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 September 30, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
  
 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I
    
    Financial InformationItem 1
    
    Financial StatementsUnaudited Condensed Consolidated Balance Sheets as at September 30, 2008 and
December 31, 2007
    
    3Unaudited Condensed Consolidated Statements of Operations, Comprehensive Income (Loss)
and Accumulated Deficit for the Three-Month and Nine-Month Periods Ended
September 30, 2008 and 2007
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three-Month
and Nine-Month Periods Ended September 30, 2008 and 2007
    
    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
    
    40Item 4.
    
    Controls and Procedures
    
    42PART II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    43Item 1A.
    
    Risk Factors
    
    43Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    46Item 3.
    
    Defaults Upon Senior Securities
    
    46Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    46Item 5.
    
    Other Information
    
    46Item 6.
    
    Exhibits
    
    46
  2




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##### 



Part I  Financial Information
 
 Item 1 Financial Statements
 IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Balance Sheets
 September 30, 2008
    
    
    December 31, 2007AssetsCurrent Assets:Cash and cash equivalents
    
    $
    61,649
    
    
    $
    11,356Accounts receivable
    
    
    13,811
    
    
    
    9,376Advance
    
    
    
    
    
    
    825Prepaid and other current assets
    
    
    485
    
    
    
    602Future income tax assets
    
    
    1,161
    
    
    
    77,106
    
    
    
    22,159Oil and gas properties and development costs, net
    
    
    179,641
    
    
    
    111,853Intangible assets  technology
    
    
    102,153
    
    
    
    102,153Long term assets
    
    
    4,104
    
    
    
    751$
    363,004
    
    
    $
    236,916Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    13,074
    
    
    $
    9,538Income tax payable
    
    
    358
    
    
    
    Debt  current portion
    
    
    18,111
    
    
    
    6,729Derivative instruments
    
    
    9,310
    
    
    
    9,43240,853
    
    
    
    25,699Long term debt
    
    
    45,640
    
    
    
    9,812Asset retirement obligations
    
    
    3,673
    
    
    
    2,218Long term obligation
    
    
    1,900
    
    
    
    1,90092,066
    
    
    
    39,629Commitments and contingenciesShareholders Equity:Share capital, issued 279,211,916 common shares;
December 31, 2007 244,873,349 common shares
    
    
    413,918
    
    
    
    324,262Purchase warrants
    
    
    18,805
    
    
    
    23,078Contributed surplus
    
    
    16,332
    
    
    
    9,937Convertible note
    
    
    2,086
    
    
    
    Accumulated deficit
    
    
    (180,203
    )
    
    
    (159,990
    )270,938
    
    
    
    197,287$
    363,004
    
    
    $
    236,916
  3




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##### 



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Operations,
    Comprehensive Income (Loss) and Accumulated Deficit
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueOil and gas revenue
    
    $
    20,437
    
    
    $
    10,864
    
    
    $
    53,459
    
    
    $
    30,249Gain (loss) on derivative instruments
    
    
    14,818
    
    
    
    (2,153
    )
    
    
    (9,915
    )
    
    
    (2,928
    )Interest income
    
    
    371
    
    
    
    112
    
    
    
    479
    
    
    
    34835,626
    
    
    
    8,823
    
    
    
    44,023
    
    
    
    27,669ExpensesOperating costs
    
    
    8,211
    
    
    
    4,266
    
    
    
    20,217
    
    
    
    12,174General and administrative
    
    
    5,255
    
    
    
    2,725
    
    
    
    13,749
    
    
    
    8,981Business and technology development
    
    
    1,969
    
    
    
    2,831
    
    
    
    4,889
    
    
    
    7,341Depletion and depreciation
    
    
    8,183
    
    
    
    6,044
    
    
    
    24,678
    
    
    
    18,960Interest expense and financing costs
    
    
    463
    
    
    
    189
    
    
    
    1,500
    
    
    
    57124,081
    
    
    
    16,055
    
    
    
    65,033
    
    
    
    48,027Income (Loss) before Income Taxes
    
    
    11,545
    
    
    
    (7,232
    )
    
    
    (21,010
    )
    
    
    (20,358
    )(Provision for) recovery of income taxesCurrent
    
    
    (358
    )
    
    
    
    
    
    
    (364
    )
    
    
    Future
    
    
    (1,125
    )
    
    
    
    
    
    
    1,161
    
    
    
    (1,483
    )
    
    
    
    
    
    
    797
    
    
    
    Net Income (Loss) and Comprehensive Income (Loss)
    
    
    10,062
    
    
    
    (7,232
    )
    
    
    (20,213
    )
    
    
    (20,358
    )Accumulated Deficit, beginning of period
    
    
    (190,265
    )
    
    
    (133,909
    )
    
    
    (159,990
    )
    
    
    (120,783
    )Accumulated Deficit, end of period
    
    $
    (180,203
    )
    
    $
    (141,141
    )
    
    $
    (180,203
    )
    
    $
    (141,141
    )Net Income (Loss) per share  Basic and Diluted
    
    $
    0.04
    
    
    $
    (0.03
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )Weighted Average Number of Shares (in thousands)Basic
    
    
    265,372
    
    
    
    242,747
    
    
    
    251,907
    
    
    
    241,812Diluted
    
    
    279,641
    
    
    
    242,747
    
    
    
    251,907
    
    
    
    241,812
  4




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##### 



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating ActivitiesNet income (loss) and comprehensive income (loss)
    
    $
    10,062
    
    
    $
    (7,232
    )
    
    $
    (20,213
    )
    
    $
    (20,358
    )Items not requiring use of cash:Depletion and depreciation
    
    
    8,183
    
    
    
    6,044
    
    
    
    24,678
    
    
    
    18,960Stock based compensation
    
    
    1,114
    
    
    
    758
    
    
    
    3,025
    
    
    
    2,613Unrealized (gain) loss on derivative instruments
    
    
    (18,553
    )
    
    
    1,730
    
    
    
    (122
    )
    
    
    2,682Unrealized foreign exchange loss
    
    
    314
    
    
    
    
    
    
    
    397
    
    
    
    Future income tax provision (recovery)
    
    
    1,125
    
    
    
    
    
    
    
    (1,161
    )
    
    
    Provision for uncollectible accounts
    
    
    725
    
    
    
    
    
    
    
    725
    
    
    
    Other
    
    
    238
    
    
    
    151
    
    
    
    697
    
    
    
    481Changes in non-cash working capital items
    
    
    (1,535
    )
    
    
    315
    
    
    
    (627
    )
    
    
    1881,673
    
    
    
    1,766
    
    
    
    7,399
    
    
    
    4,566Investing ActivitiesCapital investments
    
    
    (8,956
    )
    
    
    (9,100
    )
    
    
    (16,872
    )
    
    
    (22,557
    )Acquisition of oil and gas assets
    
    
    (22,308
    )
    
    
    
    
    
    
    (22,308
    )
    
    
    Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    1,000Recovery of development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000Advance repayments
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    400Other
    
    
    (714
    )
    
    
    (47
    )
    
    
    (817
    )
    
    
    28Changes in non-cash working capital items
    
    
    2,869
    
    
    
    2,189
    
    
    
    337
    
    
    
    695(29,109
    )
    
    
    (6,958
    )
    
    
    (39,460
    )
    
    
    (11,434
    )Financing ActivitiesShares issued on private placements, net of share issue costs
    
    
    82,687
    
    
    
    
    
    
    
    82,687
    
    
    
    Proceeds from exercise of options
    
    
    518
    
    
    
