##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the fiscal year ended December 31, 2010  Commission file number: 000-30586
 
 (IVANHOE ENERGY INC. LOGO)
Ivanhoe Energy Inc.
  Yukon, Canada
    
    98-0372413(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 654-999 Canada Place
Vancouver, BC, Canada V6C 3E1
(604) 688-8323
 
 Title of each class
    
    Name of each exchange on which registeredCommon Shares, No Par Value
    
    Toronto Stock ExchangeThe NASDAQ Capital Market
 þ o
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PART IITEMS 1 AND 2: Business and Properties
    
    
    4ITEM 1A: Risk Factors
    
    
    13ITEM 1B: Unresolved Staff Comments
    
    
    19ITEM 3: Legal Proceedings
    
    
    19PART IIITEM 5: Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    20ITEM 6: Selected Financial Data
    
    
    22ITEM 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23ITEM 7A: Quantitative and Qualitative Disclosures About Market Risk
    
    
    34ITEM 8: Financial Statements and Supplementary Data
    
    
    36ITEM 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    76ITEM 9A: Controls and Procedures
    
    
    76PART IIIITEM 10: Directors, Executive Officers and Corporate Governance
    
    
    78ITEM 11: Executive Compensation
    
    
    82ITEM 12: Security and Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    92ITEM 13: Certain Relationships and Related Transactions, and Director Independence
    
    
    94ITEM 14: Principal Accounting Fees and Services
    
    
    94PART IVITEM 15: Exhibits and Financial Statement Schedules
    
    
    96Exhibit 10.18Exhibit 10.19Exhibit 10.20Exhibit 10.21Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1
  ABBREVIATIONS
  bbl
    
    =
    
    barrel
    
    mcf
    
    =
    
    thousand cubic feetbbls/d
    
    =
    
    barrels per day
    
    mcf/d
    
    =
    
    thousand cubic feet per dayboe
    
    =
    
    barrel of oil equivalent
    
    mmcf
    
    =
    
    million cubic feetboe/d
    
    =
    
    barrels of oil equivalent per day
    
    mmcf/d
    
    =
    
    million cubic feet per daymbbls
    
    =
    
    thousand barrels
    
    mmbbls
    
    =
    
    million barrelsmbbls/d
    
    =
    
    thousand barrels per day
    
    mmbls/d
    
    =
    
    million barrels per daymboe
    
    =
    
    thousands of barrels of oil equivalent
    
    mmbtu
    
    =
    
    million British thermal unitsmboe/d
    
    =
    
    thousands of barrels of oil equivalent per day
    
    tcf
    
    =
    
    trillion cubic feet
   2




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CURRENCY AND EXCHANGE RATES
  (US$)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Closing
    
    
    1.01
    
    
    
    0.96
    
    
    
    0.82
    
    
    
    1.01
    
    
    
    0.86High
    
    
    1.01
    
    
    
    0.97
    
    
    
    1.03
    
    
    
    1.09
    
    
    
    0.91Low
    
    
    0.93
    
    
    
    0.77
    
    
    
    0.77
    
    
    
    0.84
    
    
    
    0.85Average Noon
    
    
    0.93
    
    
    
    0.88
    
    
    
    0.94
    
    
    
    0.93
    
    
    
    0.88
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our short history of limited revenue, losses and negative cash flow from our current
exploration and development activities in Canada, Ecuador, China and Mongolia;
 
    
    our limited cash resources and consequent need for additional financing;
 
    
    our ability to raise additional financing when it is required or on acceptable terms;
 
    
    the potential success of our Heavy-to-Light or HTLTM technology;
 
    
    the potential success of our oil and gas exploration and development properties in
Canada, Ecuador, China and Mongolia;
 
    
    oil price volatility;
 
    
    oil and gas industry operational hazards and environmental concerns;
 
    
    government regulation and requirements for permits and licenses, particularly in the
foreign jurisdictions in which we carry on business;
 
    
    title matters;
 
    
    risks associated with carrying on business in foreign jurisdictions;
 
    
    conflicts of interests;
 
    
    competition for oil and gas exploration properties from larger, better financed oil and
gas companies; and
 
    
    other statements contained herein regarding matters that are not historical facts.
  AVAILABLE INFORMATION
   3




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PART I
 ITEMS 1 AND 2:
    
    BUSINESS AND PROPERTIES
 GENERAL
    CORPORATE STRATEGY
  
    
    Utilize long-standing knowledge and relationships in the Far East to pursue conventional
oil and gas production and exploration opportunities;
 
    
    Seek out heavy oil development projects globally that have operational needs that can
benefit from our proprietary HTLTM technology; and
 
    
    Bias new country entry and business development to projects that, because of their
remote setting, geo-political status or operational needs, have been overlooked by the
broader industry, subsequently expanding efforts in the new locations to more conventional
oil and gas industry activities.
 Pursuing Natural Gas in China
     4




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Importance of the Heavy Oil Segment of the Oil and Gas Industry
      Ivanhoes Value Proposition
    
    
    virtual elimination of external energy requirements for steam generation and/or power
for upstream operations;
 
    
    elimination of the need for diluent or blend oils for transport;
 
    
    capture of the majority of the heavy versus light oil value differential; and
 
    
    relatively small minimum economic scale of operations suited for field upgrading and for
smaller field developments.
  Implementation Strategy
   5




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
    
    Advance its two key heavy oil projects  in Canada and Ecuador.Continue to deploy
personnel and financial resources in support of the Companys goal to become a significant
heavy oil producer.
 
    
    Advance the HTL process.Additional development work will continue to advance the HTL
process through the commercial application of HTL upgrading in Canada, Ecuador and beyond.
 
    
    Advance its natural gas project in the Zitong Block in Sichuan Province, China. Through
its wholly-owned subsidiary, Sunwing Energy, proceed with additional planning and
operational analysis to develop an appraisal program leading to a full development plan for
the Zitong block.
 
    
    Enhance the Companys financial position to support its major projects.Implementation
of large projects requires significant capital outlays. The Company is working on various
financing initiatives and establishing the relationships required for future development
activities.
 
    
    Build internal capabilities.The Company continues to seek to build its internal
leadership and technical capabilities through the addition of key personnel associated with
each major project.
 
