##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarterly period ended June 30, 2005
 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
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 Suite 654  999 Canada Place
Vancouver, British Columbia, Canada
V6C 3E1
 (Address of principal executive office)
 (604) 688-8323
 (registrants telephone number, including area code)
 
  þ o
  þ o
    1




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##### 



TABLE OF CONTENTS
 PagePART I
    
    Financial InformationItem 1
    
    Financial StatementsUnaudited Condensed Consolidated Balance Sheets as at June 30, 2005 and December 31, 2004
    
    
    3Unaudited Condensed Consolidated Statements of Loss and Accumulated Deficit for the Three-Month and Six-Month Periods Ended June 30, 2005 and 2004
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flow for the Three-Month and Six-Month Periods Ended June 30, 2005 and 2004
    
    
    5Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risks
    
    
    34Item 4.
    
    Controls and Procedures
    
    
    34PART II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3.
    
    Defaults Upon Senior Securities
    
    
    35Item 4.
    
    Submission of Matters to a Vote of Securityholders
    
    
    35Item 5.
    
    Other Information
    
    
    35Item 6.
    
    Exhibits
    
    
    35
 2




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##### 



Part I  Financial Information
 
 Item 1 Financial Statements
 IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Balance Sheets
 June 30, 2005
    
    
    December 31, 2004AssetsCurrent AssetsCash and cash equivalents
    
    $
    3,728
    
    
    $
    9,322Notes and accounts receivable
    
    
    5,998
    
    
    
    5,377Prepaid and other current assets
    
    
    512
    
    
    
    81210,238
    
    
    
    15,511Long term assets
    
    
    1,392
    
    
    
    6,424Oil and gas properties and investments, net
    
    
    121,238
    
    
    
    96,551Intangible asset
    
    
    89,932
    
    
    
    $
    222,800
    
    
    $
    118,486Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    18,611
    
    
    $
    9,845Note payable  current portion
    
    
    1,667
    
    
    
    1,667Convertible loans
    
    
    8,000
    
    
    
    28,278
    
    
    
    11,512Long term debt
    
    
    1,806
    
    
    
    2,639Asset retirement obligations
    
    
    1,688
    
    
    
    749Commitments and contingencies
    
    
    1,900
    
    
    
    Shareholders EquityShare capital, issued 201,432,299 common shares;
December 31, 2004 169,664,911 common shares
    
    
    260,709
    
    
    
    183,617Warrants
    
    
    10,153
    
    
    
    Contributed surplus
    
    
    2,559
    
    
    
    1,748Accumulated deficit
    
    
    (84,293
    )
    
    
    (81,779
    )189,128
    
    
    
    103,586$
    222,800
    
    
    $
    118,486
  3




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##### 



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Loss and Accumulated Deficit
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenueOil and gas revenue
    
    $
    6,617
    
    
    $
    3,472
    
    
    $
    12,310
    
    
    $
    6,764Interest income
    
    
    28
    
    
    
    49
    
    
    
    71
    
    
    
    896,645
    
    
    
    3,521
    
    
    
    12,381
    
    
    
    6,853ExpensesOperating costs
    
    
    1,771
    
    
    
    1,157
    
    
    
    3,533
    
    
    
    2,431General and administrative
    
    
    1,506
    
    
    
    1,462
    
    
    
    3,917
    
    
    
    3,066Business development
    
    
    1,178
    
    
    
    422
    
    
    
    1,897
    
    
    
    699Depletion and depreciation
    
    
    2,567
    
    
    
    1,503
    
    
    
    4,774
    
    
    
    2,949Interest expense
    
    
    375
    
    
    
    25
    
    
    
    495
    
    
    
    48Write down of GTL investments
    
    
    279
    
    
    
    250
    
    
    
    279
    
    
    
    2507,676
    
    
    
    4,819
    
    
    
    14,895
    
    
    
    9,443Net Loss
    
    
    1,031
    
    
    
    1,298
    
    
    
    2,514
    
    
    
    2,590Accumulated Deficit, beginning of period
    
    
    83,262
    
    
    
    62,346
    
    
    
    81,779
    
    
    
    61,054Accumulated Deficit, end of period
    
    $
    84,293
    
    
    $
    63,644
    
    
    $
    84,293
    
    
    $
    63,644Net Loss per share  Basic and Diluted
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.02Weighted Average Number of Shares (in
thousands)
    
    
    195,200
    
    
    
    169,116
    
    
    
    183,621
    
    
    
    165,622
  4




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##### 



IVANHOE ENERGY INC.
 
 Unaudited Condensed Consolidated Statements of Cash Flow
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Operating ActivitiesNet loss
    
    $
    (1,031
    )
    
    $
    (1,298
    )
    
    $
    (2,514
    )
    
    $
    (2,590
    )Items not requiring use of cashDepletion and depreciation
    
    
    2,567
    
    
    
    1,503
    
    
    
    4,774
    
    
    
    2,949Write down of GTL investments
    
    
    279
    
    
    
    250
    
    
    
    279
    
    
    
    250Stock based compensation
    
    
    534
    
    
    
    242
    
    
    
    830
    
    
    
    481Changes in non-cash working capital items
    
    
    (499
    )
    
    
    602
    
    
    
    (744
    )
    
    
    2441,850
    
    
    
    1,299
    
    
    
    2,625
    
    
    
    1,334Investing ActivitiesCapital investments
    
    
    (12,057
    )
    
    
    (14,821
    )
    
    
    (24,337
    )
    
    
    (25,176
    )Merger, net of cash acquired
    
    
    (9,979
    )
    
    
    
    
    
    
    (9,979
    )
    
    
    Equity investment and Merger related costs
    
    
    (957
    )
    
    
    (2,000
    )
    
    
    (1,687
    )
    
    
    (2,500
    )Proceeds from sale of assets
    
    
    
    
    
    
    13,458
    
    
    
    
    
    
    
    13,458Other
    
    
    (63
    )
    
    
    (112
    )
    
    
    (54
    )
    
    
    (180
    )Changes in non-cash working capital items
    
    
    2,429
    
    
    