    113
    
    
    
    1,204
    
    
    
    278Proceeds from debt obligations, net of financing costs
    
    
    
    
    
    
    9,335
    
    
    
    5,490
    
    
    
    9,335Payments of debt obligations
    
    
    (615
    )
    
    
    (615
    )
    
    
    (1,845
    )
    
    
    (1,845
    )Payments of deferred financing costs
    
    
    (542
    )
    
    
    
    
    
    
    (2,606
    )
    
    
    Other
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    Changes in non-cash working capital items
    
    
    (711
    )
    
    
    
    
    
    
    (9
    )
    
    
    81,337
    
    
    
    8,895
    
    
    
    84,921
    
    
    
    7,768Foreign Exchange Loss on Cash and Cash
Equivalents Held in a Foreign Currency
    
    
    (2,466
    )
    
    
    
    
    
    
    (2,567
    )
    
    
    Increase in Cash and Cash Equivalents, for the period
    
    
    51,435
    
    
    
    3,703
    
    
    
    50,293
    
    
    
    900Cash and cash equivalents, beginning of period
    
    
    10,214
    
    
    
    11,076
    
    
    
    11,356
    
    
    
    13,879Cash and Cash Equivalents, end of period
    
    $
    61,649
    
    
    $
    14,779
    
    
    $
    61,649
    
    
    $
    14,779
  5




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##### 



Notes to the Condensed Consolidated Financial Statements
September 30, 2008
 1. BASIS OF PRESENTATION
 Company Ivanhoe Energy GAAP
  2. CHANGES IN ACCOUNTING POLICIES
 2008 Accounting Changes
 CICA S.1535 S.3862 S.3863
 Impact of New and Pending Canadian GAAP Accounting Standards
 S.3064 S.3062
 6




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##### 



Convergence of Canadian GAAP with International Financial Reporting Standards
 IFRS
 3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at September 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    139,313
    
    
    $
    110,914
    
    
    $
    
    
    
    $
    250,227Unproved
    
    
    78,348
    
    
    
    4,197
    
    
    
    4,394
    
    
    
    
    
    
    
    86,93978,348
    
    
    
    143,510
    
    
    
    115,308
    
    
    
    
    
    
    
    337,166Accumulated depletion
    
    
    
    
    
    
    (76,461
    )
    
    
    (31,877
    )
    
    
    
    
    
    
    (108,338
    )Accumulated provision for impairment
    
    
    
    
    
    
    (16,550
    )
    
    
    (50,350
    )
    
    
    
    
    
    
    (66,900
    )78,348
    
    
    
    50,499
    
    
    
    33,081
    
    
    
    
    
    
    
    161,928Development Costs:Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,592
    
    
    
    5,592Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,902
    
    
    
    7,902Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,037
    
    
    
    11,037Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,095
    )
    
    
    (7,095
    )
    
    
    
    
    
    
    
    
    
    
    
    17,436
    
    
    
    17,436Furniture and equipment
    
    
    14
    
    
    
    120
    
    
    
    537
    
    
    
    270
    
    
    
    941Accumulated depreciation
    
    
    (5
    )
    
    
    (92
    )
    
    
    (467
    )
    
    
    (100
    )
    
    
    (664
    )9
    
    
    
    28
    
    
    
    70
    
    
    
    170
    
    
    
    277$
    78,357
    
    
    $
    50,527
    
    
    $
    33,151
    
    
    $
    17,606
    
    
    $
    179,641
 7




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##### 



As at December 31, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    134,648
    
    
    $
    107,040
    
    
    $
    
    
    
    $
    241,688Unproved
    
    
    3,297
    
    
    
    4,373
    
    
    
    
    
    
    
    7,670137,945
    
    
    
    111,413
    
    
    
    
    
    
    
    249,358Accumulated depletion
    
    
    (58,583
    )
    
    
    (27,091
    )
    
    
    
    
    
    
    (85,674
    )Accumulated provision for impairment
    
    
    (16,550
    )
    
    
    (50,350
    )
    
    
    
    
    
    
    (66,900
    )62,812
    
    
    
    33,972
    
    
    
    
    
    
    
    96,784Development Costs:Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    5,443
    
    
    
    5,443Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    4,724
    
    
    
    4,724Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    9,903
    
    
    
    9,903Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    (5,159
    )
    
    
    (5,159
    )
    
    
    
    
    
    
    
    14,911
    
    
    
    14,911Furniture and equipment
    
    
    119
    
    
    
    529
    
    
    
    107
    
    
    
    755Accumulated depreciation
    
    
    (77
    )
    
    
    (449
    )
    
    
    (71
    )
    
    
    (597
    )42
    
    
    
    80
    
    
    
    36
    
    
    
    158$
    62,854
    
    
    $
    34,052
    
    
    $
    14,947
    
    
    $
    111,853
    4. INTANGIBLE ASSETS  TECHNOLOGY
  HTL TM Technology
 RTP TM Process TM TM HTL TM Technology HTL TM
 Syntroleum Master License
 Syntroleum GTL Technology GTL
 8




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##### 



TM
 5. LONG TERM DEBT
  September 30,
    
    
    December 31,2008
    
    
    2007Variable rate bank note, (5.61% at September 30, 2008), due April 2009
    
    $
    5,200
    
    
    $
    4,500Variable rate bank note (6.54% at September 30, 2008) due September 2010
    
    
    10,000
    
    
    
    10,000Non-interest bearing promissory note, due 2006 through 2009
    
    
    1,031
    
    
    
    2,876Convertible note (6.75% at September 30, 2008) due July 2011
    
    
    38,106
    
    
    
    Promissory note (6.75% at September 30, 2008) due December 2008
    
    
    11,908
    
    
    
    66,245
    
    
    
    17,376Less:Unamortized discount
    
    
    (2,024
    )
    
    
    (139
    )Unamortized deferred financing costs
    
    
    (470
    )
    
    
    (696
    )Current maturities
    
    
    (18,111
    )
    
    
    (6,729
    )(20,605
    )
    
    
    (7,564
    )$
    45,640
    
    
    $
    9,812
 Bank Loan
  Promissory Note
 Talisman 2008 Note
 Convertible Note
 Convertible Note
   9




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##### 



2008
    
    
    12,5232009
    
    
    5,6162010
    
    
    10,0002011
    
    
    38,106$
    66,245
 6. ASSET RETIREMENT OBLIGATIONS
 TM CDF
 As at
    
    
    As atSeptember, 30
    
    
    December, 312008
    
    
    2007Carrying balance, beginning of year
    
    $
    2,218
    
    
    $
    1,953Liabilities incurred
    
    
    219
    
    
    
    20Liabilities settled
    
    
    
    
    
    
    (792
    )Accretion expense
    
    
    101
    
    
    
    119Revisions in estimated cash flows
    
    
    1,135
    
    
    
    918Carrying balance, end of period
    
    $
    3,673
    
    
    $
    2,218
 7. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 CNPC Mitsubishi
 Zitong Partners" Phase 2
 Long Term Obligation
 TM
 10




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##### 



Income Taxes
  Pan-China
   Other Commitments
    11




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##### 



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, 2007
    
    
    244,873
    
    
    $
    324,262
    
    
    $
    23,078
    
    
    $
    9,937
    
    
    $
    
    
    
    
    12,945
    
    
    $
    2.37Shares issued for:Private placement, net of
share issue costs
    
    
    29,334
    
    
    
    82,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of convertible debt
    
    
    2,291
    
    
    
    4,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Services
    
    
    217
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of options
    
    
    2,497
    
    
    
