##### 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 September 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-30586
 
 IVANHOE ENERGY INC.
 (Exact name of registrant as specified in its charter)
 Yukon, Canada
    
    98-0372413(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)Suite 654  999 Canada PlaceVancouver, British Columbia, Canada
    
    V6C 3E1(Address of principal executive office)
    
    (zip code)
 (604) 688-8323  (registrants telephone number, including area code)
 No Changes  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o Yes
o No
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o Yes þ No




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##### 



TABLE OF CONTENTS
 PagePART IFinancial InformationItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets as at September 30, 2009 and December 31, 2008
    
    
    3Unaudited
Condensed Consolidated Statements of Operations, Comprehensive Income
(Loss)
and Accumulated Deficit for the Three-Month and Nine-Month Periods Ended September 30, 2009 and 2008
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three-Month
and Nine-Month Periods Ended September 30, 2009 and 2008
    
    
    5Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45PART IIOther InformationItem 1. Legal Proceedings
    
    
    46Item 1A. Risk Factors
    
    
    46Item 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
    
    
    46Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Part I  Financial Information
 
 Item 1.
    
    Financial Statements
 IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Balance Sheets
 September 30, 2009
    
    
    December 31, 2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    39,466
    
    
    $
    38,477Accounts receivable
    
    
    6,422
    
    
    
    3,802Note receivable
    
    
    248
    
    
    
    Prepaid and other current assets
    
    
    350
    
    
    
    637Restricted cash
    
    
    2,850
    
    
    
    850Derivative instruments
    
    
    
    
    
    
    1,459Assets of discontinued operations
    
    
    
    
    
    
    2,72749,336
    
    
    
    47,952Oil and gas properties and development costs, net
    
    
    142,933
    
    
    
    143,974Intangible assets  HTLTM technology
    
    
    92,153
    
    
    
    92,153Long term assets
    
    
    608
    
    
    
    152Assets of discontinued operations
    
    
    
    
    
    
    33,044$
    285,030
    
    
    $
    317,275Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    7,510
    
    
    $
    9,219Income tax payable
    
    
    619
    
    
    
    650Debt  current portion
    
    
    6,724
    
    
    
    412Derivative instruments
    
    
    173
    
    
    
    Asset retirement obligations  current portion
    
    
    871
    
    
    
    Liabilities of discontinued operations  current portion
    
    
    
    
    
    
    6,07415,897
    
    
    
    16,355Long term debt
    
    
    36,094
    
    
    
    37,855Asset retirement obligations
    
    
    193
    
    
    
    1,928Long term obligation
    
    
    1,900
    
    
    
    1,900Future income tax liability
    
    
    20,900
    
    
    
    Liabilities of discontinued operations
    
    
    
    
    
    
    1,81074,984
    
    
    
    59,848Commitments and contingencies (Note 7)Going concern and basis of presentation (Note 1)Shareholders Equity:Share capital, issued 279,427,066 common shares 
December 31, 2008 279,381,187 common shares
    
    
    414,010
    
    
    
    413,857Purchase warrants
    
    
    18,805
    
    
    
    18,805Contributed surplus
    
    
    19,065
    
    
    
    16,862Convertible note
    
    
    2,086
    
    
    
    2,086Accumulated deficit
    
    
    (243,920
    )
    
    
    (194,183
    )210,046
    
    
    
    257,427$
    285,030
    
    
    $
    317,275
   3




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Operations,
    Comprehensive Income (Loss) and Accumulated Deficit
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueOil revenue
    
    $
    7,917
    
    
    $
    14,912
    
    
    $
    19,659
    
    
    $
    37,547Gain (loss) on derivative instruments
    
    
    72
    
    
    
    10,898
    
    
    
    (1,020
    )
    
    
    (6,793
    )Interest income
    
    
    2
    
    
    
    349
    
    
    
    20
    
    
    
    3917,991
    
    
    
    26,159
    
    
    
    18,659
    
    
    
    31,145ExpensesOperating costs
    
    
    2,907
    
    
    
    6,626
    
    
    
    8,052
    
    
    
    16,239General and administrative
    
    
    4,412
    
    
    
    4,139
    
    
    
    14,126
    
    
    
    11,438Business and technology development
    
    
    2,301
    
    
    
    2,015
    
    
    
    6,104
    
    
    
    4,934Depletion and depreciation
    
    
    5,308
    
    
    
    6,524
    
    
    
    17,308
    
    
    
    19,864Foreign exchange loss
    
    
    2,815
    
    
    
    210
    
    
    
    4,501
    
    
    
    531Interest expense and financing costs
    
    
    177
    
    
    
    335
    
    
    
    512
    
    
    
    1,092Provision for impairment
    
    
    948
    
    
    
    
    
    
    
    948
    
    
    
    18,868
    
    
    
    19,849
    
    
    
    51,551
    
    
    
    54,098Income (loss) from continuing operations before income taxes
    
    
    (10,877
    )
    
    
    6,310
    
    
    
    (32,892
    )
    
    
    (22,953
    )(Provision for) recovery of income taxesCurrent
    
    
    (618
    )
    
    
    (363
    )
    
    
    (1,624
    )
    
    
    (363
    )Future
    
    
    8,700
    
    
    
    (1,125
    )
    
    
    8,700
    
    
    
    1,1618,082
    
    
    
    (1,488
    )
    
    
    7,076
    
    
    
    798Net income (loss) from continuing operations
    
    
    (2,795
    )
    
    
    4,822
    
    
    
    (25,816
    )
    
    
    (22,155
    )Net income (loss) from discontinued operations (net of tax of $29.6
million for 2009, nil for 2008)(Notes 13 and 14)
    
    
    (23,290
    )
    
    
    5,240
    
    
    
    (23,921
    )
    
    
    1,942Net income (loss) and comprehensive income (loss)
    
    
    (26,085
    )
    
    
    10,062
    
    
    
    (49,737
    )
    
    
    (20,213
    )Accumulated deficit, beginning of period
    
    
    (217,835
    )
    
    
    (190,265
    )
    
    
    (194,183
    )
    
    
    (159,990
    )Accumulated deficit, end of period
    
    $
    (243,920
    )
    
    $
    (180,203
    )
    
    $
    (243,920
    )
    
    $
    (180,203
    )Net income (loss) per shareNet income (loss) from continuing operations, basic and diluted
    
    $
    (0.01
    )
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    (0.09
    )Net income (loss) from discontinued operations, basic and diluted
    
    
    (0.08
    )
    
    
    0.02
    
    
    
    (0.09
    )
    
    
    0.01Net income (loss) per share, basic and diluted
    
    $
    (0.09
    )
    
    $
    0.04
    
    
    $
    (0.18
    )
    
    $
    (0.08
    )Weighted average number of Shares (in thousands)Basic
    
    
    279,427
    
    
    
    265,372
    
    
    
    279,381
    
    
    
    251,907Diluted
    
    
    279,427
    
    
    
    279,641
    
    
    
    279,381
    
    
    
    251,907
   4




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating ActivitiesNet income (loss)
    
    $
    (26,085
    )
    
    $
    10,062
    
    
    $
    (49,737
    )
    
    $
    (20,213
    )Net (income) loss from discontinued operations
    
    
    23,290
    
    
    
    (5,240
    )
    
    
    23,921
    
    
    
    (1,942
    )Items not requiring use of cash:Depletion and depreciation
    
    
    5,308
    
    
    
    6,524
    
    
    
    17,308
    
    
    
    19,864Provision for impairment
    
    
    948
    
    
    
    
    
    
    
    948
    
    
    
    Stock based compensation
    
    
    1,270
    
    
    
    850
    
    
    
    2,242
    
    
    
    2,570Unrealized (gain) loss on derivative instruments
    
    
    (72
    )
    
    
    (12,706
    )
    
    
    1,632
    
    
    
    2,130Unrealized foreign exchange loss
    
    
    2,786
    
    
    
    314
    
    
    
    4,432
    
    
    
    397Future income tax (recovery) provision
    
    
    (8,700
    )
    
    
    1,125
    
    
    
    (8,700
    )
    
    
    (1,161
    )Provision for uncollectible accounts
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    725Other
    
    
    104
    
    
    
    169
    
    
    
    268
    
    
    
    486Changes in non-cash working capital items
    
    
    85
    
    
    
    (1,756
    )
    
    
    (3,177
    )
    
    
    (498
    )Net cash provided by (used in) operating activities from continuing operations
    
    
    (1,066
    )
    
    
    67
    
    
    
    (10,863
    )
    
    
    2,358Net cash provided by (used in)
operating activities from discontinued operations
    
    
    (135
    )
    
    
    1,606
    
    
    
    2,703
    
    
    
    5,041Net cash provided by (used in) operating activities
    
    
    (1,201
    )
    
    
    1,673
    
    
    
    (8,160
    )
    
