##### 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, 2010
 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(State or other jurisdiction of 
incorporation or organization)
    
    98-0372413(I.R.S. Employer
Identification No.)Suite 654  999 Canada Place Vancouver, British Columbia, Canada(Address of principal executive office)
    
    V6C 3E1(zip code)
 (604) 688-8323  (registrants telephone number, including area code)
 þ Yes o No
 o Yes o No
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o Yes þ No




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##### 



TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Consolidated Balance Sheets as at June 30, 2010 and December 31, 2009
    
    
    3Unaudited Consolidated Statements of Operations, Comprehensive Loss for the Three and Six Months Ended June 30, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2010 and 2009
    
    
    5Notes to the Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 4. Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 6. Exhibits
    
    
    31Exhibit 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 Consolidated Balance Sheets
  June 30,
    
    
    December 31,2010
    
    
    2009AssetsCurrent AssetsCash and cash equivalents
    
    $
    113,817
    
    
    $
    21,512Accounts receivable
    
    
    5,355
    
    
    
    5,021Note receivable
    
    
    256
    
    
    
    225Prepaid and other current assets
    
    
    1,366
    
    
    
    771Restricted cash
    
    
    2,850
    
    
    
    2,850123,644
    
    
    
    30,379Oil and gas properties and development costs, net (Note 2)
    
    
    195,060
    
    
    
    158,392Intangible assets  HTLTM technology (Note 3)
    
    
    92,153
    
    
    
    92,153Long term assets
    
    
    1,682
    
    
    
    839$
    412,539
    
    
    $
    281,763Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    14,342
    
    
    $
    10,779Income tax payable (Note 11)
    
    
    8
    
    
    
    530Asset retirement obligations (Note 5)
    
    
    50
    
    
    
    75314,400
    
    
    
    12,062Long term debt (Note 4)
    
    
    37,255
    
    
    
    36,934Asset retirement obligations (Note 5)
    
    
    353
    
    
    
    195Long term obligation (Note 6)
    
    
    1,900
    
    
    
    1,900Future income tax liability (Note 11)
    
    
    23,104
    
    
    
    22,64377,012
    
    
    
    73,734Commitments and contingencies (Note 6)Going concern and basis of presentation (Note 1)Shareholders EquityShare capital, issued 334,011,588 common sharesDecember 31, 2009 282,558,593 common shares
    
    
    549,281
    
    
    
    422,322Purchase warrants (Note 7)
    
    
    33,423
    
    
    
    19,427Contributed surplus
    
    
    19,291
    
    
    
    20,029Convertible note
    
    
    2,086
    
    
    
    2,086Accumulated deficit
    
    
    (268,554
    )
    
    
    (255,835
    )335,527
    
    
    
    208,029$
    412,539
    
    
    $
    281,763
   3




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Unaudited Consolidated Statements of Operations and Comprehensive Loss
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Note 12)
    
    
    
    
    
    
    (Note 12)RevenueOil revenue
    
    $
    6,047
    
    
    $
    6,009
    
    
    $
    11,377
    
    
    $
    11,742Loss on derivative instruments
    
    
    
    
    
    
    (1,173
    )
    
    
    
    
    
    
    (1,092
    )Interest
    
    
    23
    
    
    
    8
    
    
    
    42
    
    
    
    186,070
    
    
    
    4,844
    
    
    
    11,419
    
    
    
    10,668ExpensesOperating
    
    
    2,327
    
    
    
    2,444
    
    
    
    4,602
    
    
    
    5,145General and administrative (Note 2)
    
    
    5,478
    
    
    
    3,834
    
    
    
    10,455
    
    
    
    9,714Business and technology development
    
    
    2,423
    
    
    
    1,766
    
    
    
    4,934
    
    
    
    3,803Depletion and depreciation
    
    
    2,582
    
    
    
    6,045
    
    
    
    4,665
    
    
    
    12,000Foreign exchange loss (gain)
    
    
    3,086
    
    
    
    2,680
    
    
    
    (1,101
    )
    
    
    1,686Interest and financing
    
    
    4
    
    
    
    158
    
    
    
    8
    
    
    
    33515,900
    
    
    
    16,927
    
    
    
    23,563
    
    
    
    32,683Loss from continuing operations before income taxes
    
    
    (9,830
    )
    
    
    (12,083
    )
    
    
    (12,144
    )
    
    
    (22,015
    )Provision for income taxesCurrent
    
    
    (36
    )
    
    
    639
    
    
    
    (115
    )
    
    
    (1,006
    )Future
    
    
    (286
    )
    
    
    
    
    
    
    (460
    )
    
    
    (322
    )
    
    
    639
    
    
    
    (575
    )
    
    
    (1,006
    )Net loss from continuing operations
    
    $
    (10,152
    )
    
    $
    (11,444
    )
    
    $
    (12,719
    )
    
    $
    (23,021
    )Net income (loss) from discontinued operations (Note 12)
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    (631
    )Net loss and comprehensive loss
    
    
    (10,152
    )
    
    
    (11,378
    )
    
    
    (12,719
    )
    
    
    (23,652
    )Accumulated deficit, beginning of period
    
    
    (258,402
    )
    
    
    (206,457
    )
    
    
    (255,835
    )
    
    
    (194,183
    )Accumulated deficit, end of period
    
    $
    (268,554
    )
    
    $
    (217,835
    )
    
    $
    (268,554
    )
    
    $
    (217,835
    )Net loss per shareNet loss from continuing operations, basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.08
    )Net loss from discontinued operations, basic and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share, basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.08
    )Weighted average number of sharesBasic and diluted (in thousands)
    
    
    333,922
    
    
    
    279,381
    
    
    
    320,651
    
    
    
    279,381
   4




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Unaudited Consolidated Statements of Cash Flows
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating ActivitiesNet loss
    
    $
    (10,152
    )
    
    $
    (11,378
    )
    
    $
    (12,719
    )
    
    $
    (23,652
    )Net (income) loss from discontinued operations
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    631Items not requiring use of cashDepletion and depreciation
    
    
    2,582
    
    
    
    6,045
    
    
    
    4,665
    
    
    
    12,000Stock based compensation
    
    
    1,021
    
    
    
    526
    
    
    
    1,558
    
    
    
    987Unrealized loss on derivative instruments
    
    
    
    
    
    
    1,249
    
    
    
    
    
    
    
    1,704Unrealized foreign exchange (gain) loss
    
    
    3,035
    
    
    
    2,620
    
    
    
    (1,338
    )
    
    
    1,646Future income tax expense
    
    
    286
    
    
    
    
    
    
    
    460
    
    
    
    Other
    
    
    (182
    )
    
    
    72
    
    
    
    10
    
    
    
    164Abandonment costs settled (Note 5)
    
    
    (124
    )
    
    
    
    
    
    
    (182
    )
    
    
    Changes in non-cash working capital items (Note 10)
    
    
    (813
    )
    
    
    (3,985
    )
    
    
    (795
    )
    
    
    (3,277
    )Net cash used in operating activities from continuing operations
    
    
    (4,347
    )
    
    
    (4,917
    )
    
    
    (8,341
    )
    
    
    (9,797
    )Net cash provided by operating activities from discontinued operations
    