    
    Continue to deploy the personnel and the financial resources to capture additional
opportunities for development projects utilizing the Companys HTL process.
Commercialization of the Companys upgrading process requires close alignment with
partners, suppliers, host governments and financiers.
 PROPERTY DESCRIPTIONS
   Integrated Oil and Gas Properties
 Canada
    Ecuador
    6




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Conventional Oil and Gas Properties
 Asia
 China
 Zitong
     Dagang
   Mongolia
    7




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RESERVES, PRODUCTION AND RELATED INFORMATION
   Summary of Oil and Gas Reserves Using Average 2010 Prices (1)
 Canada
    
    
    China(mbbl)
    
    Tamarack
    
    
    Dagang
    
    
    Other
    
    
    TotalProvedDeveloped
    
    
    
    
    
    
    1,186
    
    
    
    79
    
    
    
    1,265Undeveloped
    
    
    
    
    
    
    473
    
    
    
    
    
    
    
    473Total proved
    
    
    
    
    
    
    1,659
    
    
    
    79
    
    
    
    1,738ProbableDeveloped
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    322Undeveloped
    
    
    175,684
    
    
    
    470
    
    
    
    
    
    
    
    176,154PossibleDeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Undeveloped
    
    
    43,809
    
    
    
    
    
    
    
    
    
    
    
    43,809
 (1)
    
    Reserves are the Companys total gross reserves before royalty deductions.
 Canada
 Probable and Possible Reserves
   Basis of Reserves Estimates
   8




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China
 Proved Reserves
   Probable Reserves
  Basis of Reserve Estimates
  Internal Control Over Reserve Estimation
   
    
    expected reservoir characteristics based on geological, geophysical and engineering
assessments;
 
    
    future production rates based on historical performance and expected future operating
and investment activities;
 
    
    future oil and gas prices and quality differentials;
 
    
    assumed effects of regulation by governmental agencies; and
 
    
    future development and operating costs.
    9




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Special Note to Canadian Investors
    
    
    SEC registrants apply SEC reserves definitions and prepare their reserves estimates in
accordance with SEC requirements and generally accepted industry practices in the US,
whereas NI 51-101 requires adherence to the definitions and standards promulgated by the
COGE Handbook;
 
    
    the SEC mandates disclosure of proved reserves calculated using an average,
first-day-of-the-month price during the 12 month period preceding and existing costs only,
whereas NI 51-101 requires disclosure of reserves and related future net revenues using
forecasted prices, with additional constant pricing disclosure being optional;
 
    
    the SEC mandates disclosure of reserves by geographic area only, whereas NI 51-101
requires disclosure of more reserve categories and product types; and
 
    
    the SEC leaves the engagement of independent qualified reserves evaluators to the
discretion of a companys board of directors, whereas NI 51-101 requires issuers to engage
such evaluators.
   10




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Production, Sales Prices and Production Costs
 2010
    
    
    2009
    
    
    2008Oil production (bbls/d)
    
    
    788
    
    
    
    1,276
    
    
    
    1,339Average sales price ($/bbl)
    
    
    75.52
    
    
    
    53.60
    
    
    
    98.73Average operating costs (1) ($/bbl)
    
    
    33.05
    
    
    
    21.88
    
    
    
    43.92
 (1)
    
    Average operating costs per unit of production, based on net interest after royalties,
represent lifting costs, including a windfall gain levy. According to the Administrative
Measures on Collection of Windfall Gain Levy on Oil Exploitation Business, enterprises
exploiting and selling oil in
China are subject to a windfall gain levy (the Windfall Levy) if the monthly weighted
average price of oil is above $40.00/bbl. Excludes depletion and depreciation, income taxes,
interest, selling and general administrative expenses.
  Producing Oil Wells
  2010
    
    
    2009
    
    
    2008Gross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)Asia
    
    
    44.0
    
    
    
    21.6
    
    
    
    44.0
    
    
    
    21.6
    (3)
    
    
    44.0
    
    
    
    36.1
 (1)
    
    Gross wells are the total number of wells in which a working interest is owned.(2)
    
    Net wells are the sum of fractional working interests owned in gross wells.(3)
    
    Our working interest in net wells was reduced from 82% to 49% as stipulated by the
governing production sharing contracts upon the Company completing the recovery of its
development investments in September 2009.
 Drilling Activity
  Acreage
 Developed Acres
    
    
    Undeveloped Acres(1)Gross
    
    
    Net
    
    
    Gross
    
    
    NetCanada
    
    
    
    
    
    
    
    
    
    
    7,520
    
    
    
    7,520Ecuador
    
    
    
    
    
    
    
    
    
    
    272,639
    
    
    
    272,639Asia  China(2)
    
    
    1,525
    
    
    
    747
    
    
    
    664,314
    
    
    
    595,338Asia  Mongolia
    
    
    
    
    
    
    
    
    
    
    3,107,907
    
    
    
    3,107,907
 (1)
    
    Undeveloped acreage is considered to be those acres on which wells have not been
drilled or completed to a point that would permit production of commercial quantities of
oil and gas regardless of whether or not such acreage contains proved reserves.(2)
    
    The number of developed acres disclosed in respect of our China properties relates only
to those portions of the field covered by our producing operations and does not include the
remaining portions of the field previously developed by CNPC.
     11




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BUSINESS AND TECHNOLOGY DEVELOPMENT
  Technology Development
    Business Development
 TM
 CERTAIN FACTORS AFFECTING THE BUSINESS
 Competition
   12




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Environmental Regulations
     Government Regulations
  EMPLOYEES
  
 ITEM 1A:
    
    RISK FACTORS
  Our ability to continue as a going concern may be adversely affected by inadequate funding
   13




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We may not be able to fund our substantial capital requirements
  We have fixed and contingent payment obligations to Talisman
  The volatility of oil prices may affect our financial results
   We may be required to take write-downs if oil prices decline, our estimated development costs
increase or our exploration results deteriorate
  Estimates of proved reserves and future net revenue may change if the assumptions on which such
estimates are based prove to be inaccurate
   14




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We may incur significant costs on exploration or development efforts which may prove unsuccessful
or unprofitable
  We compete for oil and gas properties and personnel with many other exploration and development
companies throughout the world who have access to greater resources
   Changes to laws, regulations and government policies in the jurisdictions in which we operate could
adversely affect our ability to develop our projects
     15




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Complying with environmental and other government regulations could be costly and could negatively
impact our production
    Our business involves many operating risks that can cause substantial losses; insurance may not
protect us against all these risks
    SAGD technologies for in-situ recovery of heavy oil and bitumen are energy intensive and may be
unsustainable
  We may not successfully commercialize our HTL technology
   16