    
    7,399Investing ActivitiesCapital investments
    
    
    (5,823
    )
    
    
    (8,355
    )
    
    
    (17,723
    )
    
    
    (13,075
    )Acquisition of oil and gas assets
    
    
    
    
    
    
    (22,308
    )
    
    
    
    
    
    
    (22,308
    )Advance repayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Increase in restricted cash
    
    
    (2,000
    )
    
    
    (850
    )
    
    
    (2,000
    )
    
    
    (850
    )Other
    
    
    (202
    )
    
    
    135
    
    
    
    (355
    )
    
    
    33Changes in non-cash working capital items
    
    
    (499
    )
    
    
    3,182
    
    
    
    (1,186
    )
    
    
    748Net cash used in investing activities from continuing operations
    
    
    (8,524
    )
    
    
    (28,196
    )
    
    
    (21,264
    )
    
    
    (35,352
    )Net cash provided by (used in) investing activities from discontinued operations
    
    
    35,878
    
    
    
    (913
    )
    
    
    35,292
    
    
    
    (4,108
    )Net cash provided by (used in) investing activities
    
    
    27,354
    
    
    
    (29,109
    )
    
    
    14,028
    
    
    
    (39,460
    )Financing ActivitiesShares issued on private placements, net of share issue costs
    
    
    
    
    
    
    82,687
    
    
    
    
    
    
    
    82,687Proceeds from exercise of options and warrants
    
    
    98
    
    
    
    518
    
    
    
    98
    
    
    
    1,204Proceeds from debt obligations, net of financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,790Payments of debt obligations
    
    
    
    
    
    
    (615
    )
    
    
    (416
    )
    
    
    (1,845
    )Payments of deferred financing costs
    
    
    
    
    
    
    (542
    )
    
    
    
    
    
    
    (2,606
    )Other
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    Changes in non-cash working capital items
    
    
    
    
    
    
    (711
    )
    
    
    (26
    )
    
    
    (9
    )Net cash provided by (used in)
financing activities from continuing operations
    
    
    98
    
    
    
    81,337
    
    
    
    (444
    )
    
    
    84,221Net cash provided by (used in)
financing activities from discontinued operations
    
    
    (5,200
    )
    
    
    
    
    
    
    (5,200
    )
    
    
    700Net cash provided by (used in) financing activities
    
    
    (5,102
    )
    
    
    81,337
    
    
    
    (5,644
    )
    
    
    84,921Foreign Exchange Gain (Loss) on Cash and Cash
Equivalents Held in a Foreign Currency
    
    
    12
    
    
    
    (2,466
    )
    
    
    (23
    )
    
    
    (2,567
    )Increase in Cash and Cash Equivalents, for the period
    
    
    21,063
    
    
    
    51,435
    
    
    
    201
    
    
    
    50,293Cash and cash equivalents, beginning of period
    
    
    18,403
    
    
    
    10,214
    
    
    
    39,265
    
    
    
    11,356Cash and Cash Equivalents, end of period
    
    $
    39,466
    
    
    $
    61,649
    
    
    $
    39,466
    
    
    $
    61,649Cash and cash equivalents, end of period  continuing operations
    
    $
    39,466
    
    
    $
    60,535
    
    
    $
    39,466
    
    
    $
    60,535Cash and cash equivalents, end of period  discontinued operations
    
    $
    
    
    
    $
    1,114
    
    
    $
    
    
    
    $
    1,114
   5




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at September 30, 2009Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    145,690
    
    
    $
    
    
    
    $
    
    
    
    $
    145,690Unproved
    
    
    90,787
    
    
    
    4,286
    
    
    
    4,325
    
    
    
    
    
    
    
    
    
    
    
    99,39890,787
    
    
    
    4,286
    
    
    
    150,015
    
    
    
    
    
    
    
    
    
    
    
    245,088Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (97,361
    )
    
    
    
    
    
    
    
    
    
    
    (97,361
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )90,787
    
    
    
    4,286
    
    
    
    36,104
    
    
    
    
    
    
    
    
    
    
    
    131,177Development Costs:Feasibility studies and other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    955
    
    
    
    955GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,594
    
    
    
    10,594Accumulated depreciation and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (262
    )
    
    
    (262
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,287
    
    
    
    11,287Furniture and equipment
    
    
    14
    
    
    
    141
    
    
    
    129
    
    
    
    930
    
    
    
    22
    
    
    
    1,236Accumulated depreciation
    
    
    (7
    )
    
    
    (47
    )
    
    
    (86
    )
    
    
    (615
    )
    
    
    (12
    )
    
    
    (767
    )7
    
    
    
    94
    
    
    
    43
    
    
    
    315
    
    
    
    10
    
    
    
    469$
    90,794
    
    
    $
    4,380
    
    
    $
    36,147
    
    
    $
    315
    
    
    $
    11,297
    
    
    $
    142,933
 As at December 31, 2008Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    141,089
    
    
    $
    
    
    
    $
    
    
    
    $
    141,089Unproved
    
    
    81,090
    
    
    
    1,454
    
    
    
    5,233
    
    
    
    
    
    
    
    
    
    
    
    87,77781,090
    
    
    
    1,454
    
    
    
    146,322
    
    
    
    
    
    
    
    
    
    
    
    228,866Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (81,717
    )
    
    
    
    
    
    
    
    
    
    
    (81,717
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )81,090
    
    
    
    1,454
    
    
    
    48,055
    
    
    
    
    
    
    
    
    
    
    
    130,599Development Costs:Feasibility studies and other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    801
    
    
    
    801GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,770
    
    
    
    8,770Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,036
    
    
    
    11,036Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,713
    )
    
    
    (7,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,894
    
    
    
    12,894Furniture and equipment
    
    
    20
    
    
    
    90
    
    
    
    120
    
    
    
    13
    
    
    
    406
    
    
    
    649Accumulated depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (79
    )
    
    
    (6
    )
    
    
    (77
    )
    
    
    (168
    )14
    
    
    
    90
    
    
    
    41
    
    
    
    7
    
    
    
    329
    
    
    
    481$
    81,104
    
    
    $
    1,544
    
    
    $
    48,096
    
    
    $
    7
    
    
    $
    13,223
    
    
    $
    143,974
 TM FTF TM CDF
  8




---



##### Table of Contents



4. INTANGIBLE ASSETS  HTL TM TECHNOLOGY
 RTP TM Process TM TM HTL TM Technology HTL TM TM TM
 TM
 5. LONG TERM DEBT
  September 30,
    
    
    December 31,2009
    
    
    2008Variable rate bank note (4.00% at September 30, 2009) due September 2010
    
    $
    7,000
    
    
    $
    7,000Non-interest bearing promissory note, final payment February 2009
    
    
    
    
    
    
    416Convertible note (4.25% at September 30, 2009) due July 2011
    
    
    37,306
    
    
    
    32,78744,306
    
    
    
    40,203Less:Unamortized discount
    
    
    (1,212
    )
    
    
    (4
    )Unamortized deferred financing costs
    
    
    (276
    )
    
    
    (1,932
    )Current maturities
    
    
    (6,724
    )
    
    
    (412
    )(8,212
    )
    
    
    (2,348
    )$
    36,094
    
    
    $
    37,855
  2010
    
    $
    7,0002011
    
    
    37,306$
    44,306
  9




---



##### Table of Contents



6. ASSET RETIREMENT OBLIGATIONS
  As at
    
    
    As atSeptember 30,
    
    
    December 31,2009
    
    
    2008Carrying balance, beginning of year
    
    $
    1,928
    
    
    $
    739Liabilities incurred
    
    
    185
    
    
    
    Accretion expense
    
    
    77
    
    
    
    76Revisions in estimated cash flows
    
    
    (1,126
    )
    
    
    1,113Carrying balance, end of period
    
    
    1,064
    
    
    
    1,928Less: current portion
    
    
    871
    
    
    
    Carrying balance, end of period
    
    $
    193
    
    
    $
    1,928
 7. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 Sunwing Sunwing Energy CNPC Mitsubishi
 Zitong Partners Phase 2
 Long Term Obligation
 TM TM
 Income Taxes
   10




---



##### Table of Contents



Pan-China
   Other Commitments
  Talisman
   11




---



##### Table of Contents



8. SHARE CAPITAL AND WARRANTS
  Stock OptionsWtd. AvgCommon Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ExerciseNumber
    
    
    
    
    
    
    Purchase
    
    
    Contributed
    
    
    Convertible
    
    
    Number
    
    
    Price(thousands)
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Note
    
    
    (thousands)
    
    
    Cdn.$Balance December 31, 2008
    
    
    279,381
    
    
    $
    413,857
    
    
    $
    18,805
    
    
    $
    16,862
    
    
    $
    2,086
    
    
    
    11,913
    
    
    $
    2.32Shares issued for:Exercise of options
    
    
    46
    
    
    