    5,614
    
    
    
    9,312
    
    
    
    5,131(20,627
    )
    
    
    2,139
    
    
    
    (26,745
    )
    
    
    (9,267
    )Financing ActivitiesProceeds from private placements, net of share issue costs
    
    
    10,153
    
    
    
    
    
    
    
    10,153
    
    
    
    20,428Proceeds from exercise of options and warrants
    
    
    1,690
    
    
    
    1,236
    
    
    
    1,725
    
    
    
    1,375Share issue costs on shares issued for Merger
    
    
    (93
    )
    
    
    
    
    
    
    (93
    )
    
    
    Proceeds from debt obligations
    
    
    2,000
    
    
    
    2,000
    
    
    
    8,000
    
    
    
    12,000Repayments of debt obligations
    
    
    (417
    )
    
    
    (10,000
    )
    
    
    (833
    )
    
    
    (10,000
    )Other
    
    
    (163
    )
    
    
    
    
    
    
    (426
    )
    
    
    13,170
    
    
    
    (6,764
    )
    
    
    18,526
    
    
    
    23,803Increase (decrease) in cash and cash equivalents, for the
period
    
    
    (5,607
    )
    
    
    (3,326
    )
    
    
    (5,594
    )
    
    
    15,870Cash and cash equivalents, beginning of period
    
    
    9,335
    
    
    
    33,687
    
    
    
    9,322
    
    
    
    14,491Cash and cash equivalents, end of period
    
    $
    3,728
    
    
    $
    30,361
    
    
    $
    3,728
    
    
    $
    30,361Supplementary Information Regarding Non-Cash
TransactionsFinancing activities, non-cash:Shares issued for Merger
    
    $
    (75,000
    )
    
    $
    
    
    
    $
    (75,000
    )
    
    $
    Included in the above are the following:Taxes paid
    
    $
    2
    
    
    $
    
    
    
    $
    4
    
    
    $
    3Interest paid
    
    $
    265
    
    
    $
    14
    
    
    $
    14
    
    
    $
    28Changes in non-cash working capital itemsOperating Activities:Notes and accounts receivable
    
    $
    (275
    )
    
    $
    (266
    )
    
    $
    (314
    )
    
    $
    (856
    )Prepaid and other current assets
    
    
    85
    
    
    
    3
    
    
    
    (45
    )
    
    
    31Accounts payable and accrued liabilities
    
    
    (309
    )
    
    
    865
    
    
    
    (385
    )
    
    
    1,069(499
    )
    
    
    602
    
    
    
    (744
    )
    
    
    244Investing ActivitiesNotes and accounts receivable
    
    
    432
    
    
    
    (831
    )
    
    
    (405
    )
    
    
    (1,153
    )Prepaid and other current assets
    
    
    127
    
    
    
    
    
    
    
    350
    
    
    
    Accounts payable and accrued liabilities
    
    
    1,870
    
    
    
    6,445
    
    
    
    9,367
    
    
    
    6,2842,429
    
    
    
    5,614
    
    
    
    9,312
    
    
    
    5,131$
    1,930
    
    
    $
    6,216
    
    
    $
    8,568
    
    
    $
    5,375
  5




---



##### 



Notes to the Condensed Consolidated Financial Statements
June 30, 2005
 1. BASIS OF PRESENTATION AND LIQUIDITY
 GAAP
    2. SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
 Ensyn Merger Merger Agreement
 6




---



##### 



RTPTM RTPTM CDF TM
  Intangible Assets
  RTPTMTechnology TM TM TM TM  TM
 Development Costs
 GTL EOR TM MOU
 TM
 TM
 7




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##### 



3. OIL AND GAS PROPERTIES AND INVESTMENTS
  As at June 30, 2005Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    TotalOil and Gas Properties:Proved
    
    $
    83,733
    
    
    $
    51,029
    
    
    $
    
    
    
    $
    
    
    
    $
    134,762Unproved
    
    
    21,670
    
    
    
    13,576
    
    
    
    
    
    
    
    
    
    
    
    35,246105,403
    
    
    
    64,605
    
    
    
    
    
    
    
    
    
    
    
    170,008Accumulated depletion
    
    
    (13,398
    )
    
    
    (8,934
    )
    
    
    
    
    
    
    
    
    
    
    (22,332
    )Accumulated provision for impairment
    
    
    (50,350
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,350
    )41,655
    
    
    
    55,671
    
    
    
    
    
    
    
    
    
    
    
    97,326GTL and EOR Investments:GTL master license
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    10,000Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,572
    
    
    
    4,572Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    4,245
    
    
    
    4,923
    
    
    
    9,168
    
    
    
    
    
    
    
    14,245
    
    
    
    9,495
    
    
    
    23,740Furniture and equipment
    
    
    438
    
    
    
    95
    
    
    
    
    
    
    
    15
    
    
    
    548Accumulated depreciation
    
    
    (343
    )
    
    
    (29
    )
    
    
    
    
    
    
    (4
    )
    
    
    (376
    )95
    
    
    
    66
    
    
    
    
    
    
    
    11
    
    
    
    172$
    41,750
    
    
    $
    55,737
    
    
    $
    14,245
    
    
    $
    9,506
    
    
    $
    121,238
 As at December 31, 2004Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    TotalOil and Gas Properties:Proved
    
    $
    81,648
    
    
    $
    35,771
    
    
    $
    
    
    
    $
    
    
    
    $
    117,419Unproved
    
    
    20,447
    
    
    
    10,581
    
    
    
    
    
    
    
    
    
    
    
    31,028102,095
    
    
    
    46,352
    
    
    
    
    
    
    
    
    
    
    
    148,447Accumulated depletion
    
    
    (10,956
    )
    
    
    (6,663
    )
    
    
    
    
    
    
    
    
    
    
    (17,619
    )Accumulated provision for impairment
    
    
    (50,350
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,350
    )40,789
    
    
    
    39,689
    
    
    
    
    
    
    
    
    
    
    
    80,478GTL and EOR Investments:GTL master license
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    10,000Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    3,793
    