    1,617
    
    
    
    
    
    
    
    (413
    )
    
    
    
    
    
    
    (2,897
    )
    
    $
    0.82Options:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,535
    
    
    
    
    
    
    
    3,832
    
    
    $
    1.79Cancelled/forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (447
    )
    
    $
    2.62Convertible note issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    Purchase warrants expired
    
    
    
    
    
    
    
    
    
    
    (4,273
    )
    
    
    4,273
    
    
    
    
    
    
    
    
    
    
    
    Balance September 30, 2008
    
    
    279,212
    
    
    $
    413,918
    
    
    $
    18,805
    
    
    $
    16,332
    
    
    $
    2,086
    
    
    
    13,433
    
    
    $
    2.53
 Special Warrants Offering
 Special Warrants Offering
 Purchase Warrants
  Convertible Notes
   12




---



##### 



Purchase WarrantsPrice per
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Value onYear of
    
    Special
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Price per
    
    
    ExerciseIssue
    
    Warrant
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share
    
    
    ($U.S. 000)(thousands)
    
    
    ($U.S. 000)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    May 2011
    
    Cdn. $2.93 (1)
    
    
    31,821
 
 (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
 TM MOU
 TM
 Corporate
 ,
  13




---



##### 



Three-Month Period Ended September 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    
    
    
    $
    
    
    
    $
    14,912
    
    
    $
    5,525
    
    
    $
    
    
    
    $
    
    
    
    $
    20,437Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    10,898
    
    
    
    3,920
    
    
    
    
    
    
    
    
    
    
    
    14,818Interest income
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    22
    
    
    
    
    
    
    
    338
    
    
    
    371
    
    
    
    
    
    
    
    25,821
    
    
    
    9,467
    
    
    
    
    
    
    
    338
    
    
    
    35,626ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    6,626
    
    
    
    1,585
    
    
    
    
    
    
    
    
    
    
    
    8,211General and administrative
    
    
    655
    
    
    
    102
    
    
    
    639
    
    
    
    856
    
    
    
    
    
    
    
    3,003
    
    
    
    5,255Business and technology development
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,989
    
    
    
    
    
    
    
    1,969Depletion and depreciation
    
    
    
    
    
    
    
    
    
    
    5,891
    
    
    
    1,660
    
    
    
    632
    
    
    
    
    
    
    
    8,183Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    128
    
    
    
    22
    
    
    
    144
    
    
    
    463635
    
    
    
    102
    
    
    
    13,325
    
    
    
    4,229
    
    
    
    2,643
    
    
    
    3,147
    
    
    
    24,081Income (Loss) before Income Taxes
    
    
    (635
    )
    
    
    (102
    )
    
    
    12,496
    
    
    
    5,238
    
    
    
    (2,643
    )
    
    
    (2,809
    )
    
    
    11,545Provision for income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (358
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (358
    )Future
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    (1,483
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,483
    )Net Income (Loss) and ComprehensiveIncome (Loss)
    
    $
    (635
    )
    
    $
    (102
    )
    
    $
    11,013
    
    
    $
    5,238
    
    
    $
    (2,643
    )
    
    $
    (2,809
    )
    
    $
    10,062Capital Investments
    
    $
    3,999
    
    
    $
    
    
    
    $
    1,795
    
    
    $
    596
    
    
    $
    2,566
    
    
    $
    
    
    
    $
    8,956
 14




---



##### 



Nine-Month Period Ended September 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    
    
    
    $
    
    
    
    $
    37,547
    
    
    $
    15,912
    
    
    $
    
    
    
    $
    
    
    
    $
    53,459Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (6,793
    )
    
    
    (3,122
    )
    
    
    
    
    
    
    
    
    
    
    (9,915
    )Interest income
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    88
    
    
    
    
    
    
    
    355
    
    
    
    479
    
    
    
    
    
    
    
    30,790
    
    
    
    12,878
    
    
    
    
    
    
    
    355
    
    
    
    44,023ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    16,239
    
    
    
    3,978
    
    
    
    
    
    
    
    
    
    
    
    20,217General and administrative
    
    
    1,404
    
    
    
    102
    
    
    
    1,902
    
    
    
    1,734
    
    
    
    
    
    
    
    8,607
    
    
    
    13,749Business and technology development
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,760
    
    
    
    
    
    
    
    4,889Depletion and depreciation
    
    
    
    
    
    
    
    
    
    
    17,891
    
    
    
    4,814
    
    
    
    1,969
    
    
    
    4
    
    
    
    24,678Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    642
    
    
    
    408
    
    
    
    54
    
    
    
    396
    
    
    
    1,5001,533
    
    
    
    102
    
    
    
    36,674
    
    
    
    10,934
    
    
    
    6,783
    
    
    
    9,007
    
    
    
    65,033Income (Loss) before Income Taxes
    
    
    (1,533
    )
    
    
    (102
    )
    
    
    (5,884
    )
    
    
    1,944
    
    
    
    (6,783
    )
    
    
    (8,652
    )
    
    
    (21,010
    )(Provision for) recovery of income
taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (358
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    
    
    
    
    (364
    )Future
    
    
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    
    
    
    803
    
    
    
    (4
    )
    
    
    (2
    )
    
    
    
    
    
    
    797Net Income (Loss) and ComprehensiveIncome (Loss)
    
    $
    (1,533
    )
    
    $
    (102
    )
    
    $
    (5,081
    )
    
    $
    1,940
    
    
    $
    (6,785
    )
    
    $
    (8,652
    )
    
    $
    (20,213
    )Capital Investments
    
    $
    3,999
    
    
    $
    
    
    
    $
    5,566
    
    
    $
    3,797
    
    
    $
    3,510
    
    
    $
    
    
    
    $
    16,872Identifiable Assets:As at September 30, 2008
    
    $
    78,548
    
    
    $
    168
    
    
    $
    71,832
    
    
    $
    39,252
    
    
    $
    120,171
    
    
    $
    53,033
    
    
    $
    363,004As at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    73,298
    
    
    $
    40,726
    
    
    $
    117,529
    
    
    $
    5,363
    
    
    $
    236,916
 Three-Month Period Ended September 30, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    7,994
    
    
    $
    2,870
    
    
    $
    
    
    
    $
    
    
    
    $
    10,864Loss on derivative instruments
    
    
    (720
    )
    
    
    (1,433
    )
    
    
    
    
    
    
    
    
    
    
    (2,153
    )Interest income
    
    
    12
    
    
    
    32
    
    
    
    
    
    
    
    68
    
    
    
    1127,286
    
    
    
    1,469
    
    
    
    
    
    
    
    68
    
    
    
    8,823ExpensesOperating costs
    
    
    3,220
    
    
    
    1,046
    
    
    
    
    
    
    
    
    
    
    
    4,266General and administrative
    
    
    416
    
    
    
    381
    
    
    
    
    
    
    
    1,928
    
    
    
    2,725Business and technology development
    
    
    
    
    
    
    
    
    
    
    2,831
    
    
    
    
    
    
    
    2,831Depletion and depreciation
    
    
    4,537
    
    
    
    1,306
    
    
    
    199
    
    
    
    2
    
    
    
    6,044Interest expense and financing costs
    
    
    
    
    
    
    110
    
    
    
    7
    
    
    
    72
    
    
    
    1898,173
    
    
    
    2,843
    
    
    
    3,037
    
    
    
    2,002
    
    
    
    16,055Net Loss and Comprehensive Loss
    
    $
    (887
    )
    