    153
    
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    (46
    )
    
    $
    2.58Options:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,998
    
    
    $
    2.15Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317
    )
    
    $
    2.12Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317
    )
    
    $
    2.56Compensation calculated for stock option grants*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,258
    
    
    
    
    
    
    
    
    
    
    
    Balance September 30, 2009
    
    
    279,427
    
    
    $
    414,010
    
    
    $
    18,805
    
    
    $
    19,065
    
    
    $
    2,086
    
    
    
    15,231
    
    
    $
    2.28
 * -
    
    includes stock based compensation charged to continuing operations as well as discontinued
operations.   Purchase WarrantsPrice per
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    CashYear of
    
    Special
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Price per
    
    
    Value onIssue
    
    Warrant
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share
    
    
    Exercise(thousands)
    
    
    ($U.S. 000)
    
    
    
    
    
    
    
    
    
    
    ($U.S. 000)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    May 2011
    
    Cdn. $2.93
    (1)
    
    
    31,153
 (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
  12




---



##### Table of Contents



Conventional
  Business and Technology Development
 MOU
  Corporate
 ,
  13




---



##### Table of Contents



Three Month Period Ended September 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    7,917
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,917Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    7,989
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    7,991ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    2,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,907General and administrative
    
    
    239
    
    
    
    606
    
    
    
    636
    
    
    
    
    
    
    
    
    
    
    
    2,931
    
    
    
    4,412Business and technology development
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,197
    
    
    
    
    
    
    
    2,301Depletion and depreciation
    
    
    1
    
    
    
    11
    
    
    
    5,130
    
    
    
    
    
    
    
    129
    
    
    
    37
    
    
    
    5,308Foreign exchange (gain) loss
    
    
    (7
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    2,817
    
    
    
    2,815Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    25
    
    
    
    1
    
    
    
    177Provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    948
    
    
    
    
    
    
    
    948337
    
    
    
    617
    
    
    
    8,827
    
    
    
    
    
    
    
    3,301
    
    
    
    5,786
    
    
    
    18,868Loss from continuing operations
before income taxes
    
    
    (337
    )
    
    
    (617
    )
    
    
    (838
    )
    
    
    
    
    
    
    (3,301
    )
    
    
    (5,784
    )
    
    
    (10,877
    )(Provision for) recovery
of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (269
    )
    
    
    
    
    
    
    
    
    
    
    (349
    )
    
    
    (618
    )Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,700
    
    
    
    
    
    
    
    8,700
    
    
    
    
    
    
    
    (269
    )
    
    
    
    
    
    
    8,700
    
    
    
    (349
    )
    
    
    8,082Net income (loss) from
continuing operations
    
    
    (337
    )
    
    
    (617
    )
    
    
    (1,107
    )
    
    
    
    
    
    
    5,399
    
    
    
    (6,133
    )
    
    
    (2,795
    )Net loss from discontinued
operations (net of tax of $29.6 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,290
    )
    
    
    
    
    
    
    
    
    
    
    (23,290
    )Net income (loss) and
comprehensive income (loss)
    
    $
    (337
    )
    
    $
    (617
    )
    
    $
    (1,107
    )
    
    $
    (23,290
    )
    
    $
    5,399
    
    
    $
    (6,133
    )
    
    $
    (26,085
    )Capital Investments
    
    $
    3,186
    
    
    $
    1,333
    
    
    $
    1,179
    
    
    $
    
    
    
    $
    125
    
    
    $
    
    
    
    $
    5,823
  14




---



##### Table of Contents



Nine Month Period Ended September 30, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    19,659
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    19,659Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,020
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,020
    )Interest income
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    20
    
    
    
    
    
    
    
    18,643
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    18,659ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    8,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,052General and administrative
    
    
    573
    
    
    
    1,583
    
    
    
    1,663
    
    
    
    
    
    
    
    
    
    
    
    10,307
    
    
    
    14,126Business and technology development
    
    
    491
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,613
    
    
    
    
    
    
    
    6,104Depletion and depreciation
    
    
    3
    
    
    
    47
    
    
    
    15,646
    
    
    
    
    
    
    
    1,502
    
    
    
    110
    
    
    
    17,308Foreign exchange (gain) loss
    
    
    (12
    )
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    2
    
    
    
    4,472
    
    
    
    4,501Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    430
    
    
    
    
    
    
    
    76
    
    
    
    6
    
    
    
    512Provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    948
    
    
    
    
    
    
    
    9481,055
    
    
    
    1,630
    
    
    
    25,830
    
    
    
    
    
    
    
    8,141
    
    
    
    14,895
    
    
    
    51,551Loss from continuing operations
before income taxes
    
    
    (1,055
    )
    
    
    (1,630
    )
    
    
    (7,187
    )
    
    
    
    
    
    
    (8,141
    )
    
    
    (14,879
    )
    
    
    (32,892
    )(Provision for) recovery
of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (1,266
    )
    
    
    
    
    
    
    
    
    
    
    (358
    )
    
    
    (1,624
    )Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,700
    
    
    
    
    
    
    
    8,700
    
    
    
    
    
    
    
    (1,266
    )
    
    
    
    
    
    
    8,700
    
    
    
    (358
    )
    
    
    7,076Net income (loss) from
continuing operations
    
    
    (1,055
    )
    
    
    (1,630
    )
    
    
    (8,453
    )
    
    
    
    
    
    
    559
    
    
    
    (15,237
    )
    
    
    (25,816
    )Net loss from discontinued
operations (net of tax of $29.6 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,921
    )
    
    
    
    
    
    
    
    
    
    
    (23,921
    )Net income (loss) and
comprehensive income (loss)
    
    $
    (1,055
    )
    
    $
    (1,630
    )
    
    $
    (8,453
    )
    
    $
    (23,921
    )
    
    $
    559
    
    
    $
    (15,237
    )
    
    $
    (49,737
    )Capital Investments
    
    $
    9,263
    
    
    $
    2,883
    
    
    $
    3,702
    
    
    $
    
    
    
    $
    1,818
    
    
    $
    57
    
    
    $
    17,723Identifiable Assets:As at September 30, 2009
    
    $
    90,885
    
    
    $
    5,102
    
    
    $
    53,989
    
    
    $
    
    
    
    $
    103,708
    
    
    $
    31,346
    
    
    $
    285,030As at December 31, 2008
    
    $
    81,126
    
    
    $
    1,766
    
    
    $
    64,901
    
    
    $
    37,480
    
    
    $
    105,587
    
    
    $
    26,415
    
    
    $
    317,275
  15




---



##### Table of Contents



Three Month Period Ended September 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    14,912
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    14,912Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    10,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,898Interest income
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    338
    
    
    
    349
    
    
    
    
    
    
    
    25,821
    
    
    
    
    
    
    
    
    
    
    
    338
    
    
    
    26,159ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    6,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,626General and administrative
    
    
    655
    
    
    
    101
    
    
    
    621
    
    
    
    
    
    
    
    
    
    
    
    2,762
    
    
    
    4,139Business and technology development
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,034
    
    
    
    
    
    
    
    2,015Depletion and depreciation
    
    
    1
    
    
    
    
    
    
    
    5,892
    
    
    
    
    
    
    
    631
    
    
    
    
    
    
    
    6,524Foreign exchange (gain) loss
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    (45
    )
    
    
    237
    
    
    
    210Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    22
    
    
    
    144
    
    
    
    335637
    
    
    
    101
    
    
    
    13,326
    
    
    
    
    
    
    
    2,642
    
    
    
    3,143
    
    
    
    19,849Income (loss) from continuing operations before income taxes
    
    
    (637
    )
    
    
    (101
    )
    
    
    12,495
    
    
    
    
    
    
    
    (2,642
    )
    
    
    (2,805
    )
    
    
    6,310Provision for income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (359
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (363
    )Future
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    (1,484
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1,488
    )Net income (loss) from continuing operations
    
    
    (637
    )
    
    
    (101
    )
    
    
    11,011
    
    
    
    
    
    
    
    (2,644
    )
    
    
    (2,807
    )
    
    
    4,822Net income from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,240
    
    
    
    
    
    
    
    
    
    
    
    5,240Net income (loss) and
comprehensive income (loss)
    
    $
    (637
    )
    
    $
    (101
    )
    
    $
    11,011
    
    
    $
    5,240
    
    
    $
    (2,644
    )
    
    $
    (2,807
    )
    
    $
    10,062Capital Investments
    
    $
    3,997
    
    
    $
    
    
    
    $
    1,793
    
    
    $
    
    
    
    $
    2,565
    
    
    $
    
    
    
    $
    8,355
  16




---



##### Table of Contents



Nine Month Period Ended September 30, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    37,547
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    37,547Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (6,793
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,793
    )Interest income
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    391
    
    
    
    
    
    
    
    30,790
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    31,145ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    16,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,239General and administrative
    