    
    
    2,091
    
    
    
    5,884
    
    
    
    
    
    
    
    13,793
    
    
    
    2,091
    
    
    
    15,884Furniture and equipment
    
    
    417
    
    
    
    84
    
    
    
    
    
    
    
    11
    
    
    
    512Accumulated depreciation
    
    
    (300
    )
    
    
    (22
    )
    
    
    
    
    
    
    (1
    )
    
    
    (323
    )117
    
    
    
    62
    
    
    
    
    
    
    
    10
    
    
    
    189$
    40,906
    
    
    $
    39,751
    
    
    $
    13,793
    
    
    $
    2,101
    
    
    $
    96,551
     8




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##### 



TM TM TM TM
  4. LONG TERM ASSETS
 EPIL TM
 5. INTANGIBLE ASSET
 TM TM
 6. SEGMENT INFORMATION
  Three-Month Period Ended June 30, 2005Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    3,294
    
    
    $
    3,323
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,617Interest income
    
    
    4
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    283,298
    
    
    
    3,324
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    6,645Operating costs
    
    
    1,152
    
    
    
    619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,771General and administrative
    
    
    258
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    1,111
    
    
    
    1,506Business development
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    859
    
    
    
    
    
    
    
    1,178Depletion and depreciation
    
    
    1,315
    
    
    
    1,237
    
    
    
    3
    
    
    
    9
    
    
    
    3
    
    
    
    2,567Interest expense
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    375Write-downs and provision for impairment
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    2792,809
    
    
    
    1,993
    
    
    
    601
    
    
    
    868
    
    
    
    1,405
    
    
    
    7,676Net (Income) Loss
    
    $
    (489
    )
    
    $
    (1,331
    )
    
    $
    601
    
    
    $
    868
    
    
    $
    1,382
    
    
    $
    1,031Capital Investments
    
    $
    1,711
    
    
    $
    8,700
    
    
    $
    516
    
    
    $
    1,130
    
    
    $
    
    
    
    $
    12,057
 9




---



##### 



Six-Month Period Ended June 30, 2005Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    6,163
    
    
    $
    6,147
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,310Interest income
    
    
    10
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    716,173
    
    
    
    6,150
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    12,381Operating costs
    
    
    2,269
    
    
    
    1,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,533General and administrative
    
    
    414
    
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    3,141
    
    
    
    3,917Business development
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    1,174
    
    
    
    
    
    
    
    1,897Depletion and depreciation
    
    
    2,483
    
    
    
    2,271
    
    
    
    6
    
    
    
    11
    
    
    
    3
    
    
    
    4,774Interest expense
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341
    
    
    
    495Write-downs and provision for impairment
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    2795,320
    
    
    
    3,897
    
    
    
    1,008
    
    
    
    1,185
    
    
    
    3,485
    
    
    
    14,895Net (Income) Loss
    
    $
    (853
    )
    
    $
    (2,253
    )
    
    $
    1,008
    
    
    $
    1,185
    
    
    $
    3,427
    
    
    $
    2,514Capital Investments
    
    $
    2,511
    
    
    $
    18,251
    
    
    $
    731
    
    
    $
    2,844
    
    
    $
    
    
    
    $
    24,337Identifiable Assets (As at June 30, 2005)
    
    $
    45,854
    
    
    $
    59,856
    
    
    $
    14,289
    
    
    $
    99,657
    
    
    $
    3,144
    
    
    $
    222,800Identifiable Assets (As at December 31, 2004)
    
    $
    49,465
    
    
    $
    44,960
    
    
    $
    13,867
    
    
    $
    2,441
    
    
    $
    7,753
    
    
    $
    118,486
 Three-Month Period Ended June 30, 2004Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    2,006
    
    
    $
    1,466
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,472Interest income
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    492,007
    
    
    
    1,469
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    3,521Operating costs
    
    
    677
    
    
    
    480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,157General and administrative
    
    
    302
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    986
    
    
    
    1,462Business development
    
    
    
    
    
    
    
    
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    422Depletion and depreciation
    
    
    994
    
    
    
    501
    
    
    
    7
    
    
    
    
    
    
    
    1
    
    
    
    1,503Interest expense
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    25Write-downs and provision for impairment
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    2501,996
    
    
    
    1,155
    
    
    
    679
    
    
    
    
    
    
    
    989
    
    
    
    4,819Net (Income) Loss
    
    $
    (11
    )
    
    $
    (314
    )
    
    $
    679
    
    
    $
    
    
    
    $
    944
    
    
    $
    1,298Capital Investments
    
    $
    6,793
    
    
    $
    7,277
    
    
    $
    
    
    
    $
    751
    
    
    $
    
    
    
    $
    14,821
 10




---



##### 



Six-Month Period Ended June 30, 2004Oil and GasU.S.
    
    
    China
    
    
    GTL
    
    
    EOR
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    3,800
    
    
    $
    2,964
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,764Interest income
    
    
    3
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    893,803
    
    
    
    2,970
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    6,853Operating costs
    
    
    1,431
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,431General and administrative
    
    
    409
    
    
    
    430
    
    
    
    
    
    
    
    
    
    
    
    2,227
    
    
    
    3,066Business development
    
    
    
    
    
    
    
    
    
    
    699
    
    
    
    
    
    
    
    
    
    
    
    699Depletion and depreciation
    
    
    1,859
    
    
    
    1,077
    
    
    
    11
    
    
    
    
    
    
    
    2
    
    
    
    2,949Interest expense
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    48Write-downs and provision for impairment
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    2503,744
    
    
    
    2,507
    
    
    
    960
    
    
    
    
    
    
    
    2,232
    
    
    
    9,443Net (Income) Loss
    
    $
    (59
    )
    
    $
    (463
    )
    
    $
    960
    
    
    $
    
    
    
    $
    2,152
    
    
    $
    2,590Capital Investments
    
    $
    9,843
    
    
    $
    14,152
    
    
    $
    67
    
    
    $
    1,114
    
    
    $
    
    
    