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Technological advances could render our HTL technology obsolete
  Alternate sources of energy could lower the demand for our HTL technology
  Efforts to commercialize our HTL technology may give rise to claims of infringement upon the
patents or other proprietary rights of others
  A breach of confidentiality obligations could put us at competitive risk and potentially damage our
business
  Certain projects are at a very early stage of development
    17




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Our heavy oil project in Canada may be exposed to title risks and aboriginal claims
   Our investment in Ecuador may be at risk if the agreement through which we hold our interest in the
Block 20 project is challenged or cannot be enforced
    Our business may be harmed if we are unable to retain our interests in licenses, leases and
production sharing contracts
  Our principal shareholder may significantly influence our business
   18




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If we lose our key management and technical personnel, our business may suffer
  Information regarding our future plans reflects our current intent and is subject to change
   
 ITEM 1B:
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 3:
    
    LEGAL PROCEEDINGS
     19




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PART II
 ITEM 5:
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
  TSX (Cdn$)
    
    
    NASDAQ (US$)High
    
    
    Low
    
    
    High
    
    
    Low2010Q1
    
    
    3.90
    
    
    
    2.90
    
    
    
    3.79
    
    
    
    2.75Q2
    
    
    3.36
    
    
    
    1.97
    
    
    
    3.37
    
    
    
    1.87Q3
    
    
    2.19
    
    
    
    1.59
    
    
    
    2.08
    
    
    
    1.50Q4
    
    
    2.89
    
    
    
    2.15
    
    
    
    2.88
    
    
    
    2.102009Q1
    
    
    1.53
    
    
    
    0.57
    
    
    
    1.22
    
    
    
    0.45Q2
    
    
    2.16
    
    
    
    1.38
    
    
    
    1.85
    
    
    
    1.10Q3
    
    
    2.98
    
    
    
    1.31
    
    
    
    2.81
    
    
    
    1.13Q4
    
    
    3.25
    
    
    
    2.20
    
    
    
    3.12
    
    
    
    2.02
   DIVIDENDS
 Yukon Business Corporations Act
 EXEMPTIONS FROM CERTAIN NASDAQ MARKETPLACE RULES
   .
  20




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ENFORCEABILITY OF CIVIL LIABILITIES
  EXCHANGE CONTROLS AND TAXATION
  Investment Canada Act
   Income Tax Act
  21




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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
  PERFORMANCE GRAPH
  SALES OF UNREGISTERED SECURITIES
  
 ITEM 6.
    
    SELECTED FINANCIAL DATA
 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
  ($000s, except per share amounts)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Results of OperationsRevenues
    
    
    21,928
    
    
    
    23,658
    
    
    
    50,670
    
    
    
    26,689
    
    
    
    36,320Net loss from continuing operations
    
    
    (29,110
    )
    
    
    (37,731
    )
    
    
    (38,476
    )
    
    
    (33,433
    )
    
    
    (25,677
    )Net loss from continuing operations per share  basic and diluted
    
    
    (0.09
    )
    
    
    (0.13
    )
    
    
    (0.15
    )
    
    
    (0.14
    )
    
    
    (0.11
    )Financial PositionTotal assets
    
    
    409,585
    
    
    
    281,763
    
    
    
    346,875
    
    
    
    266,516
    
    
    
    278,144Debt
    
    
    39,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long term debt
    
    
    
    
    
    
    36,934
    
    
    
    37,855
    
    
    
    9,812
    
    
    
    2,737Asset retirement obligations
    
    
    744
    
    
    
    195
    
    
    
    1,928
    
    
    
    739
    
    
    
    484Long term obligation
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
 RECONCILIATION TO US GAAP
  ($000s, except per share amounts)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Results of OperationsRevenues
    
    
    36,945
    
    
    
    17,152
    
    
    
    55,335
    
    
    
    27,281
    
    
    
    35,628Net loss from continuing operations
    
    
    (10,271
    )
    
    
    (32,679
    )
    
    
    (47,911
    )
    
    
    (23,080
    )
    
    
    (35,477
    )Net loss from continuing operations per share  basic and diluted
    
    
    (0.03
    )
    
    
    (0.12
    )
    
    
    (0.19
    )
    
    
    (0.10
    )
    
    
    (0.15
    )Financial PositionTotal assets
    
    
    393,675
    
    
    
    262,717
    
    
    
    292,847
    
    
    
    251,627
    
    
    
    252,893Debt
    
    
    40,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long term debt
    
    
    
    
    
    
    38,005
    
    
    
    40,392
    
    
    
    10,412
    
    
    
    2,737Asset retirement obligations
    
    
    744
    
    
    
    195
    
    
    
    1,928
    
    
    
    739
    
    
    
    484Long term obligation
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
  22




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ITEM 7:
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Executive Overview of 2010 Results
    
    
    23Highlights
    
    
    24Change in Net Loss
    
    
    24Results of OperationsRevenue
    
    
    25Netbacks
    
    
    25Operating Costs
    
    
    26General and Administrative
    
    
    26Business and Technology Development
    
    
    26Depletion and Depreciation
    
    
    27Foreign Exchange
    
    
    27Interest
    
    
    27Impairment
    
    
    27Derivatives
    
    
    27Income Taxes
    
    
    28Discontinued Operations
    
    
    28Liquidity and Capital Resources
    
    
    28Critical Accounting Principles and Estimates
    
    
    30New Accounting Pronouncements
    
    
    32
  EXECUTIVE OVERVIEW OF 2010 RESULTS
       23




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HIGHLIGHTS
 ($000, except as stated)
    
    2010
    
    
    2009
    
    
    2008Average production (bbls/d)
    
    
    788
    
    
    
    1,276
    
    
    
    1,339Realized oil prices ($/bbl)
    
    
    75.52
    
    
    
    53.60
    
    
    
    98.73Oil revenue
    
    
    21,720
    
    
    
    24,968
    
    
    
    48,370Cash flow provided by (used in) operating activities
    
    
    (17,764
    )
    
    
    (12,290
    )
    
    
    17,053Net loss (continuing operations(1))
    
    
    (29,110
    )
    
    
    (37,731
    )
    
    
    (38,476
    )Net loss per share  basic and diluted (continuing operations(1))
    
    
    (0.09
    )
    
    
    (0.13
    )
    
    
    (0.15
    )Working capital (continuing operations(1))
    
    
    16,485
    
    
    
    18,317
    
    
    
    31,597Capital expenditures (continuing operations(1))
    
    
    86,285
    
    
    
    26,373
    
    
    