    
    1,404
    
    
    
    102
    
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    8,319
    
    
    
    11,438Business and technology development
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,805
    
    
    
    
    
    
    
    4,934Depletion and depreciation
    
    
    1
    
    
    
    
    
    
    
    17,892
    
    
    
    
    
    
    
    1,968
    
    
    
    3
    
    
    
    19,864Foreign exchange (gain) loss
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    (45
    )
    
    
    287
    
    
    
    531Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    642
    
    
    
    
    
    
    
    54
    
    
    
    396
    
    
    
    1,0921,534
    
    
    
    102
    
    
    
    36,675
    
    
    
    
    
    
    
    6,782
    
    
    
    9,005
    
    
    
    54,098Loss from continuing operations before income taxes
    
    
    (1,534
    )
    
    
    (102
    )
    
    
    (5,885
    )
    
    
    
    
    
    
    (6,782
    )
    
    
    (8,650
    )
    
    
    (22,953
    )(Provision for) recovery
of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (359
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (363
    )Future
    
    
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    
    
    
    802
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    798Net loss from continuing operations
    
    
    (1,534
    )
    
    
    (102
    )
    
    
    (5,083
    )
    
    
    
    
    
    
    (6,784
    )
    
    
    (8,652
    )
    
    
    (22,155
    )Net income from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,942
    
    
    
    
    
    
    
    
    
    
    
    1,942Net income (loss) and
comprehensive income (loss)
    
    $
    (1,534
    )
    
    $
    (102
    )
    
    $
    (5,083
    )
    
    $
    1,942
    
    
    $
    (6,784
    )
    
    $
    (8,652
    )
    
    $
    (20,213
    )Capital Investments
    
    $
    3,998
    
    
    $
    
    
    
    $
    5,566
    
    
    $
    
    
    
    $
    3,511
    
    
    $
    
    
    
    $
    13,075
 10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  As at September 30, 2009FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    39,466
    
    
    $
    
    
    
    $
    39,466Accounts receivable
    
    
    6,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,422Note receivable
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Restricted cash
    
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    
    
    
    
    2,850Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,510
    )
    
    
    (7,510
    )Derivative instruments
    
    
    
    
    
    
    
    
    
    
    (173
    )
    
    
    
    
    
    
    (173
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,818
    )
    
    
    (42,818
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    6,670
    
    
    $
    
    
    
    $
    42,143
    
    
    $
    (52,228
    )
    
    $
    (3,415
    )
  17




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##### Table of Contents



As at December 31, 2008FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    38,477
    
    
    $
    
    
    
    $
    38,477Accounts receivable
    
    
    3,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,802Restricted cash
    
    
    
    
    
    
    
    
    
    
    850
    
    
    
    
    
    
    
    850Derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    1,459Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,219
    )
    
    
    (9,219
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,267
    )
    
    
    (38,267
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    3,802
    
    
    $
    
    
    
    $
    40,786
    
    
    $
    (49,386
    )
    
    $
    (4,798
    )
 Financial Risk Factors
  11. CAPITAL MANAGEMENT
   18




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##### Table of Contents



12. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Supplemental Cash Flow InformationCash paid during the period forIncome taxes
    
    $
    
    
    
    $
    5
    
    
    $
    1,655
    
    
    $
    5Interest
    
    $
    864
    
    
    $
    38
    
    
    $
    2,059
    
    
    $
    541Investing and Financing activities, non-cashAcquisition of oil and gas assetsDebt issued
    
    $
    
    
    
    $
    52,052
    
    
    $
    
    
    
    $
    52,052Conversion of debt to sharesExtinguishment of debt
    
    $
    
    
    
    $
    4,737
    
    
    $
    
    
    
    $
    4,737Extinguishment of interest
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    125$
    
    
    
    $
    4,862
    
    
    $
    
    
    
    $
    4,862Shares issued for bonuses
    
    $
    
    
    
    $
    490
    
    
    $
    
    
    
    $
    490Changes in non-cash working capital itemsOperating ActivitiesAccounts receivable
    
    $
    (1,308
    )
    
    $
    (2,094
    )
    
    $
    (2,669
    )
    
    $
    (3,704
    )Prepaid and other current assets
    
    
    294
    
    
    
    34
    
    
    
    287
    
    
    
    192Accounts payable and accrued liabilities
    
    
    480
    
    
    
    (54
    )
    
    
    (764
    )
    
    
    2,656Income tax payable
    
    
    619
    
    
    
    358
    
    
    
    (31
    )
    
    
    35885
    
    
    
    (1,756
    )
    
    
    (3,177
    )
    
    
    (498
    )Investing ActivitiesAccounts receivable
    
    
    3
    
    
    
    (179
    )
    
    
    49
    
    
    
    (147
    )Note receivable
    
    
    (248
    )
    
    
    
    
    
    
    (248
    )
    
    
    Prepaid and other current assets
    
    
    (11
    )
    
    
    (9
    )
    
    
    
    
    
    
    1Accounts payable and accrued liabilities
    
    
    (243
    )
    
    
    3,370
    
    
    
    (987
    )
    
    
    894(499
    )
    
    
    3,182
    
    
    
    (1,186
    )
    
    
    748Financing ActivitiesAccounts payable and accrued liabilities
    
    
    
    
    
    
    (711
    )
    
    
    (26
    )
    
    
    (9
    )$
    (414
    )
    
    $
    715
    
    
    $
    (4,389
    )
    
    $
    241
  13. INCOME TAXES
 Circular
  19




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##### Table of Contents



14. DISCONTINUED OPERATIONS
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueOil and gas revenue
    
    $
    556
    
    
    $
    5,526
    
    
    $
    5,455
    
    
    $
    15,913Gain (loss) on derivative instruments
    
    
    
    
    
    
    3,920
    
    
    
    189
    
    
    
    (3,122
    )Interest income
    
    
    
    
    
    
    21
    
    
    
    8
    
    
    
    87556
    
    
    
    9,467
    
    
    
    5,652
    
    
    
    12,878ExpensesOperating costs
    
    
    164
    
    
    
    1,585
    
    
    
    2,132
    
    
    
    3,978General and administrative
    
    
    9
    
    
    
    855
    
    
    
    139
    
    
    
    1,738Depletion and depreciation
    
    
    303
    
    
    
    1,659
    
    
    
    3,772
    
    
    
    4,813Interest expense and financing costs
    
    
    13
    
    
    
    128
    
    
    
    173
    
    
    
    407489
    
    
    
    4,227
    
    
    
    6,216
    
    
    
    10,936Income (Loss) before disposition
    
    
    67
    
    
    
    5,240
    
    
    
    (564
    )
    
    
    1,942Loss on disposition (net of tax of $29.6 millionfor 2009, nil for 2008)
    
    
    (23,357
    )
    
    
    
    
    
    
    (23,357
    )
    
    
    Net income (loss) from discontinued operations
    
    $
    (23,290
    )
    
    $
    5,240
    
    
    $
    (23,921
    )
    
    $
    1,942
  20




---



##### Table of Contents



December 31, 2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    787Accounts receivable
    
    
    1,068Prepaid and other current assets
    
    
    172Derivative instruments
    
    
    7002,727Oil and gas properties and equipment, net
    
    
    32,577Long term assets
    
    
    467$
    35,771LiabilitiesCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    874Debt  current portion
    
    
    5,2006,074Asset retirement obligations
    
    
    1,810$
    7,884
  21




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##### Table of Contents



15. ADDITIONAL DISCLOSURE REQUIRED UNDER U.S. GAAP
  Condensed Consolidated Balance Sheets
  As at September 30, 2009
    
    
    As at December 31, 2008Canadian
    
    
    Increase
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPAssetsCurrent Assets:Cash and cash equivalents
    
    $
    39,466
    
    
    $
    
    
    
    
    
    $
    39,466
    
    
    $
    38,477
    
    
    $
    
    
    
    
    
    $
    38,477Accounts receivable
    
    
    6,422
    
    
    
    
    
    
    
    
    
    6,422
    
    
    
    3,802
    
    
    
    
    
    
    
    
    
    3,802Note receivable
    
    
    248
    
    
    
    
    
    
    
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid and other current assets
    
    
    350
    
    
    
    
    
    
    
    
    
    350
    
    
    
    637
    
    
    
    
    
    
    
    
    
    1,487Restricted cash
    
    
    2,850
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    850
    
    
    
    
    
    
    
    
    
    Derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    
    
    1,459Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,727
    
    
    
    
    
    
    
    
    
    2,727Total Current Assets
    
    
    49,336
    
    
    
    
    
    
    
    
    
    49,336
    
    
    
    47,952
    
    
    
    
    
    
    
    
    
    47,952Oil and gas properties
and development costs, net
    
    
    142,933
    
    
    
    (38,500
    )
    
    (i)
    