    $
    (1,374
    )
    
    $
    (3,037
    )
    
    $
    (1,934
    )
    
    $
    (7,232
    )Capital Investments
    
    $
    7,735
    
    
    $
    645
    
    
    $
    720
    
    
    $
    
    
    
    $
    9,100
 15




---



##### 



Nine-Month Period Ended September 30, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    21,869
    
    
    $
    8,380
    
    
    $
    
    
    
    $
    
    
    
    $
    30,249Loss on derivative instruments
    
    
    (720
    )
    
    
    (2,208
    )
    
    
    
    
    
    
    
    
    
    
    (2,928
    )Interest income
    
    
    31
    
    
    
    93
    
    
    
    
    
    
    
    224
    
    
    
    34821,180
    
    
    
    6,265
    
    
    
    
    
    
    
    224
    
    
    
    27,669ExpensesOperating costs
    
    
    8,991
    
    
    
    3,183
    
    
    
    
    
    
    
    
    
    
    
    12,174General and administrative
    
    
    1,446
    
    
    
    1,564
    
    
    
    
    
    
    
    5,971
    
    
    
    8,981Business and technology development
    
    
    
    
    
    
    
    
    
    
    7,341
    
    
    
    
    
    
    
    7,341Depletion and depreciation
    
    
    13,591
    
    
    
    4,402
    
    
    
    963
    
    
    
    4
    
    
    
    18,960Interest expense and financing costs
    
    
    5
    
    
    
    295
    
    
    
    20
    
    
    
    251
    
    
    
    57124,033
    
    
    
    9,444
    
    
    
    8,324
    
    
    
    6,226
    
    
    
    48,027Net Loss and Comprehensive Loss
    
    $
    (2,853
    )
    
    $
    (3,179
    )
    
    $
    (8,324
    )
    
    $
    (6,002
    )
    
    $
    (20,358
    )Capital Investments
    
    $
    18,053
    
    
    $
    2,438
    
    
    $
    2,066
    
    
    $
    
    
    
    $
    22,557
 10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  As at September 30, 2008FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    61,649
    
    
    $
    
    
    
    $
    61,649Accounts receivable
    
    
    13,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,811Financial Liabilities:Accounts payable and
accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,074
    )
    
    
    (13,074
    )Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (358
    )
    
    
    (358
    )Derivative instruments
    
    
    
    
    
    
    
    
    
    
    (9,310
    )
    
    
    
    
    
    
    (9,310
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,751
    )
    
    
    (63,751
    )$
    13,811
    
    
    $
    
    
    
    $
    52,339
    
    
    $
    (77,183
    )
    
    $
    (11,033
    )
 As at December 31, 2007FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    11,356
    
    
    $
    
    
    
    $
    11,356Accounts receivable
    
    
    9,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,376Advance
    
    
    825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825Financial Liabilities:Accounts payable and
accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,538
    )
    
    
    (9,538
    )Derivative instruments
    
    
    
    
    
    
    
    
    
    
    (9,432
    )
    
    
    
    
    
    
    (9,432
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,541
    )
    
    
    (16,541
    )$
    10,201
    
    
    $
    
    
    
    $
    1,924
    
    
    $
    (26,079
    )
    
    $
    (13,954
    )
 16




---



##### 



Financial Risk Factors
  Market Risk
  Commodity Price Risk
    Three Month Periods Ended September 30,2008
    
    
    2007Realized losses on derivative transactions
    
    $
    (3,735
    )
    
    $
    (423
    )Unrealized gains (losses) on derivative transactions
    
    
    18,553
    
    
    
    (1,730
    )$
    14,818
    
    
    $
    (2,153
    )
 Nine Month Periods Ended September 30,2008
    
    
    2007Realized losses on derivative transactions
    
    $
    (10,037
    )
    
    $
    (246
    )Unrealized gains (losses) on derivative transactions
    
    
    122
    
    
    
    (2,682
    )$
    (9,915
    )
    
    $
    (2,928
    )
   Foreign Currency Exchange Rate Risk
  17




---



##### 



Interest Rate Risk
  Credit Risk
 TM
 September 30,
    
    
    December 31,2008
    
    
    2007Accounts Receivable:Neither impaired nor past due
    
    $
    12,465
    
    
    $
    8,259Impaired (net of valuation allowance)
    
    
    
    
    
    
    Not impaired and past due in the following periods:within 30 days
    
    
    566
    
    
    
    34731 to 60 days
    
    
    39
    
    
    
    61 to 90 days
    
    
    11
    
    
    
    4over 90 days
    
    
    730
    
    
    
    76613,811
    
    
    
    9,376AdvanceNot impaired and past due over 90 days
    
    
    
    
    
    
    825$
    13,811
    
    
    $
    10,201
  18




---



##### 



Liquidity Risk
   As at September 30, 2008
    
    As at December 31, 2007Contractual Maturity
    
    Contractual Maturity(Nominal Cash Flows)
    
    (Nominal Cash Flows)Less than
    
    1 to 2
    
    2 to 5
    
    Over 5
    
    Less than
    
    1 to 2
    
    2 to 5
    
    Over 51 year
    
    years
    
    years
    
    years
    
    1 year
    
    years
    
    years
    
    yearsDerivative
financial liabilities:Costless Collars  oil price commodity
    
    
    $6,421
    
    
    
    $2,888
    
    
    
    $
    
    
    
    $
    
    
    
    $7,156
    
    
    
    $2,276
    
    
    
    $
    
    
    
    $Non
derivative financial liabilities:Trade accounts payable
    
    
    $6,359
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $6,897
    
    
    
    $
    
    
    
    $
    
    
    
    $Accruals
    
    
    $6,714
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $2,641
    
    
    
    $
    
    
    
    $
    
    
    
    $Long term debt and interest
    
    
    $13,723
    
    
    
    $6,281
    
    
    
    $46,321
    
    
    
    $
    
    
    
    $8,240
    
    
    
    $1,541
    
    
    
    $10,277
    
    
    
    $
 11. CAPITAL MANAGEMENT
     19




---



##### 



12. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Supplemental Cash Flow InformationCash paid during the period forIncome taxes
    
    $
    
    
    
    $
    1
    
    
    $
    6
    
    
    $
    6Interest
    
    $
    168
    
    
    $
    22
    
    
    $
    773
    
    
    $
    108Investing and Financing activities, non-cashDebt issued for the acquisition of oil and gas assets
    
    $
    52,052
    
    
    $
    
    
    
    $
    52,052
    
    
    $
    Conversion of debt to sharesExtinguishment of debt
    
    $
    4,737
    
    
    $
    
    
    
    $
    4,737
    
    
    $
    Extinguishment of interest
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    $
    4,862
    
    
    $
    
    
    
    $
    4,862
    
    
    $
    Shares issued for bonuses
    
    $
    490
    
    
    $
    413
    
    
    $
    490
    
    
    $
    692Changes in non-cash working capital itemsOperating ActivitiesAccounts receivable
    
    $
    (1,366
    )
    
    $
    (921
    )
    
    $
    (3,915
    )
    
    $
    (453
    )Prepaid and other current assets
    
    
    (15
    )
    
    
    155
    
    
    
    116
    
    
    
    407Accounts payable and accrued liabilities
    
    
    (512
    )
    
    
    1,081
    
    
    
    2,814
    
    
    
    234Income tax payable
    
    
    358
    
    
    
    
    
    
    
    358
    
    
    
    (1,535
    )
    
    
    315
    
    
    
    (627
    )
    