    21,063
 (1)
    
    In July 2009, the Company disposed of its US operations and used the proceeds for its
ongoing projects. To properly reflect this sale in the Companys 2010 consolidated
financial statements, the results of the US operations have been separately identified in
comparative disclosures as Discontinued Operations.
 CHANGE IN NET LOSS
  2010
    
    
    Change
    
    
    2009
    
    
    Change
    
    
    2008Cash itemsOil revenues
    
    
    21,720
    
    
    
    
    
    
    
    24,968
    
    
    
    
    
    
    
    48,370Production volumes
    
    
    
    
    
    
    (9,515
    )
    
    
    
    
    
    
    (2,384
    )Oil prices
    
    
    
    
    
    
    6,267
    
    
    
    
    
    
    
    (21,018
    )Operating costs
    
    
    (9,503
    )
    
    
    688
    
    
    
    (10,191
    )
    
    
    11,324
    
    
    
    (21,515
    )General and administrative, less stock-based compensation
    
    
    (20,565
    )
    
    
    (2,563
    )
    
    
    (18,002
    )
    
    
    (6,198
    )
    
    
    (11,804
    )Business and technology development, less stock-based compensation
    
    
    (10,215
    )
    
    
    (872
    )
    
    
    (9,343
    )
    
    
    (3,458
    )
    
    
    (5,885
    )Realized foreign exchange gain (loss)
    
    
    (198
    )
    
    
    (87
    )
    
    
    (111
    )
    
    
    (346
    )
    
    
    235Realized gain (loss) on derivatives
    
    
    
    
    
    
    (124
    )
    
    
    124
    
    
    
    4,554
    
    
    
    (4,430
    )Net interest
    
    
    184
    
    
    
    485
    
    
    
    (301
    )
    
    
    283
    
    
    
    (584
    )Current income tax expense
    
    
    (126
    )
    
    
    1,631
    
    
    
    (1,757
    )
    
    
    (1,103
    )
    
    
    (654
    )Total cash changes
    
    
    (18,703
    )
    
    
    (4,090
    )
    
    
    (14,613
    )
    
    
    (18,346
    )
    
    
    3,733Non-cash itemsUnrealized gain (loss) on derivatives
    
    
    
    
    
    
    1,459
    
    
    
    (1,459
    )
    
    
    (7,577
    )
    
    
    6,118Unrealized foreign exchange gain (loss)
    
    
    3,523
    
    
    
    8,632
    
    
    
    (5,109
    )
    
    
    (3,347
    )
    
    
    (1,762
    )Depletion and depreciation
    
    
    (8,960
    )
    
    
    10,908
    
    
    
    (19,868
    )
    
    
    5,893
    
    
    
    (25,761
    )Stock-based compensation
    
    
    (6,095
    )
    
    
    (2,246
    )
    
    
    (3,849
    )
    
    
    (833
    )
    
    
    (3,016
    )Provision for impairment of intangible asset and development costs
    
    
    
    
    
    
    1,903
    
    
    
    (1,903
    )
    
    
    13,151
    
    
    
    (15,054
    )Write off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,621
    
    
    
    (2,621
    )Future income tax recovery
    
    
    1,125
    
    
    
    (8,475
    )
    
    
    9,600
    
    
    
    9,600
    
    
    
    Discontinued operations (net of tax)
    
    
    
    
    
    
    23,921
    
    
    
    (23,921
    )
    
    
    (28,204
    )
    
    
    4,283Other
    
    
    
    
    
    
    530
    
    
    
    (530
    )
    
    
    (417
    )
    
    
    (113
    )Total non-cash changes
    
    
    (10,407
    )
    
    
    36,632
    
    
    
    (47,039
    )
    
    
    (9,113
    )
    
    
    (37,926
    )Net loss
    
    
    (29,110
    )
    
    
    32,542
    
    
    
    (61,652
    )
    
    
    (27,459
    )
    
    
    (34,193
    )
  24




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##### Table of Contents



RESULTS OF OPERATIONS
 Revenue
 2010
    
    
    2009
    
    
    2008ProductionAsia (net bbls)Dagang
    
    
    273,868
    
    
    
    452,573
    
    
    
    471,817Daqing
    
    
    13,751
    
    
    
    13,231
    
    
    
    18,096Total production
    
    
    287,619
    
    
    
    465,804
    
    
    
    489,913Average daily production (bbls/d)
    
    
    788
    
    
    
    1,276
    
    
    
    1,339PricingAverage realized oil price ($/bbl)
    
    
    75.52
    
    
    
    53.60
    
    
    
    98.73West Texas Intermediate (WTI) ($/bbl)
    
    
    79.39
    
    
    
    61.80
    
    
    
    99.65
 2010 vs 2009
   2009 vs 2008
   Netbacks
 ($/bbl)
    
    2010
    
    
    2009
    
    
    2008Oil revenue(1)
    
    
    75.52
    
    
    
    53.60
    
    
    
    98.73Less operating costsField operating
    
    
    (19.96
    )
    
    
    (17.13
    )
    
    
    (21.70
    )Windfall Levy
    
    
    (11.59
    )
    
    
    (4.00
    )
    
    
    (21.14
    )Engineering and support costs
    
    
    (1.50
    )
    
    
    (0.75
    )
    
    
    (1.08
    )Net operating revenue(1)
    
    
    42.47
    
    
    
    31.72
    
    
    
    54.81Depletion
    
    
    (29.87
    )
    
    
    (38.70
    )
    
    
    (47.22
    )Net revenue (loss) from operations(1)
    
    
    12.60
    
    
    
    (6.98
    )
    
    
    7.59
 (1)
    
    Oil revenue per barrel, net operating revenue per barrel and net revenue (loss) from
operations per barrel do not have standardized meanings prescribed by Canadian GAAP and
therefore may not be comparable to similar measures used by other companies. Please refer
to the Non-GAAP Financial Measures at the end of this MD&A for more details.
  25




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##### Table of Contents



Operating Costs
 2010 vs 2009
   2009 vs 2008
  General and Administrative
 2010 vs 2009
  2009 vs 2008
  Business and Technology Development
 2010 vs 2009
 TM
 2009 vs 2008
   26




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##### Table of Contents



Depletion and Depreciation
 2010 vs 2009
  2009 vs 2008
  Foreign Exchange
 2010 vs 2009
  2009 vs 2008
  Interest
 2010 vs 2009
  2009 vs 2008
  Impairment
    Derivatives
   27