    
    
    
    
    
    2,031
    
    
    
    
    
    
    
    2,823Net cash used in operating activities
    
    
    (4,347
    )
    
    
    (2,886
    )
    
    
    (8,341
    )
    
    
    (6,974
    )Investing ActivitiesAdditions to oil and gas properties and development costs
    
    
    (15,226
    )
    
    
    (6,692
    )
    
    
    (40,563
    )
    
    
    (11,900
    )Other
    
    
    (498
    )
    
    
    (153
    )
    
    
    (846
    )
    
    
    (153
    )Changes in non-cash working capital items (Note 10)
    
    
    1,953
    
    
    
    35
    
    
    
    2,833
    
    
    
    (672
    )Net cash used in investing from continuing operations
    
    
    (13,771
    )
    
    
    (6,810
    )
    
    
    (38,576
    )
    
    
    (12,725
    )Net cash used in investing activities from discontinued operations
    
    
    
    
    
    
    (233
    )
    
    
    
    
    
    
    (586
    )Net cash provided by (used in) investing activities
    
    
    (13,771
    )
    
    
    (7,043
    )
    
    
    (38,576
    )
    
    
    (13,311
    )Financing ActivitiesShares issued on private placements, net of share issue costs
    
    
    (556
    )
    
    
    
    
    
    
    135,765
    
    
    
    Proceeds from exercise of options and warrants
    
    
    458
    
    
    
    
    
    
    
    2,094
    
    
    
    Payments of debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (416
    )Other
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    (100
    )Changes in non-cash working capital items (Note 10)
    
    
    39
    
    
    
    (3
    )
    
    
    39
    
    
    
    (26
    )Net cash (used in) provided by financing activities
from continuing operations
    
    
    (59
    )
    
    
    (28
    )
    
    
    137,898
    
    
    
    (542
    )Net cash provided by financing activities from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (59
    )
    
    
    (28
    )
    
    
    137,898
    
    
    
    (542
    )Foreign exchange gain (loss) on cash and cash
equivalents held in a foreign currency
    
    
    (4,391
    )
    
    
    (4
    )
    
    
    1,324
    
    
    
    (35
    )Increase (decrease) in cash and cash equivalents, for the period
    
    
    (22,568
    )
    
    
    (9,961
    )
    
    
    92,305
    
    
    
    (20,862
    )Cash and cash equivalents, beginning of period
    
    
    136,385
    
    
    
    28,364
    
    
    
    21,512
    
    
    
    39,265Cash and cash equivalents, end of period
    
    $
    113,817
    
    
    $
    18,403
    
    
    $
    113,817
    
    
    $
    18,403Cash and cash equivalents, end of period  continuing operations
    
    $
    113,817
    
    
    $
    16,135
    
    
    $
    113,817
    
    
    $
    16,135Cash and cash equivalents, end of period  discontinued operations
    
    $
    
    
    
    $
    2,268
    
    
    $
    
    
    
    $
    2,268
   5




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Notes to the Unaudited Consolidated Financial Statements
 June 30, 2010
  1. GOING CONCERN AND BASIS OF PRESENTATION
    6




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##### Table of Contents



2. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at June 30, 2010Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas PropertiesProved
    
    $
    
    
    
    $
    
    
    
    $
    151,851
    
    
    $
    
    
    
    $
    
    
    
    $
    151,851Unproved
    
    
    118,086
    
    
    
    16,755
    
    
    
    17,871
    
    
    
    
    
    
    
    
    
    
    
    152,712118,086
    
    
    
    16,755
    
    
    
    169,722
    
    
    
    
    
    
    
    
    
    
    
    304,563Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (104,507
    )
    
    
    
    
    
    
    
    
    
    
    (104,507
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )118,086
    
    
    
    16,755
    
    
    
    48,665
    
    
    
    
    
    
    
    
    
    
    
    183,506Development CostsFeasibility studies and other
deferred costsIraq and Libya  HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,888
    )
    
    
    (5,888
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,255
    
    
    
    11,255Accumulated depreciation and
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (657
    )
    
    
    (657
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,598
    
    
    
    10,598Furniture and equipment
    
    
    27
    
    
    
    256
    
    
    
    300
    
    
    
    1,308
    
    
    
    16
    
    
    
    1,907Accumulated depreciation
    
    
    (12
    )
    
    
    (69
    )
    
    
    (129
    )
    
    
    (733
    )
    
    
    (8
    )
    
    
    (951
    )15
    
    
    
    187
    
    
    
    171
    
    
    
    575
    
    
    
    8
    
    
    
    956$
    118,101
    
    
    $
    16,942
    
    
    $
    48,836
    
    
    $
    575
    
    
    $
    10,606
    
    
    $
    195,060
  7




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As at December 31, 2009Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas PropertiesProved
    
    $
    
    
    
    $
    
    
    
    $
    148,110
    
    
    $
    
    
    
    $
    
    
    
    $
    148,110Unproved
    
    
    94,431
    
    
    
    6,755
    
    
    
    14,411
    
    
    
    
    
    
    
    
    
    
    
    115,59794,431
    
    
    
    6,755
    
    
    
    162,521
    
    
    
    
    
    
    
    
    
    
    
    263,707Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (99,744
    )
    
    
    
    
    
    
    
    
    
    
    (99,744
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )94,431
    
    
    
    6,755
    
    
    
    46,227
    
    
    
    
    
    
    
    
    
    
    
    147,413Development CostsFeasibility studies and other
deferred costsIraq and Libya  HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,888
    )
    
    
    (5,888
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,868
    
    
    
    10,868Accumulated depreciation and
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393
    )
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,475
    
    
    
    10,475Furniture
and equipment
    
    
    24
    
    
    
    169
    
    
    
    135
    
    
    
    968
    
    
    
    22
    
    
    
    1,318Accumulated
depreciation
    
    
    (8
    )
    
    
    (53
    )
    
    
    (92
    )
    
    
    (650
    )
    
    
    (11
    )
    
    
    (814
    )16
    
    
    
    116
    
    
    
    43
    
    
    
    318
    
    
    
    11
    
    
    
    504$
    94,447
    
    
    $
    6,871
    
    
    $
    46,270
    
    
    $
    318
    
    
    $
    10,486
    
    
    $
    158,392
  3. INTANGIBLE ASSETS
 TM TM TM TM TM
  8




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##### Table of Contents



4. LONG TERM DEBT
  June 30,
    
    
    December 31,2010
    
    
    2009Convertible note (4.5% at June 30, 2010) due July 2011
    
    $
    37,990
    
    
    $
    38,005Less: Unamortized discount
    
    
    (735
    )
    
    
    (1,071
    )$
    37,255
    
    
    $
    36,934
 5. ASSET RETIREMENT OBLIGATIONS
  June 30,
    
    
    December 31,2010
    
    
    2009Carrying balance, beginning of period
    
    $
    948
    
    
    $
    1,928Liabilities incurred
    
    
    150
    
    
    
    185Liabilities settled
    
    
    (182
    )
    
    
    (118
    )Accretion expense
    
    
    8
    
    
    
    79Revisions in estimated cash flows
    
    
    (521
    )
    