    
    121,763
    
    
    
    143,974
    
    
    
    (38,500
    )
    
    (i)
    
    
    114,38518,982
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    9,929
    
    
    (ii)(955
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (1,018
    )
    
    (iii)(697
    )
    
    (iv)Intangible assets  technology
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153Long term assets
    
    
    608
    
    
    
    276
    
    
    (v)
    
    
    884
    
    
    
    152
    
    
    
    451
    
    
    (v)
    
    
    603Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,044
    
    
    
    (24,890
    )
    
    (xii)
    
    
    8,154Total Assets
    
    $
    285,030
    
    
    $
    (20,894
    )
    
    
    
    $
    264,136
    
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    $
    263,247Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
and accrued liabilities
    
    $
    7,510
    
    
    $
    
    
    
    
    
    $
    7,510
    
    
    $
    9,219
    
    
    $
    
    
    
    
    
    $
    9,219Income tax payable
    
    
    619
    
    
    
    
    
    
    
    
    
    619
    
    
    
    650
    
    
    
    
    
    
    
    
    
    650Debt  current portion
    
    
    6,724
    
    
    
    
    
    
    
    
    
    6,724
    
    
    
    412
    
    
    
    
    
    
    
    
    
    412Derivative instruments
    
    
    173
    
    
    
    4,891
    
    
    (viii)
    
    
    5,064
    
    
    
    
    
    
    
    1,121
    
    
    (viii)
    
    
    1,121Asset retirement obligation
  current portion
    
    
    871
    
    
    
    
    
    
    
    
    
    871
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities of discontinued
operations  current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,074
    
    
    
    
    
    
    
    
    
    6,074Total Current Liabilities
    
    
    15,897
    
    
    
    4,891
    
    
    
    
    
    20,788
    
    
    
    16,355
    
    
    
    1,121
    
    
    
    
    
    17,476Long term debt
    
    
    36,094
    
    
    
    276
    
    
    (v)
    
    
    37,583
    
    
    
    37,855
    
    
    
    451
    
    
    (v)
    
    
    40,3921,389
    
    
    (iv)
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    (iv)(176
    )
    
    (iv)Asset retirement obligations
    
    
    193
    
    
    
    
    
    
    
    
    
    193
    
    
    
    1,928
    
    
    
    
    
    
    
    
    
    1,928Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900Future income tax liability
    
    
    20,900
    
    
    
    
    
    
    
    
    
    20,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,810
    
    
    
    
    
    
    
    
    
    1,810Total Liabilities
    
    
    74,984
    
    
    
    6,380
    
    
    
    
    
    81,364
    
    
    
    59,848
    
    
    
    3,658
    
    
    
    
    
    63,506Shareholders Equity:Share capital
    
    
    414,010
    
    
    
    74,455
    
    
    (vi)
    
    
    502,525
    
    
    
    413,857
    
    
    
    74,455
    
    
    (vi)
    
    
    502,372(498
    )
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    (vii)1,358
    
    
    (ix)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (ix)13,200
    
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (viii)Purchase warrants
    
    
    18,805
    
    
    
    (18,805
    )
    
    (viii)
    
    
    
    
    
    
    18,805
    
    
    
    (18,805
    )
    
    (viii)
    
    
    Contributed surplus
    
    
    19,065
    
    
    
    (3,209
    )
    
    (vii)
    
    
    12,909
    
    
    
    16,862
    
    
    
    (3,250
    )
    
    (vii)
    
    
    10,665(2,947
    )
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    (2,947
    )
    
    (viii)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iv)
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iv)
    
    
    Accumulated deficit
    
    
    (243,920
    )
    
    
    (88,742
    )
    
    
    
    
    (332,662
    )
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    (313,296
    )Total Shareholders Equity
    
    
    210,046
    
    
    
    (27,274
    )
    
    
    
    
    182,772
    
    
    
    257,427
    
    
    
    (57,686
    )
    
    
    
    
    199,741Total Liabilities
and Shareholders Equity
    
    $
    285,030
    
    
    $
    (20,894
    )
    
    
    
    $
    264,136
    
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    $
    263,247
  22




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##### Table of Contents



Oil and Gas Properties and Development Costs
     Deferred Financing Costs
  Shareholders Equity
   23




---



##### Table of Contents



APB FASB ASC
    24




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##### Table of Contents



Condensed Consolidated Statements of Operations
  Three Months Ended September 30, 2009
    
    
    Three Months Ended September 30, 2008Canadian
    
    
    Increase
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil revenue
    
    $
    7,917
    
    
    $
    
    
    
    
    
    $
    7,917
    
    
    $
    14,912
    
    
    $
    
    
    
    
    
    $
    14,912Gain (loss) on derivative instruments
    
    
    72
    
    
    
    (1,165
    )
    
    (viii)
    
    
    (1,093
    )
    
    
    10,898
    
    
    
    14,641
    
    
    (viii)
    
    
    25,539Interest income
    
    
    2
    
    
    
    
    
    
    
    
    
    2
    
    
    
    349
    
    
    
    
    
    
    
    
    
    349Total Revenue
    
    
    7,991
    
    
    
    (1,165
    )
    
    
    
    
    6,826
    
    
    
    26,159
    
    
    
    14,641
    
    
    
    
    
    40,800ExpensesOperating costs
    
    
    2,907
    
    
    
    
    
    
    
    
    
    2,907
    
    
    
    6,626
    
    
    
    
    
    
    
    
    
    6,626General and administrative
    
    
    4,412
    
    
    
    
    
    
    
    
    
    4,412
    
    
    
    4,139
    
    
    
    
    
    
    
    
    
    4,139Business and technology development
    
    
    2,301
    
    
    
    
    
    
    
    
    
    2,301
    
    
    
    2,015
    
    
    
    11
    
    
    (x)
    
    
    2,026Depletion and depreciation
    
    
    5,308
    
    
    
    (2,887
    )
    
    (xi)
    
    
    2,421
    
    
    
    6,524
    
    
    
    (754
    )
    
    (xi)
    
    
    5,770Foreign exchange loss
    
    
    2,815
    
    
    
    104
    
    
    (iv)
    
    
    2,919
    
    
    
    210
    
    
    
    (82
    )
    
    (iv)
    
    
    128Interest expense and financing costs
    
    
    177
    
    
    
    
    
    
    
    
    
    177
    
    
    
    335
    
    
    
    
    
    
    
    
    
    335Provision for impairment
    
    
    948
    
    
    
    (26
    )
    
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Expenses
    
    
    18,868
    
    
    
    (2,809
    )
    
    
    
    
    16,059
    
    
    
    19,849
    
    
    
    (825
    )
    
    
    
    
    19,024Income (loss) from continuing operations
before income taxes
    
    
    (10,877
    )
    
    
    1,644
    
    
    
    
    
    (9,233
    )
    
    
    6,310
    
    
    
    15,466
    
    
    
    
    
    21,776(Provision for) recovery of income taxesCurrent
    
    
    (618
    )
    
    
    
    
    
    
    
    
    (618
    )
    
    
    (363
    )
    
    
    
    
    
    
    
    
    (363
    )Future
    
    
    8,700
    
    
    
    
    
    
    
    
    
    8,700
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    
    (1,125
    )8,082
    
    
    
    
    
    
    
    
    
    8,082
    
    
    
    (1,488
    )
    
    
    
    
    
    
    
    
    (1,488
    )Net income (loss) from continuing operations
    
    
    (2,795
    )
    
    
    1,644
    
    
    
    
    
    (1,151
    )
    
    
    4,822
    
    
    
    15,466
    
    
    
    
    
    20,288Net income (loss) from discontinued
operations (net of tax)
    
    
    (23,290
    )
    
    
    22,601
    
    
    (xii)
    
    
    (689
    )
    
    
    5,240
    
    
    
    378
    
    
    (xii)
    
    
    5,618Net income (loss) and Comprehensive income
(loss)
    
    
    (26,085
    )
    
    
    24,245
    
    
    
    
    
    (1,840
    )
    
    
    10,062
    
    
    
    15,844
    
    
    
    
    
    25,906Accumulated Deficit, beginning of period
    
    
    (217,835
    )
    
    
    (112,987
    )
    
    
    
    
    (330,822
    )
    
    
    (190,265
    )
    
    
    (103,456
    )
    
    
    
    
    (293,721
    )Accumulated Deficit, end of period
    
    $
    (243,920
    )
    
    $
    (88,742
    )
    
    
    
    $
    (332,662
    )
    
    $
    (180,203
    )
    
    $
    (87,612
    )
    
    
    
    $
    (267,815
    )Net income (loss) per shareNet income (loss) from continuing
operations, basic and diluted
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    
    
    $
    (0.00
    )
    
    $
    0.02
    
    
    $
    0.06
    
    
    