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##### Table of Contents



Income Taxes
    Discontinued Operations
   2009
    
    
    2008RevenueOil and gas
    
    
    5,455
    
    
    
    18,120Gain on derivative instruments
    
    
    189
    
    
    
    278Interest
    
    
    8
    
    
    
    985,652
    
    
    
    18,496ExpensesOperating
    
    
    2,132
    
    
    
    5,137General and administrative
    
    
    139
    
    
    
    2,413Depletion and depreciation
    
    
    3,772
    
    
    
    6,143Interest and financing
    
    
    173
    
    
    
    5206,216
    
    
    
    14,213Income (loss) before disposition
    
    
    (564
    )
    
    
    4,283Loss on disposition (net of tax of $29.6 million for 2009, nil for 2008)
    
    
    (23,357
    )
    
    
    Net income (loss) from discontinued operations
    
    
    (23,921
    )
    
    
    4,283
 LIQUIDITY AND CAPITAL RESOURCES
 Contractual Obligations and Commitments
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    After 2014Debt
    
    
    39,832
    
    
    
    39,832
    
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    2,042
    
    
    
    2,042
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligations(1)
    
    
    1,939
    
    
    
    
    
    
    
    332
    
    
    
    
    
    
    
    
    
    
    
    1,607Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900Leases
    
    
    2,989
    
    
    
    1,769
    
    
    
    885
    
    
    
    335
    
    
    
    
    
    
    
    Total
    
    
    48,702
    
    
    
    43,643
    
    
    
    1,217
    
    
    
    335
    
    
    
    
    
    
    
    3,507
 (1)
    
    Represents undiscounted asset retirement obligations after inflation. The discounted
value ($0.7 million) of these estimated obligations is provided for in the consolidated
financial statements.
  28




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##### Table of Contents



Debt
  Asset Retirement Obligations
  Long Term Obligation
  Operating Leases
  Other
    Sources and Uses of Cash
  2010
    
    
    2009
    
    
    2008Net cash provided by (used in) operating activities
    
    
    (17,764
    )
    
    
    (12,290
    )
    
    
    17,053Net cash provided by (used in) investing activities
    
    
    (79,860
    )
    
    
    6,396
    
    
    
    (49,321
    )Net cash provided by (used in) financing activities
    
    
    138,286
    
    
    
    (11,875
    )
    
    
    70,751
 Operating Activities
 2010 vs 2009
   29




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##### Table of Contents



2009 vs 2008
  Investing Activities
  2010 vs 2009
  2009 vs 2008
  Financing Activities
  2010 vs 2009
  2009 vs 2008
  Capital Structure
 As at December 31,
    
    2010
    
    
    2009Cash and cash equivalents
    
    
    67,817
    
    
    
    21,512Debt
    
    
    39,832
    
    
    
    Long term debt
    
    
    
    
    
    
    36,934Shareholders equity
    
    
    324,109
    
    
    
    208,029
  CRITICAL ACCOUNTING PRINCIPLES AND ESTIMATES
   30




---



##### Table of Contents



Oil and Gas Reserves
   Impairment
 Oil and Gas Properties and Development Costs
    Intangible Assets
   Future Income Taxes
    31




---



##### Table of Contents



Convertible note liability
   NEW ACCOUNTING PRONOUNCEMENTS
 Transition to International Financial Reporting Standards
   First-time Adoption of International Financial Reporting Standards
   32




---



##### Table of Contents



Area of IFRS
    
    Summary of Exemption AvailableProperty, plant and equipment
    
    Companies may elect to report property,
plant and equipment from oil and gas
operations on the opening balance sheet
on the transition date at a deemed
cost, instead of the actual cost, as
though IFRS had been adopted
retroactively. The deemed cost of an
item may be either its fair value at
the date of transition to IFRS or an
amount reported under Canadian GAAP.
The exemption can be applied on an
asset-by-asset basis.Ivanhoe elected to report property,
plant and equipment from oil and gas
operations in its opening balance sheet
on the transition date at the deemed
cost previously calculated under
Canadian GAAP.Decommissioning liabilities
    
    In accounting for changes in
decommissioning liabilities, IFRS
requires changes in such obligations to
be added to, or deducted from, the cost
of the asset to which they relate. The
adjusted depreciable amount of the
asset is then depreciated prospectively
over its remaining useful life. Rather
than recalculating the effect of all
such changes throughout the life of the
obligation, companies may elect to
measure the liability and the related
depreciation effects at the date of
transition to IFRS.Ivanhoe elected to measure only those
decommissioning liabilities outstanding
from our FTF on the date of transition
to IFRS.Stock-based compensation
    
    Companies may elect not to apply IFRS
2, Share-Based Payment, to stock
options granted on or before November
7, 2002, or which vested before the
date of transition to IFRS.
Ivanhoe elected to utilize this
exemption for the all stock options
awarded after November 7, 2002, that
vested before January 1, 2010.Business combinations
    
    Companies may elect to either restate
all past business combinations in
accordance with IFRS 3, Business
Combinations, or to apply an elective
exemption from applying IFRS 3 to past
business combinations
Ivanhoe has elected to utilize this
exemption such that transactions
entered into prior to the transition
date will not be restated.
 Expected
Areas of Significance
  AccountingPolicy Area
    
    Impact of Policy AdoptionExploration and evaluation assets
    
    The Company followed the full cost
method of accounting for its oil and
gas operations under Canadian (Cdn)
GAAP, whereby all costs related to the
exploration for, and development of,
oil and gas reserves were capitalized
and periodically evaluated for
impairment. Under IFRS, exploration
costs will initially be capitalized as
exploration and evaluation (E&E)
assets until it can be determined if
sufficient quantities of reserves have
been found to justify commercial
production. If commercial quantities
of reserves are found, E&E assets will
be reclassified to oil and gas
properties and development costs and,
if not, E&E assets will be expensed on
the consolidated income statement.
Costs incurred in connection with our
projects in Canada, Ecuador, Mongolia
and exploration projects in China will
be reclassified as E&E assets, while
producing assets in China will
continue to be classified as oil and
gas properties and development costs
on the consolidated balance sheet.Impairments
    