    
    (1,126
    )Carrying balance, end of period
    
    
    403
    
    
    
    948Less: current portion
    
    
    (50
    )
    
    
    (753
    )Carrying balance, end of period
    
    $
    353
    
    
    $
    195
 6. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
    9




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Nyalga Block Exploration Commitment
  Long Term Obligation
 TM TM
 Income Taxes
     Lease Commitments
   10




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##### Table of Contents



AfterTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2013Lease commitments
    
    $
    2,323
    
    
    $
    582
    
    
    $
    1,153
    
    
    $
    462
    
    
    $
    126
    
    
    
    
 7. SHARE CAPITAL AND WARRANTS
  Stock OptionsCommon Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Wtd. AvgNumber
    
    
    
    
    
    
    Purchase
    
    
    Contributed
    
    
    Convertible
    
    
    Number
    
    
    Exercise Price(000s)
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Note
    
    
    (000s)
    
    
    (Cdn $)Balance Dec. 31, 2009
    
    
    282,559
    
    
    $
    422,322
    
    
    $
    19,427
    
    
    $
    20,029
    
    
    $
    2,086
    
    
    
    15,013
    
    
    $
    2.27Shares issued forPrivate placement,
net of share issue
costs
    
    
    50,000
    
    
    
    121,766
    
    
    
    13,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Services
    
    
    280
    
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280
    )
    
    $
    2.44Exercise of options
    
    
    1,171
    
    
    
    4,385
    
    
    
    
    
    
    
    (2,296
    )
    
    
    
    
    
    
    (1,727
    )
    
    $
    2.86Exercise of purchase
warrants
    
    
    2
    
    
    
    9
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OptionsGranted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,306
    
    
    $
    2.75Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108
    )
    
    $
    2.20Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (428
    )
    
    $
    2.90Compensation for
stock option grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,558
    
    
    
    
    
    
    
    
    
    
    $
    Balance June 30, 2010
    
    
    334,012
    
    
    $
    549,281
    
    
    $
    33,423
    
    
    $
    19,291
    
    
    $
    2,086
    
    
    
    14,776
    
    
    $
    2.28
  Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CashPrice per
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Value onYear of
    
    Special
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry
    
    
    Price per
    
    
    ExerciseIssue
    
    Warrant
    
    
    (000s)
    
    (000s)
    
    
    (000s)
    
    
    ($US 000s)
    
    
    Date
    
    Share
    
    
    ($US 000s)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,398
    
    
    
    11,398
    
    
    $
    18,802
    
    
    May 2011
    
    Cdn.$2.93
    (1)
    
    $
    31,4882009
    
    
    N/A
    
    
    
    735
    
    
    
    735
    
    
    
    735
    
    
    
    622
    
    
    Feb 2011
    
    Cdn.$4.05
    
    
    
    2,8072010
    
    Cdn.$3.00
    
    
    10,417
    
    
    
    10,417
    
    
    
    10,417
    
    
    
    11,419
    
    
    Feb 2011
    
    Cdn.$3.16
    
    
    
    31,0362010
    
    Cdn.$3.00
    
    
    2,083
    
    
    
    2,083
    
    
    
    2,083
    
    
    
    2,580
    
    
    Mar 2011
    
    Cdn.$3.16
    
    
    
    6,20724,635
    
    
    
    24,633
    
    
    
    24,633
    
    
    $
    33,423
    
    
    
    
    
    
    
    
    
    
    $
    71,538
 (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.   11




---



##### Table of Contents



8. SEGMENT INFORMATION
  Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
   Corporate
 ,
  12




---



##### Table of Contents



Three Months Ended June 30, 2010Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil
    
    $
    
    
    
    $
    
    
    
    $
    6,047
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,047Interest
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    23
    
    
    
    
    
    
    
    6,049
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    6,070ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    2,327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,327General and administrative
    
    
    458
    
    
    
    598
    
    
    
    874
    
    
    
    
    
    
    
    
    
    
    
    3,548
    
    
    
    5,478Business and technology
development
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    2,399
    
    
    
    
    
    
    
    2,423Depletion and depreciation
    
    
    2
    
    
    
    9
    
    
    
    2,532
    
    
    
    
    
    
    
    (22
    )
    
    
    61
    
    
    
    2,582Foreign exchange (gain) loss
    
    
    5
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    3,003
    
    
    
    3,086Interest and financing
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    4467
    
    
    
    631
    
    
    
    5,811
    
    
    
    
    
    
    
    2,379
    
    
    
    6,612
    
    
    
    15,900Loss from continuing
operations before income
taxes
    
    
    (467
    )
    
    
    (631
    )
    
    
    238
    
    
    
    
    
    
    
    (2,379
    )
    
    
    (6,591
    )
    
    
    (9,830
    )Provision for income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (36
    )Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    (286
    )
    
    
    (3
    )
    
    
    (322
    )Net income (loss) from
continuing operations
    
    
    (467
    )
    
    
    (631
    )
    
    
    205
    
    
    
    
    
    
    
    (2,665
    )
    
    
    (6,594
    )
    
    
    (10,152
    )Net loss from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) and
comprehensive loss
    
    $
    (467
    )
    
    $
    (631
    )
    
    $
    205
    
    
    $
    
    
    
    $
    (2,665
    )
    
    $
    (6,594
    )
    
    $
    (10,152
    )Capital Investments
    
    $
    5,250
    
    
    $
    5,107
    
    
    $
    4,563
    
    
    $
    
    
    
    $
    140
    
    
    $
    166
    
    
    $
    15,226
  13




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##### Table of Contents



Six Months Ended June 30, 2010Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil
    
    $
    
    
    
    $
    
    
    
    $
    11,377
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,377Interest
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    42
    
    
    
    
    
    
    
    11,381
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    11,419ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    4,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,602General and administrative
    
    
    872
    
    
    
    1,098
    
    
    
    1,561
    
    
    
    
    
    
    
    
    
    
    
    6,924
    
    
    
    10,455Business and technology
development
    
    
    23
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    4,885
    
    
    
    
    
    
    
    4,934Depletion and depreciation
    
    
    4
    
    
    
    16
    
    
    
    4,790
    
    
    
    
    
    
    
    (254
    )
    
    
    109
    
    
    
    4,665Foreign exchange (gain) loss
    
    
    (3
    )
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    (1,185
    )
    
    
    (1,101
    )Interest and financing
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    8899
    
    
    
    1,140
    
    
    
    11,040
    
    
    
    
    
    
    
    4,636
    
    
    
    5,848
    
    
    
    23,563Loss from continuing
operations before income
taxes
    
    
    (899
    )
    
    
    (1,140
    )
    
    
    341
    
    
    
    
    
    
    
    (4,636
    )
    
    
    (5,810
    )
    
    
    (12,144
    )Provision for income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (115
    )Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (460
    )
    
    
    
    
    
    
    (460
    )
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    (460
    )
    
    
    (4
    )
    
    
    (575
    )Net income (loss) from
continuing operations
    
    
    (899
    )
    
    
    (1,140
    )
    
    
    230
    
    
    
    
    
    
    
    (5,096
    )
    
    
    (5,814
    )
    
    
    (12,719
    )Net loss from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) and
comprehensive loss
    
    $
    (899
    )
    