    
    $
    0.08Net Income (loss) from discontinued
operations, basic and diluted
    
    
    (0.08
    )
    
    
    0.08
    
    
    
    
    
    (0.00
    )
    
    
    0.02
    
    
    
    0.00
    
    
    
    
    
    0.02Net income (loss) per share, basic and
diluted
    
    $
    (0.09
    )
    
    $
    0.09
    
    
    
    
    $
    (0.00
    )
    
    $
    0.04
    
    
    $
    0.06
    
    
    
    
    $
    0.10Weighted Average Number of shares (in
thousands)Basic
    
    
    279,427
    
    
    
    
    
    
    
    
    
    279,427
    
    
    
    265,372
    
    
    
    
    
    
    
    
    
    265,372Diluted
    
    
    279,427
    
    
    
    
    
    
    
    
    
    279,427
    
    
    
    279,641
    
    
    
    
    
    
    
    
    
    279,641
  25




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##### Table of Contents



Nine Months Ended September 30, 2009
    
    
    Nine Months Ended September 30, 2008Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil revenue
    
    $
    19,659
    
    
    $
    
    
    
    
    
    
    
    $
    19,659
    
    
    $
    37,547
    
    
    $
    
    
    
    
    
    
    
    $
    37,547Loss on derivative instruments
    
    
    (1,020
    )
    
    
    (3,770
    )
    
    (viii)
    
    
    (4,790
    )
    
    
    (6,793
    )
    
    
    (730
    )
    
    (viii)
    
    
    (7,523
    )Interest income
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    391
    
    
    
    
    
    
    
    
    
    
    
    391Total Revenue
    
    
    18,659
    
    
    
    (3,770
    )
    
    
    
    
    
    
    14,889
    
    
    
    31,145
    
    
    
    (730
    )
    
    
    
    
    
    
    30,415ExpensesOperating costs
    
    
    8,052
    
    
    
    
    
    
    
    
    
    
    
    8,052
    
    
    
    16,239
    
    
    
    
    
    
    
    
    
    
    
    16,239General and administrative
    
    
    14,126
    
    
    
    
    
    
    
    
    
    
    
    14,126
    
    
    
    11,438
    
    
    
    
    
    
    
    
    
    
    
    11,438Business and technology development
    
    
    6,104
    
    
    
    151
    
    
    (x)
    
    
    6,255
    
    
    
    4,934
    
    
    
    148
    
    
    (x)
    
    
    5,082Depletion and depreciation
    
    
    17,308
    
    
    
    (9,241
    )
    
    (xi)
    
    
    8,067
    
    
    
    19,864
    
    
    
    (2,310
    )
    
    (xi)
    
    
    17,554Foreign exchange loss
    
    
    4,501
    
    
    
    (176
    )
    
    (iv)
    
    
    4,325
    
    
    
    531
    
    
    
    (82
    )
    
    (iv)
    
    
    449Interest expense and financing costs
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    512
    
    
    
    1,092
    
    
    
    
    
    
    
    
    
    
    
    1,092Provision for impairment
    
    
    948
    
    
    
    (26
    )
    
    
    
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Expenses
    
    
    51,551
    
    
    
    (9,292
    )
    
    
    
    
    
    
    42,259
    
    
    
    54,098
    
    
    
    (2,244
    )
    
    
    
    
    
    
    51,854Loss from continuing operations before income taxes
    
    
    (32,892
    )
    
    
    5,522
    
    
    
    
    
    
    
    (27,370
    )
    
    
    (22,953
    )
    
    
    1,514
    
    
    
    
    
    
    
    (21,439
    )(Provision for) recovery of income taxesCurrent
    
    
    (1,624
    )
    
    
    
    
    
    
    
    
    
    
    (1,624
    )
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    (363
    )Future
    
    
    8,700
    
    
    
    
    
    
    
    
    
    
    
    8,700
    
    
    
    1,161
    
    
    
    
    
    
    
    
    
    
    
    1,1617,076
    
    
    
    
    
    
    
    
    
    
    
    7,076
    
    
    
    798
    
    
    
    
    
    
    
    
    
    
    
    798Net loss from continuing operations
    
    
    (25,816
    )
    
    
    5,522
    
    
    
    
    
    
    
    (20,294
    )
    
    
    (22,155
    )
    
    
    1,514
    
    
    
    
    
    
    
    (20,641
    )Net income (loss) from discontinued operations (net of tax)
    
    
    (23,921
    )
    
    
    24,849
    
    
    (xii)
    
    
    928
    
    
    
    1,942
    
    
    
    1,129
    
    
    (xii)
    
    
    3,071Net Loss and Comprehensive Loss
    
    
    (49,737
    )
    
    
    30,371
    
    
    
    
    
    
    
    (19,366
    )
    
    
    (20,213
    )
    
    
    2,643
    
    
    
    
    
    
    
    (17,570
    )Accumulated Deficit, beginning of year
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    
    
    (313,296
    )
    
    
    (159,990
    )
    
    
    (90,255
    )
    
    
    
    
    
    
    (250,245
    )Accumulated Deficit, end of period
    
    $
    (243,920
    )
    
    $
    (88,742
    )
    
    
    
    
    
    $
    (332,662
    )
    
    $
    (180,203
    )
    
    $
    (87,612
    )
    
    
    
    
    
    $
    (267,815
    )Net income (loss) per shareNet Loss from continuing operations, basic and diluted
    
    $
    (0.09
    )
    
    $
    0.02
    
    
    
    
    
    
    $
    (0.07
    )
    
    $
    (0.09
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.08
    )Net Income (loss) from discontinued operations, basic and diluted
    
    
    (0.09
    )
    
    
    0.09
    
    
    
    
    
    
    
    0.00
    
    
    
    0.01
    
    
    
    0.00
    
    
    
    
    
    
    
    0.01Net Loss per share, basic and diluted
    
    $
    (0.18
    )
    
    $
    0.11
    
    
    
    
    
    
    $
    (0.07
    )
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    (0.07
    )Weighted Average Number of shares (in thousands)Basic and Diluted
    
    
    279,381
    
    
    
    
    
    
    
    
    
    
    
    279,381
    
    
    
    251,907
    
    
    
    
    
    
    
    
    
    
    
    251,907
 Development Costs
   26




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##### Table of Contents



Depletion and Depreciation
  Discontinued Operations
   Condensed Consolidated Statement of Cash Flow
  Additional U.S. GAAP Disclosures
 ASC 820
 Level 1:
 Level 2:
 Level 3:
   As at September 30, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative instruments liabilities
    
    $
    4,891
    
    
    $
    173
    
    
    $
    
    
    
    $
    5,064
   27




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##### Table of Contents



Impact of New and Pending U.S. GAAP Accounting Standards
    Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities-a replacement of FASB Statement No. 125, Accounting for Transfers of Financial Assets  An Amendment of FASB
Statement No. 140
    28




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##### Table of Contents



Three-Month Periods Ended September 30,2009
    
    
    2008Realized loss on derivative transactions
    
    $
    
    
    
    $
    (1,808
    )Unrealized gains on derivative transactions
    
    
    72
    
    
    
    12,706$
    72
    
    
    $
    10,898
 Nine-Month Periods Ended September 30,2009
    
    
    2008Realized gains (losses) on derivative transactions
    
    $
    612
    
    
    $
    (4,663
    )Unrealized losses on derivative transactions
    
    
    (1,632
    )
    
    
    (2,130
    )$
    (1,020
    )
    
    $
    (6,793
    )
      29




---



##### Table of Contents



ASU 09-05
   30




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
 TM TM TM
   SPECIAL NOTE TO CANADIAN INVESTORS
 SEC CSA National Instrument 51-101  Standards of
Disclosure for Oil and Gas Activities Special Note to Canadian
Investors
   Bbl
    
    = barrel
    
    Mboe/d
    
    = thousands of barrels of oil equivalent per dayBbls/d
    
    = barrels per day
    
    MMBbl
    
    = million barrelsBopd
    
    = barrels of oil per day
    
    MMBls/d
    
    = million barrels per dayBoe
    
    = barrel of oil equivalent
    
    Mcf
    
    = thousand cubic feetBoe/d
    
    = barrels of oil equivalent per day
    
    Mcf/d
    
    = thousand cubic feet per dayMBbl
    
    = thousand barrels
    
    MMBtu
    
    = million British thermal unitsMBbls/d
    
    = thousand barrels per day
    
    MMcf
    
    = million cubic feetMboe
    
    = thousands of barrels of oil equivalent
    
    MMcf/d
    
    = million cubic feet per day
  31




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##### Table of Contents



www.ivanhoeenergy.com www.sec.gov www.sedar.com
 Ivanhoe Energys Business
 TM
   TM
 Form 10-Q
 Oil and Gas
 Integrated
 TM
 Conventional
   32




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##### Table of Contents



Business and Technology Development
   Corporate
 ,
    Corporate Strategy
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
       33




---



##### Table of Contents



Ivanhoes Value Proposition
 TM
   1.
    