    Cdn GAAP generally used a two-step
approach to impairment testing: first
comparing asset carrying values with
undiscounted future cash flows to
determine whether impairment exists
and then measuring any impairment by
comparing asset carrying values with
fair values calculated using
discounted cash flows. International
Accounting Standard 36, Impairment of
Assets, uses a one-step approach for
both testing and measuring of
impairment, with asset carrying values
compared directly with the higher of
fair value less costs to sell and
value in use (which uses discounted
future cash flows). This may
potentially result in more write downs
where carrying values of assets were
previously supported under Cdn GAAP on
an undiscounted cash flow basis, but
could not be supported on a discounted
cash flow basis. IFRS also requires the
reversal of any previous impairment
losses where circumstances have
changed such that impairments have
been reduced. Cdn GAAP prohibits the
reversal of impairment losses. IFRS
will result in greater variability in
our operating results and asset
carrying values.Capitalized G&A
    
    G&A directly related to exploration
and development activities were
capitalized as oil and gas properties
and development costs under Cdn GAAP.
The threshold to capitalize G&A is
higher under IFRS; therefore, we
expect to capitalize less G&A in the
future and G&A on the consolidated
income statement will be higher as a
result.Financial instruments
    
    Under Cdn GAAP, the equity component
of the Companys Convertible Note and
the common share purchase warrants
were classified as shareholders
equity. In accordance with IAS 32,
Financial Instruments: Presentation,
financial instruments with an exercise
price denominated in a currency other
than our functional currency are
accounted for as derivatives. Since
our Convertible Note and common share
purchase warrants are denominated in
Cdn dollars and our functional
currency is US dollars, these items
were reclassified from shareholders
equity to liabilities under IFRS.
Additionally, IFRS requires derivative
instruments to be recorded at fair
value with changes in their fair value
recognized in the income statement.
This will create variability in our
results of operations and the carrying
value of liabilities.Stock-based compensation
    
    Stock options were accounted for using
the fair value method under Canadian
GAAP. The fair value was determined
using the Black Scholes option pricing
model and recorded as compensation
expense on a straight-line basis over
the period that the stock options
vested. Under IFRS 2, Share-Based
Payment, compensation expense will be
charged to earnings on a graded
vesting basis. This will accelerate
the compensation expense recognized on
the consolidated income statement in
comparison to Cdn GAAP.
  33




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 ITEM 7A:
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  COMMODITY PRICE RISK
   FOREIGN CURRENCY EXCHANGE RATE RISK
   10% Increase
    
    
    10% Decrease(Increase) Decrease in Net Loss and Comprehensive Loss
    
    or Weakening
    
    
    or StrengtheningChinese renminbi
    
    
    1,438
    
    
    
    (1,758
    )Canadian dollar
    
    
    (2,089
    )
    
    
    167
 CREDIT RISK
     34




---



##### Table of Contents



LIQUIDITY RISK
  NON-GAAP FINANCIAL MEASURES
   35




---



##### Table of Contents



ITEM 8:
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Chartered Accountants
    
    
    37Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    38Consolidated Statements of Loss and Comprehensive Loss
    
    
    39Consolidated Statements of Shareholders Equity
    
    
    40Consolidated Statements of Cash Flows
    
    
    41Notes to the Consolidated Financial Statements
    
    
    42Supplementary Disclosures About Oil and Gas Production Activities (Unaudited)
    
    
    71
  36




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
   Managements Responsibility for the Consolidated Financial Statements
  Auditors Responsibility
    Opinion
  Emphasis of Matter
  Other Matter
  /s/ Deloitte & Touche LLP

Deloitte & Touche LLPIndependent Registered Chartered AccountantsCalgary, CanadaMarch 4, 2011
  37




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Balance Sheets

December 31, 2010 and 2009
 (US$000s, except share amounts)
    
    2010
    
    
    2009AssetsCurrent AssetsCash and cash equivalents (Note 15)
    
    
    67,817
    
    
    
    21,512Accounts receivable
    
    
    6,359
    
    
    
    5,021Note receivable
    
    
    264
    
    
    
    225Prepaid and other current assets
    
    
    2,859
    
    
    
    771Restricted cash (Note 18)
    
    
    500
    
    
    
    2,85077,799
    
    
    
    30,379Oil and gas properties and development costs, net (Note 3)
    
    
    237,200
    
    
    
    158,392Intangible assets (Note 4)
    
    
    92,153
    
    
    
    92,153Long term receivables (Note 12)
    
    
    2,433
    
    
    
    839409,585
    
    
    
    281,763Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities (Note 12)
    
    
    21,482
    
    
    
    10,779Debt (Note 5)
    
    
    39,832
    
    
    
    Income tax payable (Note 14)
    
    
    
    
    
    
    530Asset retirement obligations (Note 6)
    
    
    
    
    
    
    75361,314
    
    
    
    12,062Long term debt (Note 5)
    
    
    
    
    
    
    36,934Asset retirement obligations (Note 6)
    
    
    744
    
    
    
    195Long term obligation (Note 7)
    
    
    1,900
    
    
    
    1,900Future income tax liability (Note 14)
    
    
    21,518
    
    
    
    22,64385,476
    
    
    
    73,734Commitments and contingencies (Note 7)Going concern and basis of presentation (Note 2)Shareholders EquityShare capital, issued 334,365,482 common shares
    
    
    550,562
    
    
    
    422,322December 31, 2009 282,558,593 common sharesPurchase warrants (Note 8)
    
    
    33,423
    
    
    
    19,427Contributed surplus
    
    
    22,983
    
    
    
    20,029Convertible note (Note 5)
    
    
    2,086
    
    
    
    2,086Accumulated deficit
    
    
    (284,945
    )
    
    
    (255,835
    )324,109
    
    
    
    208,029409,585
    
    
    
    281,763
  Approved on behalf of the Board:
 (signed) Robert M. Friedland
Director
    
    (signed) Brian F. Downey
Director
  38




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Loss and Comprehensive Loss
Three Years Ended December 31, 2010
 (US$000s, except per share amounts)
    
    2010
    
    
    2009
    
    
    2008RevenueOil
    
    
    21,720
    
    
    
    24,968
    
    
    
    48,370Gain (loss) on derivative instruments
    
    
    
    
    
    
    (1,335
    )
    
    
    1,688Interest
    
    
    208
    
    
    
    25
    
    
    
    61221,928
    
    
    
    23,658
    
    
    
    50,670ExpensesOperating
    
    
    9,503
    
    
    
    10,191
    
    
    
    21,515General and administrative
    
    
    26,260
    
    
    
    21,693
    
    
    
    14,252Business and technology development
    
    
    10,615
    
    
    
    9,501
    
    
    
    6,453Depletion and depreciation
    
    
    8,960
    
    
    
    19,868
    
    
    