    $
    (1,140
    )
    
    $
    230
    
    
    $
    
    
    
    $
    (5,096
    )
    
    $
    (5,814
    )
    
    $
    (12,719
    )Capital Investments
    
    $
    23,162
    
    
    $
    9,282
    
    
    $
    7,366
    
    
    $
    
    
    
    $
    365
    
    
    $
    388
    
    
    $
    40,563Identifiable AssetsAs at June 30, 2010
    
    $
    118,207
    
    
    $
    18,447
    
    
    $
    60,938
    
    
    $
    
    
    
    $
    102,970
    
    
    $
    111,977
    
    
    $
    412,539As at December 31, 2009
    
    $
    94,594
    
    
    $
    7,597
    
    
    $
    57,528
    
    
    $
    
    
    
    $
    102,878
    
    
    $
    19,166
    
    
    $
    281,763
  14




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##### Table of Contents



Three Months Ended June 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil
    
    $
    
    
    
    $
    
    
    
    $
    6,009
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,009Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,173
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,173
    )Interest
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    8
    
    
    
    
    
    
    
    4,838
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    4,844ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    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 (gain) loss
    
    
    (5
    )
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    2,670
    
    
    
    2,680Interest and financing
    
    
    
    
    
    
    
    
    
    
    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 provision for income
taxes
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    639Net loss from
continuing operations
    
    
    (285
    )
    
    
    (481
    )
    
    
    (2,985
    )
    
    
    
    
    
    
    (2,443
    )
    
    
    (5,250
    )
    
    
    (11,444
    )Net income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Net income (loss) and
comprehensive loss
    
    $
    (285
    )
    
    $
    (481
    )
    
    $
    (2,985
    )
    
    $
    66
    
    
    $
    (2,443
    )
    
    $
    (5,250
    )
    
    $
    (11,378
    )Capital Investments
    
    $
    4,009
    
    
    $
    895
    
    
    $
    1,368
    
    
    $
    
    
    
    $
    420
    
    
    $
    
    
    
    $
    6,692
  15




---



##### Table of Contents



Six Months Ended June 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil
    
    $
    
    
    
    $
    
    
    
    $
    11,742
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,742Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,092
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,092
    )Interest
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    18
    
    
    
    
    
    
    
    10,654
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    10,668ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    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 (gain) loss
    
    
    (5
    )
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    1,655
    
    
    
    1,686Interest and financing
    
    
    
    
    
    
    
    
    
    
    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
    
    
    $
    11,900
 9. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  Financial Risk Factors
   16




---



##### Table of Contents



10. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Cash paid during the period forIncome taxes
    
    $
    211
    
    
    $
    1,647
    
    
    $
    638
    
    
    $
    1,655Interest
    
    $
    10
    
    
    $
    64
    
    
    $
    815
    
    
    $
    1,195Shares issued for services and capitalized
    
    $
    
    
    
    $
    
    
    
    $
    799
    
    
    
    Changes in non-cash working capital itemsOperating activitiesAccounts receivable
    
    $
    (553
    )
    
    $
    (697
    )
    
    $
    (309
    )
    
    $
    (1,361
    )Note receivable
    
    
    5
    
    
    
    
    
    
    
    (31
    )
    
    
    Prepaid and other current assets
    
    
    (801
    )
    
    
    (56
    )
    
    
    (678
    )
    
    
    (22
    )Accounts payable and accrued liabilities
    
    
    708
    
    
    
    (946
    )
    
    
    745
    
    
    
    (1,244
    )Income tax payable
    
    
    (172
    )
    
    
    (2,286
    )
    
    
    (522
    )
    
    
    (650
    )(813
    )
    
    
    (3,985
    )
    
    
    (795
    )
    
    
    (3,277
    )Investing activitiesAccounts receivable
    
    
    (4
    )
    
    
    9
    
    
    
    (29
    )
    
    
    46Prepaid and other current assets
    
    
    
    
    
    
    33
    
    
    
    83
    
    
    
    26Accounts payable and accrued liabilities
    
    
    1,957
    
    
    
    (7
    )
    
    
    2,779
    
    
    
    (744
    )1,953
    
    
    
    35
    
    
    
    2,833
    
    
    
    (672
    )Financing activitiesAccounts payable and accrued liabilities
    
    
    39
    
    
    
    (3
    )
    
    
    39
    
    
    
    (26
    )$
    1,179
    
    
    $
    (3,951
    )
    
    $
    2,077
    
    
    $
    (3,975
    )
 June 30,
    
    
    December 31,As at
    
    2010
    
    
    2009Cash and cash equivalentsBank accounts
    
    $
    8,405
    
    
    $
    21,512Term deposit
    
    
    105,412
    
    
    
    $
    113,817
    
    
    $
    21,512
  11. INCOME TAXES
 
  17




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##### Table of Contents



12. DISCONTINUED OPERATIONS
      Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009RevenueOil and gas
    
    $
    
    
    
    $
    2,933
    
    
    $
    
    
    
    $
    4,899Gain on derivative instruments
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    189Interest
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    8
    
    
    
    2,941
    
    
    
    
    
    
    
    5,096ExpensesOperating
    
    
    
    
    
    
    941
    
    
    
    
    
    
    
    1,968General and administrative
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    130Depletion and depreciation
    
    
    
    
    
    
    1,792
    
    
    
    
    
    
    
    3,469Interest and financing
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    160
    
    
    
    2,875
    
    
    
    
    
    
    
    5,727Net income (loss)
    
    $
    
    
    
    $
    66
    
    
    $
    
    
    
    $
    (631
    )
 13. ADDITIONAL DISCLOSURE REQUIRED UNDER US GAAP
   18




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##### Table of Contents



Consolidated Balance Sheets
  As at June 30, 2010
    
    
    As at December 31, 2009Canadian
    
    
    Increase
    
    
    
    
    
    
    US
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPAssetsCurrent AssetsCash and cash equivalents
    
    $
    113,817
    
    
    $
    
    
    
    
    
    
    
    $
    113,817
    
    
    $
    21,512
    
    
    $
    
    
    
    
    
    
    
    $
    21,512Accounts receivable
    
    
    5,355
    
    
    
    
    
    
    
    
    
    
    
    5,355
    
    
    
    5,021
    
    
    
    
    
    
    
    
    
    
    
    5,021Note receivable
    
    
    256
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    225Prepaid and other current
assets
    
    
    1,366
    
    
    
    
    
    
    
    
    
    
    
    1,366
    
    
    
    771
    
    
    
    
    
    
    
    
    
    
    
    771Restricted cash
    
    
    2,850
    
    
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    2,850
    
    
    
    
    
    
    
    
    
    
    
    2,850123,644
    
    
    
    
    
    
    
    
    
    
    
    123,644
    
    
    
    30,379
    
    
    
    
    
    
    
    
    
    
    
    30,379Oil and gas properties
and development costs, net
    
    
    195,060
    
    
    
    (38,500
    )
    

    (i)
    
    
    
    177,984
    
    
    
    158,392
    
    
    
    (38,500
    )
    

    (i)

        
    
    139,34622,627
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    20,315
    
    
    (ii)(1,203
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (861
    )
    