    
    188Investing ActivitiesAccounts receivable
    
    
    (552
    )
    
    
    (5
    )
    
    
    (520
    )
    
    
    (139
    )Prepaid and other current assets
    
    
    (9
    )
    
    
    19
    
    
    
    1
    
    
    
    79Accounts payable and accrued liabilities
    
    
    3,430
    
    
    
    2,175
    
    
    
    856
    
    
    
    7552,869
    
    
    
    2,189
    
    
    
    337
    
    
    
    695Financing ActivitiesAccounts payable and accrued liabilities
    
    
    (711
    )
    
    
    
    
    
    
    (9
    )
    
    
    $
    623
    
    
    $
    2,504
    
    
    $
    (299
    )
    
    $
    883
  September 30,
    
    
    December 31,2008
    
    
    2007Bank balances in checking accounts
    
    $
    10,444
    
    
    $
    11,356Time deposits with maturities of less than 90 days
    
    
    51,205
    
    
    
    $
    61,649
    
    
    $
    11,356
 13. INCOME TAXES
  20




---



##### 



14. ACQUISITION
 Talisman
 Contingent Payment
  Back-in Right
 (a)
    
    100% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised on or before July 11, 2009;(b)
    
    150% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2009 but on or before
July 11, 2010; or(c)
    
    200% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2010 but on or before
July 11, 2011.
  15. SUBSEQUENT EVENT
 IE Ecuador Petroecuador Petroproduccion TM IE Latin America
  21




---



##### 



16. ADDITIONAL DISCLOSURE REQUIRED UNDER U.S. GAAP
  Condensed Consolidated Balance Sheets
 Shareholders Equity and Oil and Gas Properties and Development Costs
 As at September 30, 2008Assets
    
    
    Liabilities
    
    
    Shareholders EquityOil and GasProperties andDevelopment
    
    
    Derivative
    
    
    Long Term
    
    
    Share Capital
    
    
    Contributed
    
    
    Accumulated
    
    
    ConvertibleCosts
    
    
    Instruments
    
    
    Debt
    
    
    and Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    Note
    
    
    TotalCanadian GAAP
    
    $
    179,641
    
    
    $
    9,310
    
    
    $
    45,640
    
    
    $
    432,723
    
    
    $
    16,332
    
    
    $
    (180,203
    )
    
    $
    2,086
    
    
    $
    270,938Adjustments:(i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    
    
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    
    (3,250
    )
    
    
    3,748
    
    
    
    
    
    
    
    (iii)
    
    
    
    
    
    
    6,516
    
    
    
    
    
    
    
    (5,575
    )
    
    
    (2,977
    )
    
    
    2,036
    
    
    
    
    
    
    
    (6,516
    )(iv)
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,358(v)
    
    
    (25,990
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,990
    )
    
    
    

    
    
    
    (25,990
    )(vi)
    
    
    12,773
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,773
    
    
    
    
    
    
    
    12,773(vii)
    
    
    (5,806
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,806
    )
    
    
    
    
    
    
    (5,806
    )(viii)
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,086
    )
    
    
    (2,086
    )U.S. GAAP
    
    $
    161,976
    
    
    $
    15,826
    
    
    $
    47,726
    
    
    $
    502,463
    
    
    $
    10,105
    
    
    $
    (267,897
    )
    
    $
    
    
    
    $
    244,671
 As at December 31, 2007Assets
    
    
    Liabilities
    
    
    Shareholders EquityOil and GasProperties andDevelopment
    
    
    Derivative
    
    
    Share Capital
    
    
    Contributed
    
    
    AccumulatedCosts
    
    
    Instruments
    
    
    and Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    TotalCanadian GAAP
    
    $
    111,853
    
    
    $
    9,432
    
    
    $
    347,340
    
    
    $
    9,937
    
    
    $
    (159,990
    )
    
    $
    197,287Adjustments:(i)
    
    
    
    
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    (3,352
    )
    
    
    3,748
    
    
    
    (iii)
    
    
    
    
    
    
    5,786
    
    
    
    (7,988
    )
    
    
    (564
    )
    
    
    2,766
    
    
    
    (5,786
    )(iv)
    
    
    1,358
    
    
    
    
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358(v)
    
    
    (25,990
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,990
    )
    
    
    (25,990
    )(vi)
    
    
    9,334
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,334
    
    
    
    9,334(vii)
    
    
    (5,658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,658
    )
    
    
    (5,658
    )U.S. GAAP
    
    $
    90,897
    
    
    $
    15,218
    
    
    $
    414,769
    
    
    $
    6,021
    
    
    $
    (250,245
    )
    
    $
    170,545
 Shareholders Equity
  APB
 22




---



##### 



FASB
 SFAS SFAS No. 123(R)
 SFAS No. 133
 Oil and Gas Properties and Development Costs
     23




---



##### 



Deferred Financing Costs
  Condensed Consolidated Statements of Operations
  Three Month Periods Ended September 30,2008
    
    
    2007Net Income
    
    
    Net Income
    
    
    
    
    
    
    Net Loss
    
    
    Net LossNet
    
    
    Per Share
    
    
    Per Share
    
    
    Net
    
    
    Per Share
    
    
    Per ShareIncome
    
    
    Basic
    
    
    Diluted
    
    
    Loss
    
    
    Basic
    
    
    DilutedCanadian GAAP
    
    $
    10,062
    
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    (7,232
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )Fair value adjustment of derivative instruments (iii)
    
    
    14,641
    
    
    
    0.06
    
    
    
    0.05
    
    
    
    3,571
    
    
    
    0.01
    
    
    
    0.01Depletion adjustments due to differences in
provision for impairment (ix)
    
    
    1,132
    
    
    
    
    
    
    
    
    
    
    
    1,172
    
    
    
    0.01
    
    
    
    0.01Development costs expensed, net of write downs (x)
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    U.S. GAAP
    
    $
    25,824
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    (2,551
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted Average Number of Shares under U.S. GAAP (in
thousands)
    
    
    
    
    
    
    265,372
    
    
    
    279,641
    
    
    
    
    
    
    
    242,747
    
    
    
    242,747
 Nine-Month Periods Ended September 30,2008
    
    
    2007Net Loss
    
    
    Net Loss
    
    
    
    
    
    
    Net Loss
    
    
    Net LossNet
    
    
    Per Share
    
    
    Per Share
    
    
    Net
    
    
    Per Share
    
    
    Per ShareLoss
    
    
    Basic
    
    
    Diluted
    
    
    Loss
    
    
    Basic
    
    
    DilutedCanadian GAAP
    
    $
    (20,213
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )
    
    $
    (20,358
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )Fair value adjustment of derivative instruments (iii)
    
    
    (730
    )
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    
    
    
    
    Depletion adjustments due to differences in
provision for impairment (ix)
    
    
    3,439
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    3,617
    
    
    
    0.01
    
    
    
    0.01Development costs expensed, net of write downs (x)
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    
    
    
    
    Recovery of HTLTM investments (x)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,279
    
    
    
    0.02
    
    
    
    0.02U.S. GAAP
    
    $
    (17,652
    )
    
    $
    (0.07
    )
    
    $
    (0.07
    )
    
    $
    (11,167
    )
    
    $
    (0.05
    )
    
    $
    (0.05
    )Weighted Average Number of Shares under U.S. GAAP (in
thousands)
    
    
    
    
    
    
    251,907
    
    
    
    251,907
    
    
    
    
    
    
    
    241,812
    
    
    