    $
    25,176
 6. SHARE CAPITAL
  Common Shares
    
    
    
    
    
    
    Stock OptionsWeightedAverageExerciseNumber
    
    
    
    
    
    
    Contributed
    
    
    Number
    
    
    Price(thousands)
    
    
    Amount
    
    
    Surplus
    
    
    (thousands)
    
    
    Cdn.$Balance December 31, 2004
    
    
    169,665
    
    
    $
    183,617
    
    
    $
    1,748
    
    
    
    8,246
    
    
    $
    2.65Shares issued for Merger
    
    
    30,000
    
    
    
    74,907
    
    
    
    
    
    
    
    
    
    
    
    Shares issued for exercise of warrants
    
    
    1,500
    
    
    
    1,650
    
    
    
    
    
    
    
    
    
    
    
    Shares issued for services
    
    
    192
    
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    Shares issued on exercise of options
    
    
    75
    
    
    
    94
    
    
    
    (19
    )
    
    
    (75
    )
    
    $
    1.42Options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364
    
    
    $
    3.03Options expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (943
    )
    
    $
    6.17Stock based compensation
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    
    
    
    $
    Balance June 30, 2005
    
    
    201,432
    
    
    $
    260,709
    
    
    $
    2,559
    
    
    
    9,592
    
    
    $
    2.40
   11




---



##### 



Year of
    
    
    
    Number of
    
    RemainingSpecial
    
    Price per
    
    Purchase
    
    Number of
    
    Number of
    
    
    
    ExerciseWarrant
    
    Special
    
    Warrants
    
    Purchase
    
    Common
    
    
    
    Price perFinancing
    
    Warrant
    
    Issued
    
    Warrants
    
    Shares
    
    Expiry Date
    
    Share(thousands)2003
    
    U.S.$1.00
    
    
    3,000
    
    
    
    3,000
    
    
    
    1,500
    
    
    September 8, 2005
    
    U.S.$1.102003
    
    U.S.$1.70
    
    
    3,529
    
    
    
    3,029
    
    
    
    1,515
    
    
    September 8, 2005
    
    U.S.$1.872003
    
    U.S.$4.00
    
    
    1,250
    
    
    
    1,250
    
    
    
    1,250
    
    
    October 31, 2005
    
    U.S.$4.302004
    
    U.S.$2.90
    
    
    5,449
    
    
    
    5,449
    
    
    
    2,725
    
    
    February 18, 2006
    
    U.S.$3.202004
    
    U.S.$2.90
    
    
    1,724
    
    
    
    1,724
    
    
    
    862
    
    
    March 5, 2006
    
    U.S.$3.202005
    
    Cdn.$3.10
    
    
    4,100
    
    
    
    4,100
    
    
    
    4,100
    
    
    April 15, 2007
    
    Cdn.$3.5019,052
    
    
    
    18,552
    
    
    
    11,952
 7. STOCK BASED COMPENSATION
   8. NOTE AND ADVANCE PAYABLE
 LIBOR
  2005
    
    $
    8342006
    
    
    1,6672007
    
    
    9723,473Less: current portion
    
    
    1,667$
    1,806
  9. CONVERTIBLE LOANS
  12




---



##### 



10. ASSET RETIREMENT OBLIGATIONS
 TM
 11. MERGER
 Merger Shares
  Three-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    
    
    
    
    Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per Share
    
    
    Revenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    6,645
    
    
    $
    1,031
    
    
    $
    0.01
    
    
    $
    3,521
    
    
    $
    1,298
    
    
    $
    0.01Pro forma adjustments
    
    
    6
    
    
    
    550
    
    
    
    
    
    
    
    36
    
    
    
    330
    
    
    
    $
    6,651
    
    
    $
    1,581
    
    
    $
    0.01
    
    
    $
    3,557
    
    
    $
    1,628
    
    
    $
    0.01Weighted Average
Number of Shares
(in thousands)
    
    
    
    
    
    
    
    
    
    
    200,145
    
    
    
    
    
    
    
    
    
    
    
    199,116
 Six-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    
    
    
    
    Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per Share
    
    
    Revenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    12,381
    
    
    $
    2,514
    
    
    $
    0.01
    
    
    $
    6,853
    
    
    $
    2,590
    
    
    $
    0.02Pro forma adjustments
    
    
    736
    
    
    
    730
    
    
    
    
    
    
    
    174
    
    
    
    605
    
    
    
    $
    13,117
    
    
    $
    3,244
    
    
    $
    0.01
    
    
    $
    7,027
    
    
    $
    3,195
    
    
    $
    0.02Weighted Average
Number of Shares
(in thousands)
    
    
    
    
    
    
    
    
    
    
    200,527
    
    
    
    
    
    
    
    
    
    
    
    195,621
  13




---



##### 



Purchase Consideration29,999,886 shares of Ivanhoe at $2.50 per share
    
    $
    75,000Cash
    
    
    10,00085,000Merger related costs
    
    
    4,000Total purchase consideration and cost of the Merger
    
    $
    89,000Net Assets AcquiredCash
    
    $
    21Non-cash working capital, net
    
    
    (117
    )Oil and gas properties and investments
    
    
    4,561Intangible asset
    
    
    89,531Asset retirement obligation
    
    
    (96
    )Contingent obligation
    
    
    (1,900
    )Less : previous investment in EPIL
    
    
    (3,000
    )$
    89,000
  12. ENSYN AGREEMENTS
 RTPTM Joint Venture
 RTPTM Joint
Venture TM TM TM TM TM TM TM TM TM TM TM TM
 IE HTL Aera TM TM TM TM TM TM
 TM TM
 TM TM TM TM TM
 ConocoPhillips Canada Resources Limited
 ConocoPhillips Canada
 14




---



##### 



13. COMMITMENTS AND CONTINGENCIES
 Zitong Exploration Commitment
  Contingent Obligations
 TM
 14. SUBSEQUENT EVENT
 Private Placement
  15. ADDITIONAL DISCLOSURE REQUIRED UNDER U.S. GAAP
  Condensed Consolidated Balance Sheets
 Shareholders Equity and Oil and Gas Properties and Investments
 15