    (iii)Intangible assets  technology
    
    
    92,153
    
    
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    92,153
    
    
    
    
    
    
    
    
    
    
    
    92,153Long term assets
    
    
    1,682
    
    
    
    
    
    
    
    
    
    
    
    1,682
    
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    839Total Assets
    
    $
    412,539
    
    
    $
    (17,076
    )
    
    
    
    
    
    $
    395,463
    
    
    $
    281,763
    
    
    $
    (19,046
    )
    
    
    
    
    
    $
    262,717Liabilities and Shareholders
EquityCurrent LiabilitiesAccounts payable
and accrued liabilities
    
    $
    14,342
    
    
    $
    
    
    
    
    
    
    
    $
    14,342
    
    
    $
    10,779
    
    
    $
    
    
    
    
    
    
    
    $
    10,779Income tax payable
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    530Derivative instruments
    
    
    
    
    
    
    6,907
    
    
    (vi)
    
    
    6,907
    
    
    
    
    
    
    
    8,249
    
    
    (vi)
    
    
    8,249Asset retirement obligations
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    75314,400
    
    
    
    6,907
    
    
    
    
    
    
    
    21,307
    
    
    
    12,062
    
    
    
    8,249
    
    
    
    
    
    
    
    20,311Long term debt
    
    
    37,255
    
    
    
    883
    
    
    (iii)
    
    
    37,988
    
    
    
    36,934
    
    
    
    1,225
    
    
    (iii)
    
    
    38,005(150
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (154
    )
    
    (iii)Asset retirement obligations
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    195Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900Future income tax liability
    
    
    23,104
    
    
    
    
    
    
    
    
    
    
    
    23,104
    
    
    
    22,643
    
    
    
    
    
    
    
    
    
    
    
    22,64377,012
    
    
    
    7,640
    
    
    
    
    
    
    
    84,652
    
    
    
    73,734
    
    
    
    9,320
    
    
    
    
    
    
    
    83,054Shareholders EquityShare capital
    
    
    549,281
    
    
    
    74,455
    
    
    (iv)
    
    
    637,266
    
    
    
    422,322
    
    
    
    74,455
    
    
    (iv)
    
    
    510,784(1,028
    )
    

    (v)
    
    
    
    
    
    
    
    
    
    
    
    (551
    )
    

    (v)1,358
    
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (vii)13,200
    
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (vi)Purchase warrants
    
    
    33,423
    
    
    
    (33,423
    )
    
    (vi)
    
    
    
    
    
    
    19,427
    
    
    
    (19,427
    )
    
    (vi)
    
    
    Contributed surplus
    
    
    19,291
    
    
    
    (2,720
    )
    

    (v)
    
    
    
    13,624
    
    
    
    20,029
    
    
    
    (3,197
    )
    

    (v)
    
    
    
    13,885(2,947
    )
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    (2,947
    )
    
    (vi)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iii)
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iii)
    
    
    Accumulated deficit
    
    
    (268,554
    )
    
    
    (71,525
    )
    
    
    
    
    
    
    (340,079
    )
    
    
    (255,835
    )
    
    
    (89,171
    )
    
    
    
    
    
    
    (345,006
    )335,527
    
    
    
    (24,716
    )
    
    
    
    
    
    
    310,811
    
    
    
    208,029
    
    
    
    (28,366
    )
    
    
    
    
    
    
    179,663$
    412,539
    
    
    $
    (17,076
    )
    
    
    
    
    
    $
    395,463
    
    
    $
    281,763
    
    
    $
    (19,046
    )
    
    
    
    
    
    $
    262,717
  19




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##### Table of Contents



Oil and Gas Properties and Development Costs
 (i)
    
    There are certain differences between the full cost method of accounting for oil and gas
properties as applied in Canada and as applied in the US. The principal difference is in the
method of performing ceiling test evaluations under the full cost method of accounting rules.
In the ceiling test evaluation for US GAAP purposes, the Company limits, on a
country-by-country basis, the capitalized costs of oil and gas properties, net of accumulated
depletion, depreciation and amortization and deferred income taxes, to (a) the present value
of estimated future net revenues computed by applying current prices of oil and gas reserves
to estimated future production of proved oil and gas reserves as of the date of the latest
balance sheet presented, less estimated future expenditures (based on current costs) to be
incurred in developing and producing the proved reserves computed using a discount factor of
10% and assuming continuation of existing economic conditions; plus (b) the cost of properties
not being amortized (e.g. major development projects) and (c) the lower of cost or fair value
of unproved properties included in the costs being amortized less (d) income tax effects
related to the difference between the book and tax basis of the properties referred to in (b)
and (c) above. If capitalized costs exceed this limit, the excess is charged as a provision
for impairment. Unproved properties and major development projects are assessed on a quarterly
basis for possible impairments or reductions in value. If a reduction in value has occurred,
the impairment is transferred to the carrying value of proved oil and gas properties. The
Company performed the ceiling test in accordance with US GAAP and determined that for the
three months ended June 30, 2010, no impairment provision was required, nor was an impairment
provision required under Canadian GAAP. The cumulative differences in the amount of
impairment provisions between US and Canadian GAAP were $38.5 million at June 30, 2010, and
December 31, 2009.(ii)
    
    The cumulative differences in the amount of impairment provisions between US and Canadian
GAAP resulted in a reduction in accumulated depletion.(iii)
    
    The Company was required, under Canadian GAAP, to bifurcate the value of a convertible note,
allocating a portion to long-term debt and a portion to equity. Under US GAAP, the convertible
debt security is classified in its entirety as debt. Under Canadian GAAP, this discount
accretion was capitalized. To reconcile to US GAAP, the entire $2.1 million recorded in
equity is reversed as well as the unamortized discount of $0.7 million and the accreted
discount that was capitalized in the amount of $1.2 million. In addition, because the
convertible note is not denominated in US currency the re-measurement of the different
carrying value for US GAAP results in an adjustment to net income. The foreign exchange gain
of $0.2 million is shown as a separate amount in the US GAAP reconciliation of the Companys
consolidated balance sheet shown above and is adjusted to the Foreign Exchange Loss line item
in the US GAAP reconciliation of the consolidated statement of operations below.
 Shareholders Equity
 (iv)
    
    In June 1999, the shareholders approved a reduction of stated capital in respect of the
common shares by an amount of $74.5 million being equal to the accumulated deficit as at
December 31, 1998. Under US GAAP, a reduction of the accumulated deficit such as this is not
recognized except in the case of a quasi reorganization.(v)
    
    Under Canadian GAAP, the Company accounts for all stock options granted to employees and
directors since January 1, 2002, using the fair value based method of accounting. Under this
method, compensation costs are recognized in the financial statements over the stock options
vesting period using an option-pricing model for determining the fair value of the stock
options at the grant date. Under US GAAP, prior to January 1, 2006, the Company applied
Accounting Principles Board (APB) Opinion No. 25, as interpreted by the Financial Accounting
Standards Board (FASB) Interpretation No. 44, in accounting for its stock option plan and
did not recognize compensation costs in its financial statements for stock options issued to
employees and directors. Beginning January 1, 2006, the Company applied the revision to FASBs
Accounting Standards Codification (ASC) Topic 718 Stock Compensation (formerly SFAS 123R)
which supersedes APB No. 25, Accounting for Stock Issued to Employees. The Company elected
to implement this statement on a modified prospective basis starting in the first quarter of
2006 whereby the Company began recognizing stock based compensation in its US GAAP results of
operations for the unvested portion of awards outstanding as at January 1, 2006, and for all
awards granted after January 1, 2006. There are no significant differences between the
accounting for stock options under Canadian GAAP and US GAAP subsequent to January 1, 2006.(vi)
    