    241,812
 24




---



##### 



INPEX TM
 Condensed Consolidated Statements of Cash Flow
  Impact of New and Pending U.S. GAAP Accounting Standards
 SFAS No. 162 GAAP
hierarchy
 SFAS No. 161
 SFAS No.
141(R) SFAS
No. 160
 25




---



##### 



SFAS No. 157
  Level 1:
 Level 2:
 Level 3:
   As at September 30, 2008Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative instruments liabilities
    
    $
    6,516
    
    
    $
    9,310
    
    
    $
    
    
    
    $
    15,826
  26




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
 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
   Boe
    
    = barrel of oil equivalentBbl
    
    = barrelMBbl
    
    = thousand barrelsMMBbl
    
    = million barrelsMboe
    
    = thousands of barrels of oil equivalentBopd
    
    = barrels of oil per dayBbls/d
    
    = barrels per dayBoe/d
    
    = barrels of oil equivalent per dayMboe/d
    
    = thousands of barrels of oil equivalent per dayMBbls/d
    
    = thousand barrels per dayMMBls/d
    
    = million barrels per dayMMBtu
    
    = million British thermal unitsMcf
    
    = thousand cubic feetMMcf
    
    = million cubic feet
 27




---



##### 



Mcf/d
    
    = thousand cubic feet per dayMMcf/d
    
    = million cubic feet per day
  www.ivanhoeenergy.com www.sec.gov www.sedar.com
 Ivanhoe Energys Business
 RTP TM Process HTL TM Technology HTL TM
 E&P GTL Technology GTL
   Corporate Strategy
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
    28




---



##### 



Ivanhoe Energy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
  1.
    
    Build a portfolio of major HTLTMprojects.Continue to deploy the personnel
and the financial resources in support of our goal to capture additional opportunities for
development projects utilizing the Companys HTLTM Technology.2.
    
    Advance the technology.Additional development work will continue to advance the
technology through the first commercial application and beyond.3.
    
    Enhance the Companys financial position in anticipation of major projects.
Implementation of large projects requires significant capital outlays. The Company is
refining its financing plans and establishing the relationships required for the
development activities of the future.
 29




---



##### 



4.
    
    Build internal capabilities.During 2008, significant progress has been made in
building execution teams in preparation for the Companys first HTLTM projects.
The upstream team consists of a number of experienced heavy oil engineers and geologists
complemented by a core team of petroleum engineers and geologists. Also, the Companys
Houston-based HTLTM technology team has been strengthened. The Company expects
to continue filling key positions in its execution mode.5.
    
    Build the relationships needed for the future.Commercialization of the Companys
technologies demands close alignment with partners, suppliers, host governments and
financiers.
 Talisman Lease Acquisition
 Talisman)
    Ecuador Block 20 Contract
  
   30




---



##### 



Executive Overview of 2008 Results
  Three-Month Periods Ended
    
    Nine-Month Periods EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Oil and gas revenue
    
    $
    20,437
    
    
    $
    10,864
    
    
    $
    53,459
    
    
    $
    30,249Net income (loss)
    
    $
    10,062
    
    
    $
    (7,232
    )
    
    $
    (20,213
    )
    
    $
    (20,358
    )Net income (loss) per share
    
    $
    0.04
    
    
    $
    (0.03
    )
    
    $
    (0.08
    )
    
    $
    (0.08
    )Average production (Boe/d)
    
    
    1,895
    
    
    
    1,734
    
    
    
    1,898
    
    
    
    1,863Net operating revenue per Boe
    
    $
    70.12
    
    
    $
    41.36
    
    
    $
    63.93
    
    
    $
    35.53Cash flow from operating activities
    
    $
    1,673
    
    
    $
    1,766
    
    
    $
    7,399
    
    
    $
    4,566Capital investments
    
    $
    8,956
    
    
    $
    9,100
    
    
    $
    16,872
    
    
    $
    22,557
 Financial Results  Change in Net Loss
  Three-Month Periods Ended September 30,
    
    
    Nine-Month Periods Ended September 30,Favorable
    
    
    
    
    
    
    
    
    
    
    
    
    Favorable(Unfavorable)
    
    
    
    
    
    
    
    
    
    
    
    
    (Unfavorable)2008
    
    
    
    Variances
    
    
    
    2007
    
    
    2008
    
    
    
    Variances
    
    
    2007Summary of Net Income (Loss)
by Significant Components:Oil and Gas Revenues:
    
    $
    20,437
    
    
    
    
    
    
    
    
    $
    10,864
    
    
    $
    53,459
    
    
    
    
    
    
    
    $
    30,249Production volumes
    
    
    
    
    
    
    $
    996
    
    
    
    
    
    
    
    
    
    
    
    
    $
    621Oil and gas prices
    
    
    
    
    
    
    
    8,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,589Realized loss on
derivative instruments
    
    
    (3,735
    )
    
    
    
    (3,312)
    
    
    
    
    (423
    )
    
    
    (10,037
    )
    
    
    
    (9,791)
    
    
    
    (246
    )Operating costs
    
    
    (8,211
    )
    
    
    
    (3,945)
    
    
    
    
    (4,266
    )
    
    
    (20,217
    )
    
    
    
    (8,043)
    
    
    
    (12,174
    )General and administrative, less
stock based compensation
    
    
    (4,352
    )
    
    
    
    (2,119)
    
    
    
    
    (2,233
    )
    
    
    (11,228
    )
    
    
    
    (4,247)
    
    
    
    (6,981
    )Business and technology development,
less stock based compensation
    
    
    (1,758
    )
    
    
    
    807
    
    
    
    
    (2,565
    )
    
    
    (4,385
    )
    
    
    
    2,343
    
    
    
    (6,728
    )Net interest
    
    
    91
    
    
    
    
    105
    
    
    
    
    (14
    )
    
    
    (514
    )
    
    
    
    (472)
    
    
    
    (42
    )Current income tax provision
    
    
    (358
    )
    
    
    
    (358)
    
    
    
    
    
    
    
    
    (364
    )
    
    
    
    (364)
    
    
    
    Unrealized gain (loss)
on derivative instruments
    
    
    18,553
    
    
    
    
    20,283
    
    
    
    
    (1,730
    )
    
    
    122
    
    
    
    
    2,804
    
    
    
    (2,682
    )Depletion and depreciation
    
    
    (8,183
    )
    
    
    
    (2,139)
    
    
    
    
    (6,044
    )
    
    
    (24,678
    )
    
    
    
    (5,718)
    
    
    
    (18,960
    )Stock based compensation
    
    
    (1,114
    )
    
    
    
    (356)
    
    
    
    
    (758
    )
    
    
    (3,025
    )
    
    
    
    (412)
    
    
    
    (2,613
    )Future income tax
(provision) recovery
    
    
    (1,125
    )
    
    
    
    (1,125)
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    1,161
    
    
    
    Other
    
    
    (183
    )
    
    
    
    (120)
    
    
    
    
    (63
    )
    
    
    (507
    )
    
    
    
    (326)
    
    
    
    (181
    )Net Income (Loss)
    
    $
    10,062
    
    
    
    $
    17,294
    
    
    
    $
    (7,232
    )
    
    $
    (20,213
    )
    
    
    $
    145
    
    
    $
    (20,358
    )
   31




---



##### 



Revenues and Operating Costs
  Three-Month Periods Ended September 30,
    
    Nine-Month Periods Ended September 30,Net Boes
    
    Percentage
    
    Net Boes
    
    Percentage2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeChina:Dagang
    
    
    118,110
    
    
    
    111,012
    
    
    