    25,761Foreign exchange (gain) loss
    
    
    (3,325
    )
    
    
    5,220
    
    
    
    1,527Interest and financing
    
    
    24
    
    
    
    856
    
    
    
    1,309Impairment of intangible asset and development costs (Note 3)
    
    
    
    
    
    
    1,903
    
    
    
    15,054Impairment of deferred financing costs (Note 13)
    
    
    
    
    
    
    
    
    
    
    2,62152,037
    
    
    
    69,232
    
    
    
    88,492Loss from continuing operations before income taxes
    
    
    (30,109
    )
    
    
    (45,574
    )
    
    
    (37,822
    )(Provision for) recovery of income taxes(Note 14)Current
    
    
    (126
    )
    
    
    (1,757
    )
    
    
    (654
    )Future
    
    
    1,125
    
    
    
    9,600
    
    
    
    999
    
    
    
    7,843
    
    
    
    (654
    )Net loss  continuing operations
    
    
    (29,110
    )
    
    
    (37,731
    )
    
    
    (38,476
    )Net (loss) income  discontinued operations (net of tax of $29.6 million for 2009, nil for 2008) (Note 18)
    
    
    
    
    
    
    (23,921
    )
    
    
    4,283Net loss and comprehensive loss
    
    
    (29,110
    )
    
    
    (61,652
    )
    
    
    (34,193
    )Net loss per common shareNet loss  continuing operations, basic and diluted
    
    
    (0.09
    )
    
    
    (0.13
    )
    
    
    (0.15
    )Net (loss) income  discontinued operations, basic and diluted
    
    
    
    
    
    
    (0.09
    )
    
    
    0.02Net loss per common share, basic and diluted
    
    
    (0.09
    )
    
    
    (0.22
    )
    
    
    (0.13
    )Weighted average number of common sharesBasic and diluted (000s)
    
    
    327,442
    
    
    
    279,722
    
    
    
    258,815
   39




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Shareholders Equity

Three Years Ended December 31, 2010
 (US$000s)
    
    2010
    
    
    2009
    
    
    2008Common shares, beginning of year
    
    
    422,322
    
    
    
    413,857
    
    
    
    324,262Shares issued for cash, net of share issue costs (Note 8)
    
    
    121,697
    
    
    
    
    
    
    
    82,451Shares issued for services
    
    
    799
    
    
    
    207
    
    
    
    Shares issued for acquisition of a business, net of share issue costs (Note 17)
    
    
    
    
    
    
    6,874
    
    
    
    Exercise of stock options
    
    
    5,735
    
    
    
    1,384
    
    
    
    1,792Exercise of purchase warrants
    
    
    9
    
    
    
    
    
    
    
    Exercise of convertible debt
    
    
    
    
    
    
    
    
    
    
    4,862Shares issued for employee bonuses
    
    
    
    
    
    
    
    
    
    
    490End of year
    
    
    550,562
    
    
    
    422,322
    
    
    
    413,857Purchase warrants, beginning of year (Note 8)
    
    
    19,427
    
    
    
    18,805
    
    
    
    23,078Issuance of special warrants on private placement
    
    
    13,999
    
    
    
    
    
    
    
    Warrants issued for acquisition of a business
    
    
    
    
    
    
    622
    
    
    
    Exercise of purchase warrants
    
    
    (3
    )
    
    
    
    
    
    
    Expiry of purchase warrants
    
    
    
    
    
    
    
    
    
    
    (4,273
    )End of year
    
    
    33,423
    
    
    
    19,427
    
    
    
    18,805Contributed surplus, beginning of year
    
    
    20,029
    
    
    
    16,862
    
    
    
    9,937Stock-based compensation expense
    
    
    6,894
    
    
    
    3,659
    
    
    
    3,239Exercise of stock options
    
    
    (3,940
    )
    
    
    (492
    )
    
    
    (587
    )Expiry of purchase warrants
    
    
    
    
    
    
    
    
    
    
    4,273End of year
    
    
    22,983
    
    
    
    20,029
    
    
    
    16,862Convertible note, beginning of year
    
    
    2,086
    
    
    
    2,086
    
    
    
    Issuance of convertible note
    
    
    
    
    
    
    
    
    
    
    2,086End of year
    
    
    2,086
    
    
    
    2,086
    
    
    
    2,086Accumulated deficit, beginning of year
    
    
    (255,835
    )
    
    
    (194,183
    )
    
    
    (159,990
    )Net loss and comprehensive loss
    
    
    (29,110
    )
    
    
    (61,652
    )
    
    
    (34,193
    )End of year
    
    
    (284,945
    )
    
    
    (255,835
    )
    
    
    (194,183
    )
   40




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Cash Flows


Three Years Ended December 31, 2010
 (US$000s)
    
    2010
    
    
    2009
    
    
    2008Operating ActivitiesNet loss
    
    
    (29,110
    )
    
    
    (61,652
    )
    
    
    (34,193
    )Net loss (income) from discontinued operations
    
    
    
    
    
    
    23,921
    
    
    
    (4,283
    )Items not requiring use of cashDepletion and depreciation
    
    
    8,960
    
    
    
    19,868
    
    
    
    25,761Provision for impairment
    
    
    
    
    
    
    1,903
    
    
    
    15,054Stock-based compensation (Note 9)
    
    
    6,095
    
    
    
    3,849
    
    
    
    3,016Unrealized loss (gain) on derivative instruments
    
    
    
    
    
    
    1,459
    
    
    
    (6,118
    )Impairment of deferred financing costs (Note 13)
    
    
    
    
    
    
    
    
    
    
    2,621Unrealized foreign exchange (gain) loss
    
    
    (3,523
    )
    
    
    5,109
    
    
    
    1,762Future income tax recovery
    
    
    (1,125
    )
    
    
    (9,600
    )
    
    
    Provision for uncollectible accounts
    
    
    
    
    
    
    174
    
    
    
    625Other
    
    
    (14
    )
    
    
    553
    
    
    
    519Abandonment costs settled (Note 6)
    
    
    (179
    )
    
    
    (118
    )
    
    
    Changes in non-cash working capital items
    
    
    1,132
    
    
    
    (459
    )
    
    
    6,016Net cash (used in) provided by operating activities  continuing operations
    
    
    (17,764
    )
    
    
    (14,993
    )
    
    
    10,780Net cash provided by operating activities  discontinued operations
    
    
    
    
    
    
    2,703
    
    
    