    The Company accounts for purchase warrants as equity under Canadian GAAP. As more fully
described in its consolidated financial statements in Item 8 of the Companys 2009 Annual
Report filed on Form 10-K, the accounting treatment of warrants under US GAAP reflects the
application of ASC Topic 815 Derivatives and Hedging (formerly SFAS 133). Under Topic 815,
share purchase warrants with an exercise price denominated in a currency other than a
companys functional currency are accounted for as derivative liabilities. Changes in the fair
value of the warrants are required to be recognized in the statement of operations each
reporting period for US GAAP purposes. At the time that the Companys share purchase warrants
are exercised, the value of the warrants will be reclassified to shareholders equity for US
GAAP purposes. Under Canadian GAAP, the fair value of the warrants on the issue date is
recorded as a reduction to the proceeds from the issuance of common shares, with the offset to
the warrant component of equity. The warrants are not revalued to fair value under Canadian
GAAP.
  20




---



##### Table of Contents



(vii)
    
    Under US GAAP, the aggregate value attributed to the acquisition of royalty rights during
1999 and 2000 was $1.4 million higher, due to the difference between Canadian and US GAAP in
the value ascribed to the shares issued, primarily resulting from differences in the
recognition of effective dates of the transactions.
 Consolidated Statements of Operations
  Three Months Ended June 30, 2010
    
    
    Three Months Ended June 30, 2009Canadian
    
    
    Increase
    
    
    
    
    
    
    US
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil
    
    $
    6,047
    
    
    $
    
    
    
    
    
    
    
    $
    6,047
    
    
    $
    6,009
    
    
    $
    
    
    
    
    
    
    
    $
    6,009Gain (loss) on derivative
instruments
    
    
    
    
    
    
    15,465
    
    
    (vi)
    
    
    15,465
    
    
    
    (1,173
    )
    
    
    (564
    )
    
    (vi)
    
    
    (1,737
    )Interest
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    86,070
    
    
    
    15,465
    
    
    
    
    
    
    
    21,535
    
    
    
    4,844
    
    
    
    (564
    )
    
    
    
    
    
    
    4,280ExpensesOperating
    
    
    2,327
    
    
    
    
    
    
    
    
    
    
    
    2,327
    
    
    
    2,444
    
    
    
    
    
    
    
    
    
    
    
    2,444General and administrative
    
    
    5,478
    
    
    
    
    
    
    
    
    
    
    
    5,478
    
    
    
    3,834
    
    
    
    
    
    
    
    
    
    
    
    3,834Business and technology
development
    
    
    2,423
    
    
    
    
    
    
    
    
    
    
    
    2,423
    
    
    
    1,766
    
    
    
    
    
    
    
    
    
    
    
    1,766Depletion and depreciation
    
    
    2,582
    
    
    
    (1,219
    )
    
    (ix)
    
    
    1,363
    
    
    
    6,045
    
    
    
    (3,140
    )
    
    (ix)
    
    
    2,905Foreign exchange (gain) loss
    
    
    3,086
    
    
    
    (115
    )
    
    (iii)
    
    
    2,971
    
    
    
    2,680
    
    
    
    112
    
    
    (iii)
    
    
    2,792Interest and financing
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    158Provision for impairment of
intangible asset and
development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    (viii)
    
    
    515,900
    
    
    
    (1,334
    )
    
    
    
    
    
    
    14,566
    
    
    
    16,927
    
    
    
    (3,023
    )
    
    
    
    
    
    
    13,904Loss from continuing
operations before income tax
    
    
    (9,830
    )
    
    
    16,799
    
    
    
    
    
    
    
    6,969
    
    
    
    (12,083
    )
    
    
    2,459
    
    
    
    
    
    
    
    (9,624
    )Provision for income taxCurrent
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    639Future
    
    
    (286
    )
    
    
    
    
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (322
    )
    
    
    
    
    
    
    
    
    
    
    (322
    )
    
    
    639
    
    
    
    
    
    
    
    
    
    
    
    639Net income (loss) from
continuing operations
    
    
    (10,152
    )
    
    
    16,799
    
    
    
    
    
    
    
    6,647
    
    
    
    (11,444
    )
    
    
    2,459
    
    
    
    
    
    
    
    (8,985
    )Net income (loss) from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    1,085
    
    

    (x)
    
    
    
    1,151Net loss and comprehensive loss
    
    $
    (10,152
    )
    
    $
    16,799
    
    
    
    
    
    
    $
    6,647
    
    
    $
    (11,378
    )
    
    $
    3,544
    
    
    
    
    
    
    $
    (7,834
    )Net income (loss) per shareNet income (loss) from
continuing operations, basic
and diluted
    
    $
    (0.03
    )
    
    $
    0.05
    
    
    
    
    
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.03
    )Net income from discontinued
operations, basic and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) per share,
basic and diluted
    
    $
    (0.03
    )
    
    $
    0.05
    
    
    
    
    
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.03
    )Weighted average number of
shares (in thousands)Basic and diluted
    
    
    333, 922
    
    
    
    
    
    
    
    
    
    
    
    333,922
    
    
    
    279,381
    
    
    
    
    
    
    
    
    
    
    
    279,381
  21




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##### Table of Contents



Six Months Ended June 30, 2010
    
    
    Six Months Ended June 30, 2009Canadian
    
    
    Increase
    
    
    
    
    
    
    US
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil
    
    $
    11,377
    
    
    $
    
    
    
    
    
    
    
    $
    11,377
    
    
    $
    11,742
    
    
    $
    
    
    
    
    
    
    
    $
    11,742Gain (loss) on derivative
instruments
    
    
    
    
    
    
    15,338
    
    
    (vi)
    
    
    15,338
    
    
    
    (1,092
    )
    
    
    (2,605
    )
    
    (vi)
    
    
    (3,697
    )Interest
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    1811,419
    
    
    
    15,338
    
    
    
    
    
    
    
    26,757
    
    
    
    10,668
    
    
    
    (2,605
    )
    
    
    
    
    
    
    8,063ExpensesOperating
    
    
    4,602
    
    
    
    
    
    
    
    
    
    
    
    4,602
    
    
    
    5,145
    
    
    
    
    
    
    
    
    
    
    
    5,145General and administrative
    
    
    10,455
    
    
    
    
    
    
    
    
    
    
    
    10,455
    
    
    
    9,714
    
    
    
    
    
    
    
    
    
    
    
    9,714Business and technology
development
    
    
    4,934
    
    
    
    
    
    
    
    
    
    
    
    4,934
    
    
    
    3,803
    
    
    
    
    
    
    
    
    
    
    
    3,803Depletion and depreciation
    
    
    4,665
    
    
    
    (2,312
    )
    