    6
    %
    
    
    349,599
    
    
    
    342,368
    
    
    
    2
    %Daqing
    
    
    4,615
    
    
    
    5,172
    
    
    
    -11
    %
    
    
    14,604
    
    
    
    16,069
    
    
    
    -9
    %122,725
    
    
    
    116,184
    
    
    
    6
    %
    
    
    364,203
    
    
    
    358,437
    
    
    
    2
    %U.S.:South Midway
    
    
    47,722
    
    
    
    38,297
    
    
    
    25
    %
    
    
    143,419
    
    
    
    134,265
    
    
    
    7
    %Spraberry
    
    
    3,261
    
    
    
    4,838
    
    
    
    -33
    %
    
    
    10,984
    
    
    
    14,876
    
    
    
    -26
    %Others
    
    
    638
    
    
    
    239
    
    
    
    167
    %
    
    
    1,406
    
    
    
    1,092
    
    
    
    29
    %51,621
    
    
    
    43,374
    
    
    
    19
    %
    
    
    155,809
    
    
    
    150,233
    
    
    
    4
    %174,346
    
    
    
    159,558
    
    
    
    9
    %
    
    
    520,012
    
    
    
    508,670
    
    
    
    2
    %
    Three Months Ended
    
    
    Favorable
    
    
    Three Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    (1,808
    )
    
    $
    (1,808)
    
    
    $
    U.S.
    
    
    (1,927
    )
    
    
    (1,504)
    
    
    
    (423
    )$
    (3,735
    )
    
    $
    (3,312)
    
    
    $
    (423
    )
 32




---



##### 



Nine Months Ended
    
    
    Favorable
    
    
    Nine Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    (4,663
    )
    
    $
    (4,663)
    
    
    $
    U.S.
    
    
    (5,374
    )
    
    
    (5,128)
    
    
    
    (246
    )$
    (10,037
    )
    
    $
    (9,791)
    
    
    $
    (246
    )
 Windfall Levy
 China
    
    Production Volumes
  
    
    Operating Costs
  U.S.
    
    Production Volumes
  
    
    Operating Costs
  33




---



##### 



Three-Month Periods Ended September 30,2008
    
    
    2007China
    
    
    U.S.
    
    
    Total
    
    
    China
    
    
    U.S.
    
    
    TotalNet Production:Boe
    
    
    122,725
    
    
    
    51,621
    
    
    
    174,346
    
    
    
    116,184
    
    
    
    43,374
    
    
    
    159,558Boe/day for the period
    
    
    1,334
    
    
    
    561
    
    
    
    1,895
    
    
    
    1,263
    
    
    
    471
    
    
    
    1,734Per Boe
    
    
    
    
    
    
    
    
    
    Per BoeOil and gas revenue
    
    $
    121.50
    
    
    $
    107.04
    
    
    $
    117.22
    
    
    $
    68.81
    
    
    $
    66.16
    
    
    $
    68.09Field operating costs
    
    
    22.58
    
    
    
    24.07
    
    
    
    23.02
    
    
    
    17.20
    
    
    
    18.06
    
    
    
    17.43Windfall Levy (China) and
Production tax (U.S.)
    
    
    30.47
    
    
    
    1.63
    
    
    
    21.93
    
    
    
    9.20
    
    
    
    1.46
    
    
    
    7.09Engineering and support costs
    
    
    0.95
    
    
    
    5.00
    
    
    
    2.15
    
    
    
    1.32
    
    
    
    4.59
    
    
    
    2.2154.00
    
    
    
    30.70
    
    
    
    47.10
    
    
    
    27.72
    
    
    
    24.11
    
    
    
    26.73Net operating revenue
    
    
    67.50
    
    
    
    76.34
    
    
    
    70.12
    
    
    
    41.09
    
    
    
    42.05
    
    
    
    41.36Depletion
    
    
    48.01
    
    
    
    31.94
    
    
    
    43.25
    
    
    
    39.02
    
    
    
    29.91
    
    
    
    36.55Net revenue from operations
    
    $
    19.49
    
    
    $
    44.40
    
    
    $
    26.87
    
    
    $
    2.07
    
    
    $
    12.14
    
    
    $
    4.81
 Nine-Month Periods Ended September 30,2008
    
    
    2007China
    
    
    U.S.
    
    
    Total
    
    
    China
    
    
    U.S.
    
    
    TotalNet Production:Boe
    
    
    364,203
    
    
    
    155,809
    
    
    
    520,012
    
    
    
    358,437
    
    
    
    150,233
    
    
    
    508,670Boe/day for the period
    
    
    1,329
    
    
    
    569
    
    
    
    1,898
    
    
    
    1,313
    
    
    
    550
    
    
    
    1,863Per Boe
    
    
    
    
    
    
    
    
    
    Per BoeOil and gas revenue
    
    $
    103.09
    
    
    $
    102.13
    
    
    $
    102.81
    
    
    $
    61.01
    
    
    $
    55.78
    
    
    $
    59.47Field operating costs
    
    
    20.48
    
    
    
    19.55
    
    
    
    20.21
    
    
    
    17.65
    
    
    
    14.86
    
    
    
    16.83Windfall Levy (China) and
Production tax (U.S.)
    
    
    22.94
    
    
    
    1.42
    
    
    
    16.49
    
    
    
    6.18
    
    
    
    1.27
    
    
    
    4.73Engineering and support costs
    
    
    1.17
    
    
    
    4.56
    
    
    
    2.18
    
    
    
    1.26
    
    
    
    5.06
    
    
    
    2.3844.59
    
    
    
    25.53
    
    
    
    38.88
    
    
    
    25.09
    
    
    
    21.19
    
    
    
    23.94Net operating revenue
    
    
    58.50
    
    
    
    76.60
    
    
    
    63.93
    
    
    
    35.92
    
    
    
    34.59
    
    
    
    35.53Depletion
    
    
    49.12
    
    
    
    30.72
    
    
    
    43.61
    
    
    
    37.89
    
    
    
    29.08
    
    
    
    35.29Net revenue (loss) from operations
    
    $
    9.38
    
    
    $
    45.88
    
    
    $
    20.32
    
    
    $
    (1.97
    )
    
    $
    5.51
    
    
    $
    0.24
 34




---



##### 



General and Administrative
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2008 vs.
    
    
    2008 vs.2007
    
    
    2007Favorable (unfavorable) variances:Oil and Gas Activities:Canada
    
    $
    (655
    )
    
    $
    (1,404
    )Ecuador
    
    
    (102
    )
    
    
    (102
    )China
    
    
    (223
    )
    
    
    (456
    )U.S.
    
    
    (475
    )
    
    
    (170
    )Corporate
    
    
    (1,075
    )
    
    
    (2,636
    )(2,530
    )
    
    
    (4,768
    )Less: stock based compensation
    
    
    411
    
    
    
    521$
    (2,119
    )
    
    $
    (4,247
    )
 Canada
  China
  U.S.
  Corporate
  35




---



##### 



Business and Technology Development
  Net Interest
  Unrealized Loss on Derivative Instruments
   Three Months Ended
    
    
    Favorable
    
    
    Three Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    12,706
    
    
    $
    13,426
    
    
    $
    (720
    )U.S.
    
    
    5,847
    
    
    
    6,857
    
    
    
    (1,010
    )$
    18,553
    
    
    $
    20,283
    
    
    $
    (1,730
    )
 Nine Months Ended
    
    
    Favorable
    
    
    Nine Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    (2,130
    )
    
    $
    (1,410
    )
    
    $
    (720
    )U.S.
    