---



##### 



As at June 30, 2005Oil and Gas
    
    
    Shareholders' EquityProperties and
    
    
    Share Capital
    
    
    Contributed
    
    
    AccumulatedInvestments
    
    
    and Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    TotalCanadian GAAP
    
    $
    121,238
    
    
    $
    270,862
    
    
    $
    2,559
    
    
    $
    (84,293
    )
    
    $
    189,128Adjustment for reduction in stated capital
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    Adjustment to ascribed value of shares
issued for U.S. royalty interests, net
    
    
    1,358
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358Provision for impairment
    
    
    (8,650
    )
    
    
    
    
    
    
    
    
    
    
    (8,650
    )
    
    
    (8,650
    )Depletion adjustments due to differences in
provision for impairment
    
    
    910
    
    
    
    
    
    
    
    
    
    
    
    910
    
    
    
    910GTL and EOR development costs expensed
    
    
    (9,168
    )
    
    
    
    
    
    
    
    
    
    
    (9,168
    )
    
    
    (9,168
    )Adjustment for change in accounting for
stock based compensation
    
    
    
    
    
    
    (300
    )
    
    
    (2,458
    )
    
    
    2,758
    
    
    
    U.S. GAAP
    
    $
    105,688
    
    
    $
    346,375
    
    
    $
    101
    
    
    $
    (172,898
    )
    
    $
    173,578
 As at December 31, 2004Oil and Gas
    
    
    Shareholders' EquityProperties and
    
    
    
    
    
    
    Contributed
    
    
    AccumulatedInvestments
    
    
    Share Capital
    
    
    Surplus
    
    
    Deficit
    
    
    TotalCanadian GAAP
    
    $
    96,551
    
    
    $
    183,617
    
    
    $
    1,748
    
    
    $
    (81,779
    )
    
    $
    103,586Adjustment for reduction in stated capital
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    Adjustment to ascribed value of shares
issued for U.S. royalty interests, net
    
    
    1,358
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358Provision for impairment
    
    
    (8,650
    )
    
    
    
    
    
    
    
    
    
    
    (8,650
    )
    
    
    (8,650
    )Depletion adjustments due to differences in
provision for impairment
    
    
    482
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    482GTL and EOR development costs expensed
    
    
    (5,884
    )
    
    
    
    
    
    
    
    
    
    
    (5,884
    )
    
    
    (5,884
    )Adjustment for change in accounting for
stock based compensation
    
    
    
    
    
    
    (300
    )
    
    
    (1,660
    )
    
    
    1,960
    
    
    
    U.S. GAAP
    
    $
    83,857
    
    
    $
    259,130
    
    
    $
    88
    
    
    $
    (168,326
    )
    
    $
    90,892
 Share Capital and Accumulated Deficit
  Oil and Gas Properties and Investments
   16




---



##### 



Condensed Consolidated Statements of Loss
  Three-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    Net
    
    
    Net LossLoss
    
    
    Per Share
    
    
    Loss
    
    
    Per ShareCanadian GAAP
    
    $
    1,031
    
    
    $
    0.01
    
    
    $
    1,298
    
    
    $
    0.01Stock based compensation expense
    
    
    (566
    )
    
    
    
    
    
    
    (232
    )
    
    
    Depletion adjustments due to differences in
provision for impairment
    
    
    (256
    )
    
    
    
    
    
    
    (57
    )
    
    
    GTL and EOR development costs expensed, net
    
    
    1,355
    
    
    
    
    
    
    
    501
    
    
    
    U.S. GAAP
    
    $
    1,564
    
    
    $
    0.01
    
    
    $
    1,510
    
    
    $
    0.01Weighted Average Number of Shares
under U.S. GAAP (in
thousands)
    
    
    
    
    
    
    195,200
    
    
    
    
    
    
    
    169,116
 Six-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    Net
    
    
    Net LossLoss
    
    
    Per Share
    
    
    Loss
    
    
    Per ShareCanadian GAAP
    
    $
    2,514
    
    
    $
    0.01
    
    
    $
    2,590
    
    
    $
    0.02Stock based compensation expense
    
    
    (798
    )
    
    
    
    
    
    
    (461
    )
    
    
    Depletion adjustments due to differences in
provision for impairment
    
    
    (428
    )
    
    
    
    
    
    
    (80
    )
    
    
    GTL and EOR development costs expensed, net
    
    
    3,284
    
    
    
    0.02
    
    
    
    931
    
    
    
    U.S. GAAP
    
    $
    4,572
    
    
    
    0.03
    
    
    $
    2,980
    
    
    $
    0.02Weighted Average Number of
Shares under U.S. GAAP (in
thousands)
    
    
    
    
    
    
    183,621
    
    
    
    
    
    
    
    165,622
  17




---



##### 



Stock Based Compensation
  Three-Month Periods
    
    
    Six-Month PeriodsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss under U.S. GAAP
    
    $
    1,564
    
    
    $
    1,510
    
    
    $
    4,572
    
    
    $
    2,980Stock-based compensation expense determined under the fair
value based method for employee and director awards
    
    
    597
    
    
    
    498
    
    
    
    860
    
    
    
    992Pro forma net loss under U.S. GAAP
    
    $
    2,161
    
    
    $
    2,008
    
    
    $
    5,432
    
    
    $
    3,972Basic loss per common share under U.S. GAAP:As reported
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.02Pro forma
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.02Weighted Average Number of Shares under U.S. GAAP (in thousands)
    
    
    195,200
    
    
    
    169,116
    
    
    
    183,621
    
    
    
    165,622
  Pro Forma Effect of Merger
  18




---



##### 



Three-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    
    
    
    
    Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per Share
    
    
    Revenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    6,645
    
    
    $
    1,564
    
    
    $
    0.01
    
    
    $
    3,521
    
    
    $
    1,510
    
    
    $
    0.01Pro forma adjustments
    
    
    6
    
    
    
    550
    
    
    
    
    
    
    
    36
    
    
    
    330
    
    
    