    (ix)
    
    
    2,353
    
    
    
    12,000
    
    
    
    (6,354
    )
    
    (ix)
    
    
    5,646Foreign exchange (gain) loss
    
    
    (1,101
    )
    
    
    4
    
    
    (iii)
    
    
    (1,097
    )
    
    
    1,686
    
    
    
    (280
    )
    
    (iii)
    
    
    1,406Interest and financing
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    335Provision for impairment of
intangible asset and
development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    (viii)
    
    
    15123,563
    
    
    
    (2,308
    )
    
    
    
    
    
    
    21,255
    
    
    
    32,683
    
    
    
    (6,483
    )
    
    
    
    
    
    
    26,200Loss from continuing
operations before income tax
    
    
    (12,144
    )
    
    
    17,646
    
    
    
    
    
    
    
    5,502
    
    
    
    (22,015
    )
    
    
    3,878
    
    
    
    
    
    
    
    (18,137
    )Provision for income taxCurrent
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    (115
    )
    
    
    (1,006
    )
    
    
    
    
    
    
    
    
    
    
    (1,006
    )Future
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    
    
    
    
    (575
    )
    
    
    (1,006
    )
    
    
    
    
    
    
    
    
    
    
    (1,006
    )Net income (loss) from
continuing operations
    
    
    (12,719
    )
    
    
    17,646
    
    
    
    
    
    
    
    4,927
    
    
    
    (23,021
    )
    
    
    3,878
    
    
    
    
    
    
    
    (19,143
    )Net income (loss) from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (631
    )
    
    
    2,248
    
    

    (x)
    
    
    
    1,617Net loss and comprehensive loss
    
    $
    (12,719
    )
    
    $
    17,646
    
    
    
    
    
    
    $
    4,927
    
    
    $
    (23,652
    )
    
    $
    6,126
    
    
    
    
    
    
    $
    (17,526
    )Net income (loss) per shareNet income (loss) from
continuing operations, basic
and diluted
    
    $
    (0.04
    )
    
    $
    0.06
    
    
    
    
    
    
    $
    0.02
    
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.07
    )Net income from discontinued
operations, basic and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    0.01Net income (loss) per share,
basic and diluted
    
    $
    (0.04
    )
    
    $
    0.06
    
    
    
    
    
    
    $
    0.02
    
    
    $
    (0.08
    )
    
    $
    0.02
    
    
    
    
    
    
    $
    (0.06
    )Weighted
average number of shares (in thousands)Basic and diluted
    
    
    320,651
    
    
    
    
    
    
    
    
    
    
    
    320,651
    
    
    
    279,381
    
    
    
    
    
    
    
    
    
    
    
    279,381
 Development Costs
 (viii)
    
    As more fully described under Oil and Gas Properties and Development Costs in Item 8 of
the Companys 2009 Annual Report filed on Form 10-K, under Canadian GAAP, feasibility,
marketing and related costs incurred prior to executing a definitive agreement are capitalized
and are subsequently written down upon determination that a projects future value has been
impaired. Under US GAAP, such costs are considered to be research and development and are
expensed as incurred.
  22




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##### Table of Contents



Depletion and Depreciation
 (ix)
    
    As discussed under Oil and Gas Properties and Development Costs in this note, there is a
difference between US and Canadian GAAP in performing the ceiling test evaluation under the
full cost method of the accounting rules. Application of the ceiling test evaluation under US
GAAP has resulted in an accumulated net increase in impairment provisions on the Companys US
and China oil and gas properties. This net increase in US GAAP impairment provisions has
resulted in lower depletion rates for US GAAP purposes and a reduction in the net loss for the
three and six months ended June 30, 2010 and 2009.
 Discontinued Operations
 (x)
    
    For the six months ended June 30, 2009, a $2.2 million adjustment related to discontinued
operations resulting from depletion differences as more fully described in note (ii).
 Consolidated Statements of Cash Flow
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   Special Note to Canadian Investors
 National Instrument 51-101 
Standards of Disclosure for Oil and Gas Activities Special Note to Canadian Investors
 Advisories
   23




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##### Table of Contents



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
  www.ivanhoeenergy.com www.sec.gov www.sedar.com
 HIGHLIGHTS
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Average daily production (bbls/d)
    
    
    869
    
    
    
    1,405
    
    
    
    837
    
    
    
    1,431Realized oil prices ($/bbl)
    
    $
    76.47
    
    
    $
    46.99
    
    
    $
    75.11
    
    
    $
    45.34Oil revenue
    
    $
    6,047
    
    
    $
    6,009
    
    
    $
    11,377
    
    
    $
    11,742Working capital (continuing operations(1))
    
    $
    109,244
    
    
    $
    13,254
    
    
    $
    109,244
    
    
    $
    13,254Capital expenditures (continuing operations)
    
    $
    15,226
    
    
    $
    6,692
    
    
    $
    40,563
    
    
    $
    11,900Cash flow used in operating activities (continuing
operations)
    
    $
    (4,347
    )
    
    $
    (4,917
    )
    
    $
    (8,341
    )
    
    $
    (9,797
    )Net loss (continuing operations)
    
    $
    (10,152
    )
    
    $
    (11,378
    )
    
    $
    (12,719
    )
    
    $
    (23,652
    )Net loss per share, basic and diluted (continuing
operations)
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.08
    )
 (1)
    
    In July 2009, the Company disposed of its US operations and used the proceeds for its ongoing
projects. To properly reflect this sale in the Companys 2010 unaudited consolidated financial
statements, the results of the US operations have been separately identified in comparative
disclosures as Discontinued Operations.   24




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##### Table of Contents



Changes in Net Loss
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    Change
    
    
    2009
    
    
    2010
    
    
    Change
    
    
    2009Cash itemsOil revenues
    
    $
    6,047
    
    
    
    
    
    
    $
    6,009
    
    
    $
    11,377
    
    
    
    
    
    
    $
    11,742Production volumes
    
    
    
    
    
    
    (2,286
    )
    
    
    
    
    
    
    
    
    
    
    (4,847
    )Oil prices
    
    
    
    
    
    
    2,324
    
    
    
    
    
    
    
    
    
    
    
    4,482Realized loss-derivative instruments
    
    
    
    
    
    
    (76
    )
    
    
    76
    
    
    
    
    
    
    
    (612
    )
    
    
    612Operating costs
    
    
    (2,327
    )
    
    
    117
    
    
    
    (2,444
    )
    
    
    (4,602
    )
    
    
    543
    
    
    
    (5,145
    )G&A less stock based compensation
    
    
    (4,460
    )
    
    
    (1,128
    )
    
    
    (3,332
    )
    
    
    (8,921
    )
    
    
    (142
    )
    
    
    (8,779
    )Business and technology development
less stock based compensation
    
    
    (2,420
    )
    
    
    (678
    )
    
    
    (1,742
    )
    
    
    (4,910
    )
    
    
    (1,159
    )
    
    
    (3,751
    )Foreign exchange (loss) gain
    
    
    (51
    )
    
    
    9
    
    
    
    (60
    )
    
    
    (237
    )
    
    
    (197
    )
    
    
    (40
    )Net interest
    
    
    19
    
    
    
    100
    
    
    