    
    2,252
    
    
    
    4,214
    
    
    
    (1,962
    )$
    122
    
    
    $
    2,804
    
    
    $
    (2,682
    )
 Depletion and Depreciation
  China
  36




---



##### 



Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
  Operating Activities
  Investing Activities
   Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2008
    
    
    2007
    
    
    Decrease
    
    
    2008
    
    
    2007
    
    
    DecreaseOil and Gas Activities:Canada
    
    $
    3,999
    
    
    $
    
    
    
    $
    (3,999
    )
    
    $
    3,999
    
    
    $
    
    
    
    $
    (3,999
    )China
    
    
    1,795
    
    
    
    7,735
    
    
    
    5,940
    
    
    
    5,566
    
    
    
    18,053
    
    
    
    12,487U.S.
    
    
    596
    
    
    
    645
    
    
    
    49
    
    
    
    3,797
    
    
    
    2,438
    
    
    
    (1,359
    )Business and
Technology Development
    
    
    2,566
    
    
    
    720
    
    
    
    (1,846
    )
    
    
    3,510
    
    
    
    2,066
    
    
    
    (1,444
    )$
    8,956
    
    
    $
    9,100
    
    
    $
    144
    
    
    $
    16,872
    
    
    $
    22,557
    
    
    $
    5,685
 
    
    Canada
  
    
    China
  37




---



##### 




    
    U.S.
  
    
    Business and Technology Development
 FTF
 Financing Activities
 Special Warrants Offering
 Outlook for balance of 2008
     38




---



##### 



Contractual Obligations
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    After 2011Consolidated Balance Sheets:Note payable  current portion
    
    $
    18,111
    
    
    $
    12,920
    
    
    $
    5,191
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt
    
    
    45,640
    
    
    
    
    
    
    
    
    
    
    
    9,538
    
    
    
    36,102
    
    
    
    Asset retirement obligation
    
    
    3,673
    
    
    
    
    
    
    
    15
    
    
    
    1,905
    
    
    
    
    
    
    
    1,753Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    Other Commitments:Interest payable
    
    
    2,573
    
    
    
    803
    
    
    
    1,089
    
    
    
    681
    
    
    
    
    
    
    
    Lease commitments
    
    
    2,610
    
    
    
    259
    
    
    
    893
    
    
    
    773
    
    
    
    549
    
    
    
    136Zitong exploration commitment
    
    
    22,500
    
    
    
    2,500
    
    
    
    9,000
    
    
    
    11,000
    
    
    
    
    
    
    
    Total
    
    $
    97,007
    
    
    $
    16,482
    
    
    $
    18,088
    
    
    $
    23,897
    
    
    $
    36,651
    
    
    $
    1,889
 Off Balance Sheet Arrangements
  Outstanding Share Data
  Quarterly Financial Data In Accordance With Canadian and U.S. GAAP (Unaudited)
 QUARTER ENDED2008
    
    2007
    
    20063rd Qtr
    
    2nd Qtr
    
    1st Qtr
    
    4th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st Qtr
    
    4th QtrTotal revenue
    
    $
    35,626
    
    
    $
    (2,772
    )
    
    $
    11,169
    
    
    $
    5,848
    
    
    $
    8,823
    
    
    $
    9,589
    
    
    $
    9,257
    
    
    $
    11,137Net income (loss):Canadian GAAP
    
    $
    10,062
    
    
    $
    (21,731
    )
    
    $
    (8,544
    )
    
    $
    (18,849
    )
    
    $
    (7,232
    )
    
    $
    (6,579
    )
    
    $
    (6,547
    )
    
    $
    (11,323
    )U.S. GAAP
    
    $
    25,824
    
    
    $
    (32,981
    )
    
    $
    (10,495
    )
    
    $
    (16,094
    )
    
    $
    (2,551
    )
    
    $
    (1,211
    )
    
    $
    (7,536
    )
    
    $
    (18,255
    )Net income (loss) per share:Canadian GAAP
    
    $
    0.04
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.05
    )U.S. GAAP
    
    $
    0.10
    
    
    $
    (0.13
    )
    
    $
    (0.04
    )
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.03
    )
    
    $
    (0.08
    )
 TM
 39




---



##### 



Transition to International Financial Reporting Standards (IFRS)
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Financial Risk Factors
  Market Risk
  Commodity Price Risk
   Three Months Ended
    
    
    Favorable
    
    
    Three Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    (1,808
    )
    
    $
    (1,808)
    
    
    $
    U.S.
    
    
    (1,927
    )
    
    
    (1,504)
    
    
    
    (423
    )$
    (3,735
    )
    
    $
    (3,312)
    
    
    $
    (423
    )
 Nine Months Ended
    
    
    Favorable
    
    
    Nine Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2008
    
    
    Variances
    
    
    2007China
    
    $
    (4,663
    )
    
    $
    (4,663)
    
    
    $
    U.S.
    
    
    (5,374
    )
    
    
    (5,128)
    
    
    
    (246
    )$
    (10,037
    )
    
    $
    (9,791)
    
    
    $
    (246
    )
  40




---



##### 



Foreign Currency Exchange Rate Risk
  Interest Rate Risk
  Credit Risk
 TM
 41




---



##### 



Liquidity Risk
  
 Item 4. Controls and Procedures
    42




---



##### 



Part II  Other Information
 
 Item 1. Legal Proceedings:
 
 Item 1A. Risk Factors:
  Capital Requirements and Additional Financing .
 Reserves . Ecuador Block 20
 Stage of Development .
 Nature of Oil Sands and Heavy Oil Exploration and Development and Operational Risks .
 SAGD Recovery Process and Technology Risks .
 43




---



##### 



Regulations, Permits, Leases and Licenses .
    Environmental Regulation .
 Human Resources .
 Future Payments and Security granted to Talisman under the Talisman Lease Acquisition .
 44




---



##### 



Royalty Regime.
 , WTI
    Title Risks and Aboriginal Claims .
  Emissions Management GHGs
   45




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds:
 Securities Act Special Warrants Offering
 Convertible Note
 
 Item 3. Defaults Upon Senior Securities:
 
 Item 4. Submission of Matters To a Vote of Security Holders:
 
 Item 5. Other Information:
 
 Item 6. Exhibits
 EXHIBITNUMBER
    
    DESCRIPTION10.1
    
    Cdn.$12.5 million Promissory Note in favour of Talisman Energy Canada due December 31, 200810.2
    
    Cdn.$40 million Promissory Note in favour of Talisman Energy Canada due July 11, 2011 and
convertible at the option of Talisman Energy Canada into 12,779,552 common shares at Cdn.$3.13
per share10.3
    
    Fixed and Floating Charge Debenture of Ivanhoe Energy Inc. in favour of Talisman Energy
Canada dated July 11, 2008 in the principal sum of Cdn.$67.5 million10.4
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada31.1
    
    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
 46




---



##### 



/s/ W. Gordon Lancaster
  47




---



##### 



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    Cdn.$12.5 million Promissory Note in favour of Talisman Energy Canada due December 31, 200810.2
    
    Cdn.$40 million Promissory Note in favour of Talisman Energy Canada due July 11, 2011
and convertible at the option of Talisman Energy Canada into 12,779,552 common shares at
Cdn.$3.13 per share10.3
    
    Fixed and Floating Charge Debenture of Ivanhoe Energy Inc. in favour of Talisman Energy
Canada dated July 11, 2008 in the principal sum of Cdn.$67.5 million10.4
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada31.1
    
    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
 48