    Virtual elimination of external energy requirements for steam generation and/or power
for upstream operations.
 2.
    
    Elimination of the need for diluent or blend oils for transport.
 3.
    
    Capture of the majority of the heavy versus light oil value differential.
 4.
    
    Relatively small minimum economic scale of operations suited for field upgrading and
for smaller field developments.
 TM
 TM
 Implementation Strategy  Heavy Oil
   Execute . TM
 Additional projects . TM
 Advance the technology . TM TM FTF
 Finance initial projects.
 Build internal capabilities. TM TM
  34




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##### Table of Contents



Executive Overview of 2009 Results
  Three-Month
Periods EndedSeptember 30,
    
    

Nine-Month
Periods EndedSeptember 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Oil revenues
    
    $
    7,917
    
    
    $
    14,912
    
    
    $
    19,659
    
    
    $
    37,547Net income (loss) from continuing operations
    
    $
    (2,795
    )
    
    $
    4,822
    
    
    $
    (25,816
    )
    
    $
    (22,155
    )Net income (loss) from continuing operations per share  basic and diluted
    
    $
    (0.01
    )
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    (0.09
    )Net income (loss) and comprehensive income (loss)
    
    $
    (26,085
    )
    
    $
    10,062
    
    
    $
    (49,737
    )
    
    $
    (20,213
    )Net income (loss) per share  basic and diluted
    
    $
    (0.09
    )
    
    $
    0.04
    
    
    $
    (0.18
    )
    
    $
    (0.08
    )Average production (Boe/d)
    
    
    1,403
    
    
    
    1,334
    
    
    
    1,421
    
    
    
    1,329Net operating revenue per Boe
    
    $
    38.82
    
    
    $
    67.50
    
    
    $
    29.91
    
    
    $
    58.50Cash flow provided by (used in) operating activities from continuing operations
    
    $
    (1,066
    )
    
    $
    67
    
    
    $
    (10,863
    )
    
    $
    2,358Cash flow provided by (used in) operating activities
    
    $
    (1,201
    )
    
    $
    1,673
    
    
    $
    (8,160
    )
    
    $
    7,399Capital investments
    
    $
    (5,823
    )
    
    $
    (8,355
    )
    
    $
    (17,723
    )
    
    $
    (13,075
    )
  35




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##### Table of Contents



Financial Results  Change in Net Loss
  Three-Month
Periods EndedSeptember 30,
    
    

Nine-Month
Periods EndedSeptember 30,Favorable
    
    
    
    
    
    
    
    
    
    
    Favorable(Unfavorable)
    
    
    
    
    
    
    
    
    
    
    (Unfavorable)2009
    
    
    Variances
    
    
    2008
    
    
    2009
    
    
    Variances
    
    
    2008Summary of Net Income (Loss) by Significant Components:Cash Items:Net operating revenues:Oil Revenues:
    
    $
    7,917
    
    
    
    
    
    
    $
    14,912
    
    
    $
    19,659
    
    
    
    
    
    
    $
    37,547Production volumes
    
    
    
    
    
    $
    767
    
    
    
    
    
    
    
    
    
    
    $
    2,409Oil prices
    
    
    
    
    
    
    (7,762
    )
    
    
    
    
    
    
    
    
    
    
    (20,297
    )Realized gain (loss)
on derivative instruments
    
    
    
    
    
    
    1,808
    
    
    
    (1,808
    )
    
    
    612
    
    
    
    5,275
    
    
    
    (4,663
    )Operating costs
    
    
    (2,907
    )
    
    
    3,719
    
    
    
    (6,626
    )
    
    
    (8,052
    )
    
    
    8,187
    
    
    
    (16,239
    )General and administrative, less
stock based compensation
    
    
    (3,244
    )
    
    
    258
    
    
    
    (3,502
    )
    
    
    (12,039
    )
    
    
    (2,665
    )
    
    
    (9,374
    )Business and technology development,
less stock based compensation
    
    
    (2,198
    )
    
    
    (394
    )
    
    
    (1,804
    )
    
    
    (5,949
    )
    
    
    (1,519
    )
    
    
    (4,430
    )Current provision for income taxes
    
    
    (618
    )
    
    
    (255
    )
    
    
    (363
    )
    
    
    (1,624
    )
    
    
    (1,261
    )
    
    
    (363
    )Foreign exchange loss
    
    
    (2,815
    )
    
    
    (2,605
    )
    
    
    (210
    )
    
    
    (4,501
    )
    
    
    (3,970
    )
    
    
    (531
    )Net interest
    
    
    (77
    )
    
    
    (224
    )
    
    
    147
    
    
    
    (240
    )
    
    
    111
    
    
    
    (351
    )(3,942
    )
    
    
    (4,688
    )
    
    
    746
    
    
    
    (12,134
    )
    
    
    (13,730
    )
    
    
    1,596Non-Cash Items:Unrealized gain (loss)
on derivative instruments
    
    
    72
    
    
    
    (12,634
    )
    
    
    12,706
    
    
    
    (1,632
    )
    
    
    498
    
    
    
    (2,130
    )Depletion and depreciation
    
    
    (5,308
    )
    
    
    1,216
    
    
    
    (6,524
    )
    
    
    (17,308
    )
    
    
    2,556
    
    
    
    (19,864
    )Stock based compensation
    
    
    (1,270
    )
    
    
    (420
    )
    
    
    (850
    )
    
    
    (2,242
    )
    
    
    328
    
    
    
    (2,570
    )Provision for impairment
    
    
    (948
    )
    
    
    (948
    )
    
    
    
    
    
    
    (948
    )
    
    
    (948
    )
    
    
    Future income tax recovery (provision)
    
    
    8,700
    
    
    
    9,825
    
    
    
    (1,125
    )
    
    
    8,700
    
    
    
    7,539
    
    
    
    1,161Discontinued operations (net of tax)
    
    
    (23,290
    )
    
    
    (28,530
    )
    
    
    5,240
    
    
    
    (23,921
    )
    
    
    (25,863
    )
    
    
    1,942Other
    
    
    (99
    )
    
    
    32
    
    
    
    (131
    )
    
    
    (252
    )
    
    
    96
    
    
    
    (348
    )(22,143
    )
    
    
    (31,459
    )
    
    
    9,316
    
    
    
    (37,603
    )
    
    
    (15,794
    )
    
    
    (21,809
    )Net income (loss)
    
    $
    (26,085
    )
    
    $
    (36,147
    )
    
    $
    10,062
    
    
    $
    (49,737
    )
    
    $
    (29,524
    )
    
    $
    (20,213
    )
    36




---



##### Table of Contents



Revenues and Operating Costs
 China
  Three
Months EndedSeptember 30,
    
    

Nine
Months EndedSeptember 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Production:Boe
    
    
    129,074
    
    
    
    122,725
    
    
    
    388,033
    
    
    
    364,203Boe/day for the period
    
    
    1,403
    
    
    
    1,334
    
    
    
    1,421
    
    
    
    1,329Per Boe
    
    
    Per BoeOil revenue
    
    $
    61.34
    
    
    $
    121.50
    
    
    $
    50.66
    
    
    $
    103.09Field operating costs
    
    
    15.47
    
    
    
    22.58
    
    
    
    17.06
    
    
    
    20.48Windfall Levy
    
    
    6.32
    
    
    
    30.47
    
    
    
    2.99
    
    
    
    22.94Engineering and support costs
    
    
    0.73
    
    
    
    0.95
    
    
    
    0.70
    
    
    
    1.1722.52
    
    
    
    54.00
    
    
    
    20.75
    
    
    
    44.59Net operating revenue
    
    
    38.82
    
    
    
    67.50
    
    
    
    29.91
    
    
    
    58.50Depletion
    
    
    39.74
    
    
    
    48.01
    
    
    
    40.32
    
    
    
    49.12Net revenue (loss) from operations
    
    $
    (0.92
    )
    
    $
    19.49
    
    
    $
    (10.41
    )
    
    $
    9.38
  
    
    Production Volumes
 Three-Month
Periods EndedSeptember 30,
    
    

Nine-Month
Periods EndedSeptember 30,Net Boes
    
    
    Percentage
    
    
    Net Boes
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    ChangeChina:Dagang
    
    
    125,079
    
    
    
    118,110
    
    
    
    6
    %
    
    
    377,451
    
    
    
    349,599
    
    
    
    8
    %Daqing
    
    
    3,995
    
    
    
    4,615
    
    
    
    -13
    %
    
    
    10,582
    
    
    
    14,604
    
    
    
    -28
    %129,074
    
    
    
    122,725
    
    
    
    5
    %
    
    
    388,033
    
    
    
    364,203
    
    
    
    7
    %
   
    
    Oil Prices
   37




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##### Table of Contents



Three Months Ended
    
    
    Favorable
    
    
    Three Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2009
    
    
    Variances
    
    
    2008$
    
    
    
    $
    1,808
    
    
    $
    (1,808
    )
 Nine Months Ended
    
    
    Favorable
    
    
    Nine Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2009
    
    
    Variances
    
    
    2008$
    612
    
    
    $
    5,275
    
    
    $
    (4,663
    )
 
    
    Operating Costs
  General and Administrative
  Three Months
    
    
    Nine MonthsEnded
    
    
    Ended2009 vs.
    