    $
    6,651
    
    
    $
    2,114
    
    
    $
    0.01
    
    
    $
    3,557
    
    
    $
    1,840
    
    
    $
    0.01Weighted Average Number
of Shares (in thousands)
    
    
    
    
    
    
    
    
    
    
    200,145
    
    
    
    
    
    
    
    
    
    
    
    199,116
 Six-Month Periods Ended June 30,2005
    
    
    2004Net
    
    
    Net Loss
    
    
    
    
    
    
    Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per Share
    
    
    Revenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    12,381
    
    
    $
    4,572
    
    
    $
    0.03
    
    
    $
    6,853
    
    
    $
    2,980
    
    
    $
    0.02Pro forma adjustments
    
    
    736
    
    
    
    730
    
    
    
    
    
    
    
    174
    
    
    
    605
    
    
    
    $
    13,117
    
    
    $
    5,302
    
    
    $
    0.03
    
    
    $
    7,027
    
    
    $
    3,585
    
    
    $
    0.02Weighted Average Number
of Shares (in thousands)
    
    
    
    
    
    
    
    
    
    
    200,527
    
    
    
    
    
    
    
    
    
    
    
    195,621
 Condensed Consolidated Statements of Cash Flow
  Impact of New and Pending Canadian GAAP Accounting Standards
 CICA S.1530 S.3855 S.3865
  AcG 15
 19




---



##### 



Impact of New and Pending U.S. GAAP Accounting Standards
 FASB
 SFAS No. 123(R)
  FIN 47
 SFAS 154
 20




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   21




---



##### 



Executive Overview of 2005 Results
   Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 30,
    
    
    June 30,(stated in thousands of U.S. dollars, except per share and production amounts)2005
    
    
    2004
    
    
    2005
    
    
    2004Oil and gas revenue
    
    $
    6,617
    
    
    $
    3,472
    
    
    $
    12,310
    
    
    $
    6,764Net loss
    
    $
    1,031
    
    
    $
    1,298
    
    
    $
    2,514
    
    
    $
    2,590Net loss per share
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.02Average production (Mboe/d)
    
    
    1,653
    
    
    
    1,169
    
    
    
    1,659
    
    
    
    1,182Capital investments
    
    $
    12,057
    
    
    $
    14,821
    
    
    $
    24,337
    
    
    $
    25,176Cash flow from operating activities
    
    $
    1,850
    
    
    $
    1,299
    
    
    $
    2,625
    
    
    $
    1,334
 Financial
ResultsChange in Net Losses
  22




---



##### 



Three-Months
    
    
    Six-MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,(stated in thousands of U.S. Dollars)Net Losses for 2004
    
    $
    1,298
    
    
    $
    2,590Favorable (unfavorable) variances:Cash Items:Net Operating Revenues:Production volumes
    
    
    1,336
    
    
    
    2,536Oil and gas prices
    
    
    1,809
    
    
    
    3,010Less: Operating costs
    
    
    (614
    )
    
    
    (1,102
    )2,531
    
    
    
    4,444General and administrative
    
    
    248
    
    
    
    (502
    )Business development
    
    
    (756
    )
    
    
    (1,198
    )Net interest
    
    
    (371
    )
    
    
    (465
    )Total Cash Variances
    
    
    1,652
    
    
    
    2,279Non-Cash Items:Depletion and depreciation
    
    
    (1,064
    )
    
    
    (1,825
    )Stock based compensation
    
    
    (292
    )
    
    
    (349
    )Write downs of GTL investments
    
    
    (29
    )
    
    
    (29
    )Total Non-Cash Variances
    
    
    (1,385
    )
    
    
    (2,203
    )Net Losses for 2005
    
    $
    1,031
    
    
    $
    2,514
    Net Operating Revenues
 
    Production Volumes 2005 vs. 2004
   23




---



##### 



Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 30,
    
    
    June 30,Average Net Boe's
    
    
    Percentage
    
    
    Average Net Boe's
    
    
    Percentage2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeChina:Dagang
    
    
    58,285
    
    
    
    34,078
    
    
    
    71
    %
    
    
    118,521
    
    
    
    75,338
    
    
    
    57
    %Daqing
    
    
    7,849
    
    
    
    11,424
    
    
    
    -31
    %
    
    
    19,848
    
    
    
    20,526
    
    
    
    -3
    %66,134
    
    
    
    45,502
    
    
    
    45
    %
    
    
    138,369
    
    
    
    95,864
    
    
    
    44
    %U.S.:South Midway
    
    
    51,551
    
    
    
    44,149
    
    
    
    17
    %
    
    
    101,319
    
    
    
    87,299
    
    
    
    16
    %Citrus
    
    
    8,817
    
    
    
    2,437
    
    
    
    262
    %
    
    
    18,344
    
    
    
    5,870
    
    
    
    213
    %Knights Landing
    
    
    16,624
    
    
    
    3,900
    
    
    
    326
    %
    
    
    27,924
    
    
    
    3,900
    
    
    
    616
    %Others
    
    
    7,332
    
    
    
    10,362
    
    
    
    -29
    %
    
    
    14,274
    
    
    
    22,145
    
    
    
    -36
    %84,324
    
    
    
    60,848
    
    
    
    39
    %
    
    
    161,861
    
    
    
    119,214
    
    
    
    36
    %150,458
    
    
    
    106,350
    
    
    
    41
    %
    
    
    300,230
    
    
    
    215,078
    
    
    
    40
    %    Oil
and Gas Prices 2005 vs. 2004
  24




---



##### 




    Operating Costs 2005 vs. 2004
     Three-Month Periods Ended June 30,2005
    
    
    2004U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalNet Production:BOE
    
    
    84,324
    
    
    
    66,134
    
    
    
    150,458
    
    
    
    60,848
    
    
    
    45,502
    
    
    
    106,350BOE/day for the year
    
    
    927
    
    
    
    727
    
    
    
    1,653
    
    
    
    669
    
    
    
    500
    
    
    