    (81
    )
    
    
    34
    
    
    
    198
    
    
    
    (164
    )Current income tax provision
    
    
    (36
    )
    
    
    (675
    )
    
    
    639
    
    
    
    (115
    )
    
    
    891
    
    
    
    (1,006
    )Total cash changes
    
    
    (3,228
    )
    
    
    (2,293
    )
    
    
    (935
    )
    
    
    (7,374
    )
    
    
    (843
    )
    
    
    (6,531
    )Non-cash itemsUnrealized loss on derivatives
    
    
    
    
    
    
    1,249
    
    
    
    (1,249
    )
    
    
    
    
    
    
    1,704
    
    
    
    (1,704
    )Foreign exchange (loss) gain
    
    
    (3,035
    )
    
    
    (415
    )
    
    
    (2,620
    )
    
    
    1,338
    
    
    
    2,984
    
    
    
    (1,646
    )Depletion and depreciation
    
    
    (2,582
    )
    
    
    3,463
    
    
    
    (6,045
    )
    
    
    (4,665
    )
    
    
    7,335
    
    
    
    (12,000
    )Stock based compensation
    
    
    (1,021
    )
    
    
    (495
    )
    
    
    (526
    )
    
    
    (1,558
    )
    
    
    (571
    )
    
    
    (987
    )Future income tax expense
    
    
    (286
    )
    
    
    (286
    )
    
    
    
    
    
    
    (460
    )
    
    
    (460
    )
    
    
    Discontinued operations (net of tax)
    
    
    
    
    
    
    (66
    )
    
    
    66
    
    
    
    
    
    
    
    631
    
    
    
    (631
    )Other
    
    
    
    
    
    
    69
    
    
    
    (69
    )
    
    
    
    
    
    
    153
    
    
    
    (153
    )Total non-cash changes
    
    
    (6,924
    )
    
    
    3,519
    
    
    
    (10,443
    )
    
    
    (5,345
    )
    
    
    11,776
    
    
    
    (17,121
    )Net loss
    
    $
    (10,152
    )
    
    
    1,226
    
    
    $
    (11,378
    )
    
    $
    (12,719
    )
    
    
    10,933
    
    
    $
    (23,652
    )
 Oil Production
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Asia(net bbls)Dagang
    
    
    75,210
    
    
    
    123,894
    
    
    
    143,004
    
    
    
    252,372Daqing
    
    
    3,861
    
    
    
    3,987
    
    
    
    8,463
    
    
    
    6,58779,071
    
    
    
    127,881
    
    
    
    151,467
    
    
    
    258,959Average daily production (bbls/d)
    
    
    869
    
    
    
    1,405
    
    
    
    837
    
    
    
    1,430
  25




---



##### Table of Contents



Net Revenue From Operations
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,($/bbl)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Oil revenue
    
    $
    76.47
    
    
    $
    46.99
    
    
    $
    75.11
    
    
    $
    45.34Less operating costs:Field operating
    
    
    (17.31
    )
    
    
    (16.74
    )
    
    
    (17.85
    )
    
    
    (17.86
    )Windfall Levy
    
    
    (11.00
    )
    
    
    (1.71
    )
    
    
    (11.09
    )
    
    
    (1.33
    )Engineering and support costs
    
    
    (1.12
    )
    
    
    (0.66
    )
    
    
    (1.43
    )
    
    
    (0.69
    )Net operating revenue
    
    
    47.04
    
    
    
    27.88
    
    
    
    44.74
    
    
    
    25.46Depletion
    
    
    (31.81
    )
    
    
    (40.99
    )
    
    
    (31.44
    )
    
    
    (40.60
    )Net revenue (loss) from operations
    
    $
    15.23
    
    
    $
    (13.11
    )
    
    $
    13.30
    
    
    $
    (15.14
    )
 Oil Revenue
  Operating Costs
  General and Administrative
   Business and Technology Development
   26




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##### Table of Contents



Depletion and Depreciation
  Asia
  Foreign Exchange
    Interest and Financing Costs
  Unrealized Gain (Loss) on Derivative Instruments
  Provision for/Recovery of Income Taxes
 Asia
  Business and Technology Development
   27




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##### Table of Contents



Discontinued Operations
  FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 Contractual Obligations
  Payments Due by YearTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    After
 2013Included in balance sheetLong term debt
    
    $
    37,255
    
    
    $
    
    
    
    $
    37,255
    
    
    $
    
    
    
    $
    
    
    
    $
    Asset retirement obligation
    
    
    710
    
    
    
    50
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    500Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    Other commitmentsInterest payable
    
    
    1,748
    
    
    
    
    
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    Lease commitments
    
    
    2,323
    
    
    
    582
    
    
    
    1,153
    
    
    
    462
    
    
    
    126
    
    
    
    Zitong exploration commitment
    
    
    21,076
    
    
    
    21,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nyalga exploration commitment
    
    
    1,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,464
    
    
    
    $
    66,476
    
    
    $
    21,708
    
    
    $
    40,156
    
    
    $
    622
    
    
    $
    3,490
    
    
    $
    500
 Sources and Uses of Cash
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Cash used in operating activities (continuing operations)
    
    $
    (4,347
    )
    
    $
    (4,917
    )
    
    $
    (8,341
    )
    
    $
    (9,797
    )Cash used in investing activities (continuing operations)
    
    $
    (13,771
    )
    
    $
    (6,810
    )
    
    $
    (38,576
    )
    
    $
    (12,725
    )Cash
provided by (used in) financing activities (continuing operations)
    
    $
    (59
    )
    
    $
    (28
    )
    
    $
    137,898
    
    
    $
    (542
    )
  Operating Activities
   28




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##### Table of Contents



Investing Activities
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Oil and gas activitiesCanada
    
    $
    5,250
    
    
    $
    4,009
    
    
    $
    23,162
    
    
    $
    6,077Ecuador
    
    
    5,107
    
    
    
    895
    
    
    
    9,282
    
    
    
    1,551Asia
    
    
    4,563
    
    
    
    1,368
    
    
    
    7,366
    
    
    
    2,524Business and technology development
    
    
    140
    
    
    
    420
    
    
    
    365
    
    
    
    1,694Corporate
    
    
    166
    
    
    
    
    
    
    
    388
    
    
    
    54Total capital expenditures
    
    $
    15,226
    
    
    $
    6,692
    
    
    $
    40,563
    
    
    $
    11,900
 Canada
  Ecuador
  Asia
  Business and Technology Development
  Corporate
  Financing Activities
  Capital Structure
 June 30,
    
    
    December 31,2010
    
    
    2009Long term debt
    
    $
    37,255
    
    
    $
    36,934Shareholders equity
    
    $
    335,527
    
    
    $
    208,029
   29




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##### Table of Contents



Outlook for 2010
 TM TM
  International Financial Reporting Standards (IFRS)
    
 Item 4. Controls and Procedures
     30




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##### Table of Contents



Part II OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 6. Exhibits
 Exhibit 
Number
    
    Description31.1
    
    
    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
   IVANHOE ENERGY INC.By:
    
    /s/ Gerald D. Schiefelbein

Name: Gerald D. SchiefelbeinTitle: Chief Financial Officer
   31