    
    2009 vs.2008
    
    
    2008Favorable (unfavorable) variances:Oil Activities:Canada
    
    $
    416
    
    
    $
    831Ecuador
    
    
    (505
    )
    
    
    (1,481
    )China
    
    
    (15
    )
    
    
    (50
    )Corporate
    
    
    (169
    )
    
    
    (1,988
    )(273
    )
    
    
    (2,688
    )Less: stock based compensation
    
    
    531
    
    
    
    23$
    258
    
    
    $
    (2,665
    )
  38




---



##### Table of Contents



Canada
  Ecuador
  China
  Corporate
   Business and Technology Development
  Foreign Exchange Loss
  Net Interest
   39




---



##### Table of Contents



Unrealized Gain (Loss) on Derivative Instruments
   Three Months Ended
    
    
    Favorable
    
    
    Three Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2009
    
    
    Variances
    
    
    2008$
    72
    
    
    $
    (12,634
    )
    
    $
    12,706
 Nine Months Ended
    
    
    Favorable
    
    
    Nine Months EndedSeptember 30,
    
    
    (Unfavorable)
    
    
    September 30,2009
    
    
    Variances
    
    
    2008$
    (1,632
    )
    
    $
    498
    
    
    $
    (2,130
    )
 Depletion and Depreciation
  China
  Provision for/Recovery of Income Taxes
 China
   40




---



##### Table of Contents



Business and Technology Development
  Discontinued Operations
  Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
  Three-Month Periods Ended 
September 30,
    
    
    Nine-Month Periods Ended
 September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    (1,201
    )
    
    $
    1,673
    
    
    $
    (8,160
    )
    
    $
    7,399Net cash provided by (used in) investing activities
    
    $
    27,354
    
    
    $
    (29,109
    )
    
    $
    14,028
    
    
    $
    (39,460
    )Net cash provided by (used in) financing activities
    
    $
    (5,102
    )
    
    $
    81,337
    
    
    $
    (5,644
    )
    
    $
    84,921Net increase (decrease) in cash and cash equivalents
    
    $
    21,063
    
    
    $
    51,435
    
    
    $
    201
    
    
    $
    50,293
   
    
    Inability to attract strategic investors to our projects,
 
    
    Volatility in the public debt and private and equity markets,
 
    
    Increases in interest rates or credit spreads, as well as limitations on the
availability of credit, that affect our ability to borrow under future potential credit
facilities on a secured or unsecured basis, and
 
    
    A decrease in the market price for our common stock.
 Operating Activities
   41




---



##### Table of Contents



Investing Activities
   Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2009
    
    
    2008
    
    
    Decrease
    
    
    2009
    
    
    2008
    
    
    DecreaseOil and Gas Activities:Canada
    
    $
    3,186
    
    
    $
    3,997
    
    
    $
    811
    
    
    $
    9,263
    
    
    $
    3,998
    
    
    $
    (5,265
    )Ecuador
    
    
    1,333
    
    
    
    
    
    
    
    (1,333
    )
    
    
    2,883
    
    
    
    
    
    
    
    (2,883
    )China
    
    
    1,179
    
    
    
    1,793
    
    
    
    614
    
    
    
    3,702
    
    
    
    5,566
    
    
    
    1,864Business and Technology Development
    
    
    125
    
    
    
    2,565
    
    
    
    2,440
    
    
    
    1,818
    
    
    
    3,511
    
    
    
    1,693Corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    (57
    )$
    5,823
    
    
    $
    8,355
    
    
    $
    2,532
    
    
    $
    17,723
    
    
    $
    13,075
    
    
    $
    (4,648
    )
 
    
    Canada
  
    
    Ecuador
 TM
 
    
    China
  
    
    Business and Technology Development
  Financing Activities
 Special
Warrants Offering
  42




---



##### Table of Contents



Outlook for balance of 2009
     Contractual Obligations
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    After 2012Consolidated Balance Sheets:Note payable  current portion
    
    $
    6,724
    
    
    $
    
    
    
    
    6,724
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt
    
    
    36,094
    
    
    
    
    
    
    
    
    
    
    
    36,094
    
    
    
    
    
    
    
    Asset retirement obligation
    
    
    1,064
    
    
    
    
    
    
    
    871
    
    
    
    
    
    
    
    
    
    
    
    193Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    Other Commitments:Interest payable
    
    
    4,592
    
    
    
    702
    
    
    
    2,683
    
    
    
    1,207
    
    
    
    
    
    
    
    Lease commitments
    
    
    2,624
    
    
    
    324
    
    
    
    1,083
    
    
    
    744
    
    
    
    347
    
    
    
    126Zitong exploration commitment
    
    
    24,694
    
    
    
    13,123
    
    
    
    11,571
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    77,692
    
    
    $
    14,149
    
    
    $
    22,932
    
    
    $
    38,045
    
    
    $
    2,247
    
    
    $
    319
 Off Balance Sheet Arrangements
   43




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##### Table of Contents



Outstanding Share Data
  Quarterly Financial Data In Accordance With Canadian and U.S. GAAP (Unaudited)
 QUARTER ENDED2009
    
    
    2008
    
    
    20073rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th QtrTotal revenueCanadian GAAP
    
    $
    7,991
    
    
    $
    4,844
    
    
    $
    5,824
    
    
    $
    19,524
    
    
    $
    26,159
    
    
    $
    (3,249
    )
    
    $
    8,235
    
    
    $
    5,336U.S. GAAP
    
    $
    6,826
    
    
    $
    4,280
    
    
    $
    3,783
    
    
    $
    24,919
    
    
    $
    40,800
    
    
    $
    (15,453
    )
    
    $
    5,068
    
    
    $
    6,453Net income (loss) from continuing operations:Canadian GAAP
    
    $
    (2,795
    )
    
    $
    (11,444
    )
    
    $
    (11,577
    )
    
    $
    (16,322
    )
    
    $
    4,822
    
    
    $
    (18,547
    )
    
    $
    (8,430
    )
    
    $
    (16,178
    )U.S. GAAP
    
    $
    (1,151
    )
    
    $
    (8,985
    )
    
    $
    (10,158
    )
    
    $
    (27,189
    )
    
    $
    20,206
    
    
    $
    (30,201
    )
    
    $
    (10,728
    )
    
    $
    (13,959
    )Net income (loss) from discontinued operations (net of tax):Canadian GAAP
    
    $
    (23,290
    )
    
    $
    66
    
    
    $
    (697
    )
    
    $
    2,342
    
    
    $
    5,240
    
    
    $
    (3,184
    )
    
    $
    (114
    )
    
    $
    (2,671
    )U.S. GAAP
    
    $
    (689
    )
    
    $
    1,151
    
    
    $
    466
    
    
    $
    (18,210
    )
    
    $
    5,618
    
    
    $
    (2,780
    )
    
    $
    234
    
    
    $
    (2,266
    )Net income (loss) per share  continuing operationsCanadian GAAP
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )U.S. GAAP
    
    $
    (0.00
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.10
    )
    
    $
    0.07
    
    
    $
    (0.12
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )Net income (loss) per share  discontinued operationsCanadian GAAP
    
    $
    (0.08
    )
    
    $
    0.00
    
    
    $
    (0.00
    )
    
    $
    0.01
    
    
    
    0.02
    
    
    
    (0.01
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )U.S. GAAP
    
    $
    (0.00
    )
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    
    0.02
    
    
    
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
  Transition to International Financial Reporting Standards (IFRS)
 IFRS
   44




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##### Table of Contents



IASB First Time Adoption of International Financial
Reporting Standards
 
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
     45




---



##### Table of Contents



Part II  Other Information
 
 Item 1.
    
    Legal Proceedings:
  
 Item 1A.
    
    Risk Factors:
 Form 10-K.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds:None
 
 Item 3.
    
    Defaults Upon Senior Securities:None
 
 Item 4.
    
    Submission of Matters To a Vote of Security Holders:None
 
 Item 5.
    
    Other Information:None
 
 Item 6.
    
    Exhibits
 EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    
    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




---



##### Table of Contents



IVANHOE ENERGY INC.By:
    
    /s/ W. Gordon LancasterName:
    
    W. Gordon LancasterTitle:
    
    Chief Financial Officer
   47




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    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
  48