    1,169Per BOE
    
    
    Per BOEOil and gas revenue
    
    $
    39.07
    
    
    $
    50.25
    
    
    $
    43.98
    
    
    $
    32.97
    
    
    $
    32.21
    
    
    $
    32.65Operating costs
    
    
    10.14
    
    
    
    8.15
    
    
    
    9.26
    
    
    
    7.87
    
    
    
    7.17
    
    
    
    7.57Production taxes
    
    
    0.53
    
    
    
    
    
    
    
    0.30
    
    
    
    1.12
    
    
    
    
    
    
    
    0.64Engineering support
    
    
    3.00
    
    
    
    1.21
    
    
    
    2.21
    
    
    
    2.12
    
    
    
    3.38
    
    
    
    2.6613.67
    
    
    
    9.36
    
    
    
    11.77
    
    
    
    11.11
    
    
    
    10.55
    
    
    
    10.87Net Revenue before depletion
    
    
    25.40
    
    
    
    40.89
    
    
    
    32.21
    
    
    
    21.86
    
    
    
    21.66
    
    
    
    21.78Depletion
    
    
    15.38
    
    
    
    18.70
    
    
    
    16.84
    
    
    
    15.85
    
    
    
    11.01
    
    
    
    13.78Net Revenue from operations
    
    $
    10.02
    
    
    $
    22.19
    
    
    $
    15.37
    
    
    $
    6.01
    
    
    $
    10.65
    
    
    $
    8.00
 25




---



##### 



Six-Month Periods Ended June 30,2005
    
    
    2004U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalNet Production:BOE
    
    
    161,861
    
    
    
    138,369
    
    
    
    300,230
    
    
    
    119,214
    
    
    
    95,864
    
    
    
    215,078BOE/day
    
    
    894
    
    
    
    764
    
    
    
    1,659
    
    
    
    655
    
    
    
    527
    
    
    
    1,182Per Boe
    
    Per BoeOil and gas revenue
    
    $
    38.08
    
    
    $
    44.42
    
    
    $
    41.00
    
    
    $
    31.88
    
    
    $
    30.92
    
    
    $
    31.45Operating costs
    
    
    10.44
    
    
    
    7.95
    
    
    
    9.29
    
    
    
    8.51
    
    
    
    7.28
    
    
    
    7.96Production taxes
    
    
    0.52
    
    
    
    
    
    
    
    0.28
    
    
    
    1.15
    
    
    
    
    
    
    
    0.64Engineering support
    
    
    3.06
    
    
    
    1.19
    
    
    
    2.20
    
    
    
    2.34
    
    
    
    3.15
    
    
    
    2.7014.02
    
    
    
    9.14
    
    
    
    11.77
    
    
    
    12.00
    
    
    
    10.43
    
    
    
    11.30Net revenue before depletion
    
    
    24.06
    
    
    
    35.28
    
    
    
    29.23
    
    
    
    19.88
    
    
    
    20.49
    
    
    
    20.15Depletion
    
    
    15.08
    
    
    
    16.40
    
    
    
    15.69
    
    
    
    15.11
    
    
    
    11.22
    
    
    
    13.37Net revenue from operations
    
    $
    8.98
    
    
    $
    18.88
    
    
    $
    13.54
    
    
    $
    4.77
    
    
    $
    9.27
    
    
    $
    6.78
 General and Administrative 2005 vs. 2004
  Three-Months
    
    
    Six-MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,(stated in thousands of U.S. Dollars)General and Administrative for 2004
    
    $
    1,462
    
    
    $
    3,066Favorable (unfavorable) variances:Oil and Gas Activities:U.S.
    
    
    44
    
    
    
    (5
    )China
    
    
    37
    
    
    
    68Corporate
    
    
    (125
    )
    
    
    (914
    )(44
    )
    
    
    (851
    )General and Administrative for 2005
    
    $
    1,506
    
    
    $
    3,917
  Business Development 2005 vs. 2004
  26




---



##### 



Three-Months
    
    
    Six-MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,(stated in thousands of U.S. Dollars)Business Development for 2004
    
    $
    422
    
    
    $
    699Favorable (unfavorable) variances:GTL
    
    
    103
    
    
    
    (24
    )EOR
    
    
    (859
    )
    
    
    (1,174
    )(756
    )
    
    
    (1,198
    )Business Development for 2005
    
    $
    1,178
    
    
    $
    1,897
 TM TM
 Depletion and Depreciation 2005 vs. 2004
   
    
    During periods of increasing oil prices our share of proved oil reserves decreases, as
fewer barrels of oil are required to recover our costs under our Dagang production-sharing
contract.
    
    Following an internal review of the results of our current development program at
Dagang, and especially the results from the work completed in the northern blocks over the
past six months, we have revised our estimate of total proved reserves downward. At
year-end 2005, our current internal estimate of reserves at Dagang will be confirmed or
further revised, by a full independent review by Gilbert Laustsen Jung Associates, our
independent reserve evaluator for our China properties.
    
    We impaired the cost of our first Zitong block exploration well, the Dingyuan 1, which
was plugged and suspended in the three-month period ended June 30, 2005 resulting in those
well costs being included with our proved properties and therefore subject to depletion.
 Capital Investments
  27




---



##### 



Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 30,
    
    
    June 30,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2005
    
    
    2004
    
    
    Decrease
    
    
    2005
    
    
    2004
    
    
    DecreaseOil and Gas Activities:U.S.
    
