    
    
    
    (2,415
    )Less: stock based compensation
    
    
    (49
    )
    
    
    (523
    )$
    (48
    )
    
    $
    (2,938
    )
  34




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##### Table of Contents



Canada
  Ecuador
  China
  Corporate
   Business and Technology Development
  Foreign Exchange Loss
  Net Interest
  Unrealized Gain (Loss) on Derivative Instruments
   35




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##### Table of Contents



Three Months Ended

    
    
    
    
    
    Favorable
    
    
    Three Months EndedJune 30,

    
    
    
    
    
    (Unfavorable)
    
    
    June 30,2009

    
    
    
    
    
    Variances
    
    
    2008$
    (1,249
    )
    
    
    
    
    $
    11,629
    
    
    $
    (12,878
    )Six Months Ended

    
    
    
    
    
    Favorable
    
    
    Six Months EndedJune 30,

    
    
    
    
    
    (Unfavorable)
    
    
    June 30,2009

    
    
    
    
    
    Variances
    
    
    2008$
    (1,704
    )
    
    
    
    
    $
    13,132
    
    
    $
    (14,836
    )
 Depletion and Depreciation
  China
  Provision for/Recovery of Income Taxes
 China
  Discontinued Operations
   36




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##### Table of Contents



Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
  Three-Month Periods ended June 30,
    
    
    Six-Month Periods ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    (2,886
    )
    
    $
    2,626
    
    
    $
    (6,974
    )
    
    $
    5,643Net cash used in investing activities
    
    $
    (7,043
    )
    
    $
    (3,868
    )
    
    $
    (13,311
    )
    
    $
    (10,351
    )Net cash provided by (used in) financing activities
    
    $
    (28
    )
    
    $
    4,765
    
    
    $
    (542
    )
    
    $
    3,566Net increase (decrease) in cash and cash equivalents
    
    $
    (9,961
    )
    
    $
    3,523
    
    
    $
    (20,862
    )
    
    $
    (1,142
    )
   
    
    Inability to attract strategic investors to our projects,
    
    Volatility in the public debt and private and equity markets,
    
    Increases in interest rates or credit spreads, as well as limitations on the
availability of credit, that affect our ability to borrow under future potential credit
facilities on a secured or unsecured basis, and
    
    A decrease in the market price for our common stock.
 Operating Activities
  Investing Activities
   37




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##### Table of Contents



Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 30,
    
    
    June 30,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2009
    
    
    2008
    
    
    Decrease
    
    
    2009
    
    
    2008
    
    
    DecreaseOil and Gas Activities:Canada
    
    $
    4,009
    
    
    $
    
    
    
    $
    (4,009
    )
    
    $
    6,077
    
    
    $
    
    
    
    $
    (6,077
    )Ecuador
    
    
    895
    
    
    
    
    
    
    
    (895
    )
    
    
    1,551
    
    
    
    
    
    
    
    (1,551
    )China
    
    
    1,368
    
    
    
    1,646
    
    
    
    278
    
    
    
    2,524
    
    
    
    3,771
    
    
    
    1,247Business and Technology Development
    
    
    420
    
    
    
    231
    
    
    
    (189
    )
    
    
    1,694
    
    
    
    946
    
    
    
    (748
    )Corporate
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    54
    
    
    
    3
    
    
    
    (51
    )$
    6,692
    
    
    $
    1,880
    
    
    $
    (4,812
    )
    
    $
    11,900
    
    
    $
    4,720
    
    
    $
    (7,180
    )
 
    
    Canada
  
    
    Ecuador
 TM
 
    
    China
  
    
    Business and Technology Development
  Financing Activities
  Outlook for balance of 2009
   38




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##### Table of Contents



Contractual Obligations
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    After 2012Consolidated Balance Sheets:Long term debt
    
    $
    39,792
    
    
    $
    
    
    
    $
    6,652
    
    
    $
    33,140
    
    
    $
    
    
    
    $
    Asset retirement obligation
    
    
    2,164
    
    
    
    
    
    
    
    1,974
    
    
    
    
    
    
    
    
    
    
    
    190Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    Other Commitments:Interest payable
    
    
    5,043
    
    
    
    1,358
    
    
    
    2,572
    
    
    
    1,113
    
    
    
    
    
    
    
    Lease commitments
    
    
    2,934
    
    
    
    737
    
    
    
    1,032
    
    
    
    703
    
    
    
    336
    
    
    
    126Zitong exploration commitment
    
    
    24,694
    
    
    
    13,123
    
    
    
    11,571
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    76,527
    
    
    $
    15,218
    
    
    $
    23,801
    
    
    $
    34,956
    
    
    $
    2,236
    
    
    $
    316
 Off Balance Sheet Arrangements
  Outstanding Share Data
   39




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##### Table of Contents



Quarterly Financial Data In Accordance With Canadian and U.S. GAAP (Unaudited)
 QUARTER ENDED2009
    