    $
    1,711
    
    
    $
    6,793
    
    
    $
    5,082
    
    
    $
    2,511
    
    
    $
    9,843
    
    
    $
    7,332China
    
    
    8,700
    
    
    
    7,277
    
    
    
    (1,423
    )
    
    
    18,251
    
    
    
    14,152
    
    
    
    (4,099
    )GTL
    
    
    516
    
    
    
    
    
    
    
    (516
    )
    
    
    731
    
    
    
    67
    
    
    
    (664
    )EOR
    
    
    1,130
    
    
    
    751
    
    
    
    (379
    )
    
    
    2,844
    
    
    
    1,114
    
    
    
    (1,730
    )$
    12,057
    
    
    $
    14,821
    
    
    $
    2,764
    
    
    $
    24,337
    
    
    $
    25,176
    
    
    $
    839
 Oil and Gas Activities  U.S.
      28




---



##### 



Oil and Gas Activities  China
    Enhanced Oil Recovery and Heavy Oil Processing Activities
 TM
 o
 29




---



##### 



TM
 TM
 TM TM TM TM TM
 RTPTM Unit TM TM TM TM
  TM TM TM
 30




---



##### 



Gas-To-Liquids Activities
  CTL
  Liquidity and Capital Resources
 Sources and Uses of Cash
     31




---



##### 



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Cash flow from operating activities
    
    $
    1,850
    
    
    $
    1,299
    
    
    $
    2,625
    
    
    $
    1,334Investing ActivitiesCapital investments, after changes in non-cash working capital
    
    
    (9,628
    )
    
    
    (9,207
    )
    
    
    (15,025
    )
    
    
    (20,045
    )Merger, net of cash acquired
    
    
    (9,979
    )
    
    
    
    
    
    
    (9,979
    )
    
    
    Equity investment and Merger related costs
    
    
    (957
    )
    
    
    (2,000
    )
    
    
    (1,687
    )
    
    
    (2,500
    )Proceeds from sale of assets
    
    
    
    
    
    
    13,458
    
    
    
    
    
    
    
    13,458Other
    
    
    (63
    )
    
    
    (112
    )
    
    
    (54
    )
    
    
    (180
    )(20,627
    )
    
    
    2,139
    
    
    
    (26,745
    )
    
    
    (9,267
    )Financing ActivitiesProceeds from private placements, net of all share issue costs
    
    
    10,060
    
    
    
    
    
    
    
    10,060
    
    
    
    20,428Proceeds from exercise of options and warrants
    
    
    1,690
    
    
    
    1,236
    
    
    
    1,725
    
    
    
    1,375Net debt financing
    
    
    1,583
    
    
    
    (8,000
    )
    
    
    7,167
    
    
    
    2,000Other
    
    
    (163
    )
    
    
    
    
    
    
    (426
    )
    
    
    13,170
    
    
    
    (6,764
    )
    
    
    18,526
    
    
    
    23,803Net Source (Use) of Cash
    
    $
    (5,607
    )
    
    $
    (3,326
    )
    
    $
    (5,594
    )
    
    $
    15,870
 Outlook for 2005
    32




---



##### 



Contractual Obligations
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    After 2008Purchase Agreement:
    
    $
    100
    
    
    $
    
    
    
    $
    100
    
    
    $
    
    
    
    $
    
    
    
    $
    Consolidated Balance Sheets:Note payable
 current portion (Note 8)
    
    
    1,667
    
    
    
    834
    
    
    
    833
    
    
    
    
    
    
    
    
    
    
    
    Long term debt (Note 8)
    
    
    1,806
    
    
    
    
    
    
    
    834
    
    
    
    972
    
    
    
    
    
    
    
    Convertible loans (Note 9)
    
    
    8,000
    
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Commitments:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest payable
    
    
    495
    
    
    
    352
    
    
    
    122
    
    
    
    21
    
    
    
    
    
    
    
    Lease commitments
    
    
    2,489
    
    
    
    348
    
    
    
    773
    
    
    
    514
    
    
    
    375
    
    
    
    479Zitong exploration commitment (Note 13)
    
    
    6,700
    
    
    
    6,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Contingent obligation (Note 13)
    
    
    1,900
    
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    23,157
    
    
    $
    16,234
    
    
    $
    4,562
    
    
    $
    1,507
    
    
    $
    375
    
    
    $
    479
 Off Balance Sheet Arrangements
  Outstanding Share Data
  33




---



##### 



Quarterly Financial Data In Accordance With Canadian and U.S. GAAP (Unaudited)
 QUARTER ENDED2005
    
    
    2004
    
    
    20032nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd QtrTotal revenue
    
    $
    6,645
    
    
    $
    5,736
    
    
    $
    6,212
    
    
    $
    4,932
    
    
    $
    3,521
    
    
    $
    3,332
    
    
    $
    2,330
    
    
    $
    2,423Net loss  Canadian GAAP
    
    $
    1,031
    
    
    $
    1,483
    
    
    $
    17,184
    
    
    $
    951
    
    
    $
    1,298
    
    
    $
    1,292
    
    
    $
    23,154
    
    
    $
    1,330Net loss  U.S. GAAP
    
    $
    1,564
    
    
    $
    3,008
    
    
    $
    15,736
    
    
    $
    980
    
    
    $
    1,510
    
    
    $
    1,470
    
    
    $
    23,270
    
    
    $
    1,306Net loss per share  Canadian
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.09
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.15
    
    
    $
    0.01Net loss per share  U.S. GAAP
    
    $
    0.01
    
    
    $
    0.02
    
    
    $
    0.09
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.15
    
    
    $
    0.01
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   
 Part II  Other Information
 
 Item 1. Legal Proceedings: None
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds:
 Act
 34




---



##### 




    
    On July 7, 2005, 1,000,000 special warrants were issued at a price of Cdn.$3.10 per
special warrant to an institutional investor in a transaction exempt from registration
under Rule 903 of the Act. Each special warrant entitles the holder to receive, at no
additional cost, one common share and one common share purchase warrant before or
immediately following the filing and regulatory acceptance of a Canadian prospectus, or
four months after the closing date, which ever occurs first. One common share purchase
warrant will entitle the holder to purchase one common share at a price of Cdn.$3.50
exercisable until July 7, 2007.
 
 Item 3.Defaults Upon Senior Securities: None
 
 Item 4.Submission of Matters To a Vote of Securityholders: None
 
 Item 5. Other Information: None
 
 Item 6. Exhibits
 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
 
 IVANHOE ENERGY INC.By:
    
    /s/
    
    W. Gordon LancasterName:
    
    W. Gordon LancasterTitle:
    
    Chief Financial OfficerDated: August 4, 2005
 35




---



##### 



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
 36