    
    2008

    
    
    20072nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd QtrTotal revenueCanadian GAAP
    
    $
    4,844
    
    
    $
    5,824
    
    
    $
    19,524
    
    
    $
    26,159
    
    
    $
    (3,249
    )
    
    $
    8,235
    
    
    $
    5,336
    
    
    $
    7,391U.S. GAAP
    
    $
    4,280
    
    
    $
    3,783
    
    
    $
    24,919
    
    
    $
    40,800
    
    
    $
    (15,453
    )
    
    $
    5,068
    
    
    $
    6,453
    
    
    $
    10,962Net income (loss)
from continuing
operations:Canadian GAAP
    
    $
    (11,444
    )
    
    $
    (11,577
    )
    
    $
    (16,322
    )
    
    $
    4,822
    
    
    $
    (18,547
    )
    
    $
    (8,430
    )
    
    $
    (16,178
    )
    
    $
    (5,855
    )U.S. GAAP
    
    $
    (8,985
    )
    
    $
    (10,158
    )
    
    $
    (27,189
    )
    
    $
    20,206
    
    
    $
    (30,201
    )
    
    $
    (10,728
    )
    
    $
    (13,959
    )
    
    $
    10,840Net income (loss)
from discontinued
operations:Canadian GAAP
    
    $
    66
    
    
    $
    (697
    )
    
    $
    2,342
    
    
    $
    5,240
    
    
    $
    (3,184
    )
    
    $
    (114
    )
    
    $
    (2,671
    )
    
    $
    (1,377
    )U.S. GAAP
    
    $
    1,151
    
    
    $
    466
    
    
    $
    (18,210
    )
    
    $
    5,618
    
    
    $
    (2,780
    )
    
    $
    234
    
    
    $
    (2,266
    )
    
    $
    (13,391
    )Net income (loss)
per share 
continuing operationsCanadian GAAP
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.02
    )U.S. GAAP
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.10
    )
    
    $
    0.07
    
    
    $
    (0.12
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.05Net income (loss)
per share 
discontinued
operationsCanadian GAAP
    
    $
    0.00
    
    
    $
    (0.00
    )
    
    $
    0.01
    
    
    $
    0.02
    
    
    
    (0.01
    )
    
    
    (0.00
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )U.S. GAAP
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    0.02
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.06
    )
  Transition to International Financial Reporting Standards (IFRS)
 IFRS
  First Time Adoption
of International Financial Reporting Standards
  40




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
     41




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##### Table of Contents



Part II  Other Information
 
 Item 1.
    
    Legal Proceedings:
  
 Item 1A.
    
    Risk Factors:
   
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds:None
 
 Item 3.
    
    Defaults Upon Senior Securities:None
 
 Item 4.
    
    Submission of Matters To a Vote of Security Holders:
 AGM
 Name of Director Nominee
    
    Votes in Favor
    
    
    Votes WithheldA. Robert Abboud
    
    
    198,466,047
    
    
    
    3,558,607Howard Balloch
    
    
    198,284,531
    
    
    
    3,740,123Brian F. Downey
    
    
    198,574,399
    
    
    
    3,450,255Robert M. Friedland
    
    
    181,559,895
    
    
    
    20,464,759Robert G. Graham
    
    
    181,701,787
    
    
    
    20,322,867Peter Meredith
    
    
    181,587,548
    
    
    
    20,437,106Robert A. Pirraglia
    
    
    181,068,736
    
    
    
    20,955,918
  42




---



##### Table of Contents




    
    Deloitte & Touche LLP were re-appointed as the Companys auditors for remuneration to be
determined by the Companys Board of Directors (201,361,601 Common Shares voted in favor
and 663,054 Common Shares withheld from voting); and
    
    An ordinary resolution was passed ratifying the grant of 185,000 incentive stock options
to two employees of the Company (106,011,137 Common Shares voted in favor and 28,796,550
Common Shares voted against).
 
 Item 5.
    
    Other Information:None
 
 Item 6.
    
    Exhibits
 EXHIBITNUMBER
    
    DESCRIPTION10.1
    
    Stock Purchase Agreement among Ivanhoe Energy Holdings Inc., as Seller, Ivanhoe Energy Inc.,
as Seller Parent, Seneca South Midway LLC, as Purchaser and Seneca Resources Corporation, as
Purchaser Parent.31.1
    
    Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification by the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  43




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##### Table of Contents



SIGNATURE
  IVANHOE ENERGY INC.By:
    
    /s/ W. Gordon LancasterName: W. Gordon LancasterTitle:    Chief Financial OfficerDated: August 10, 2009
  44




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    Stock Purchase Agreement among Ivanhoe Energy Holdings Inc., as Seller, Ivanhoe Energy
Inc., as Seller Parent, Seneca South Midway LLC, as Purchaser and Seneca Resources
Corporation, as Purchaser Parent dated June 16, 2009.31.1
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  45