    6,273Net cash (used in) provided by operating activities
    
    
    (17,764
    )
    
    
    (12,290
    )
    
    
    17,053Investing ActivitiesCapital investments
    
    
    (86,285
    )
    
    
    (26,373
    )
    
    
    (21,063
    )Acquisition of oil and gas assets
    
    
    
    
    
    
    
    
    
    
    (22,308
    )Settlement of advances
    
    
    
    
    
    
    
    
    
    
    200Decrease (increase) in restricted cash
    
    
    2,350
    
    
    
    (2,000
    )
    
    
    (850
    )Long term receivables
    
    
    (1,558
    )
    
    
    (587
    )
    
    
    73Changes in non-cash working capital items
    
    
    5,633
    
    
    
    64
    
    
    
    (1,035
    )Net cash used in investing activities  continuing operations
    
    
    (79,860
    )
    
    
    (28,896
    )
    
    
    (44,983
    )Net cash provided by (used in) investing activities   discontinued operations
    
    
    
    
    
    
    35,292
    
    
    
    (4,338
    )Net cash (used in) provided by investing activities
    
    
    (79,860
    )
    
    
    6,396
    
    
    
    (49,321
    )Financing ActivitiesShares and warrants issued on private placements, net of share issue costs
    
    
    135,696
    
    
    
    
    
    
    
    82,451Share issue costs on acquisition
    
    
    
    
    
    
    (26
    )
    
    
    Proceeds from exercise of options and warrants
    
    
    2,600
    
    
    
    893
    
    
    
    1,205Proceeds from debt obligations, net of financing costs
    
    
    
    
    
    
    
    
    
    
    4,790Payments of debt obligations
    
    
    
    
    
    
    (7,416
    )
    
    
    (15,750
    )Payments of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (2,621
    )Other
    
    
    
    
    
    
    (100
    )
    
    
    (50
    )Changes in non-cash working capital items
    
    
    (10
    )
    
    
    (26
    )
    
    
    26Net cash provided by (used in) financing activities  continuing operations
    
    
    138,286
    
    
    
    (6,675
    )
    
    
    70,051Net cash provided by (used in) financing activities   discontinued operations
    
    
    
    
    
    
    (5,200
    )
    
    
    700Net cash provided by (used in) financing activities
    
    
    138,286
    
    
    
    (11,875
    )
    
    
    70,751Foreign exchange gain (loss) on cash and cash equivalents held in a foreign currency
    
    
    5,643
    
    
    
    16
    
    
    
    (10,574
    )Increase (decrease) in cash and cash equivalents, for the year
    
    
    46,305
    
    
    
    (17,753
    )
    
    
    27,909Cash and cash equivalents, beginning of year
    
    
    21,512
    
    
    
    39,265
    
    
    
    11,356Cash and cash equivalents, end of year
    
    
    67,817
    
    
    
    21,512
    
    
    
    39,265Cash and cash equivalents, end of year  continuing operations
    
    
    67,817
    
    
    
    21,512
    
    
    
    38,477Cash and cash equivalents, end of year  discontinued operations
    
    
    
    
    
    
    
    
    
    
    788
   41




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Notes to the Consolidated Financial Statements
 1. NATURE OF OPERATIONS
  2. SIGNIFICANT ACCOUNTING POLICIES
   Going Concern and Basis of Presentation
   Principles of Consolidation
  Foreign Currency Translation
   42




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##### Table of Contents



Cash and Cash Equivalents
  Full Cost Accounting for Oil and Gas Operations
   Capitalized Interest
  Depletion and Depreciation
   Impairment
   Intangible Assets
  Asset Retirement Costs
   43




---



##### Table of Contents



Oil and Gas Revenue
   Income or Loss Per Common Share
  Income Taxes
  Stock-based Compensation
  Financial Assets and Liabilities
     44




---



##### Table of Contents



Level 1 
    
    Quoted prices are available in active markets. Active markets are those in which
transactions occur in sufficient frequency and volume to provide pricing information on an
ongoing basis.
 Level 2 
    
    Pricing inputs are other than quoted prices in an active market included in Level 1.
Prices in Level 2 are either directly or indirectly observable as of the reporting date.
Level 2 valuations are based on inputs, including quoted forward prices for commodities, time
value and volatility factors, which can be substantially observed or corroborated in the
market place.
 Level 3 
    
    Valuation at this level are those with inputs for the asset or liability that are not
based on observable market data.
  3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
 As at December 31, 2010
    
    Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and gas propertiesProved
    
    
    
    
    
    
    
    
    
    
    159,551
    
    
    
    
    
    
    
    
    
    
    
    159,551Unproved
    
    
    125,435
    
    
    
    26,249
    
    
    
    39,126
    
    
    
    
    
    
    
    
    
    
    
    190,810125,435
    
    
    
    26,249
    
    
    
    198,677
    
    
    
    
    
    
    
    
    
    
    
    350,361Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (108,334
    )
    
    
    
    
    
    
    
    
    
    
    (108,334
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )125,435
    
    
    
    26,249
    
    
    
    73,793
    
    
    
    
    
    
    
    
    
    
    
    225,477Development costsFeasibility studies and other deferred costsIraq and Libya  HTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,888
    )
    
    
    (5,888
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,426
    
    
    
    11,426Accumulated depreciation and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (921
    )
    
    
    (921
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,505
    
    
    
    10,505Furniture and equipment
    
    
    27
    
    
    
    436
    
    
    
    592
    
    
    
    1,361
    
    
    
    58
    
    
    
    2,474Accumulated depreciation
    
    
    (17
    )
    
    
    (101
    )
    
    
    (229
    )
    
    
    (894
    )
    
    
    (15
    )
    
    
    (1,256
    )10
    
    
    
    335
    
    
    
    363
    
    
    
    467
    
    
    
    43
    
    
    
    1,218125,445
    
    
    
    26,584
    
    
    
    74,156
    
    
    
    467
    
    
    
    10,548
    
    
    
    237,200
  45




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##### Table of Contents



As at December 31, 2009
    
    Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and gas propertiesProved
    
    
    
    
    
    
    
    
    
    
    148,110
    
    
    
    
    
    
    
    
    
    
    
    148,110Unproved
    
    
    94,431
    
    
    
    6,755
    
    
    
    14,411
    
    
    
    
    
    
    
    
    
    
    
    115,59794,431
    
    
    
    6,755
    
    
    
    162,521
    
    
    
    
    
    
    
    
    
    
    
    263,707Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (99,744
    )
    
    
    
    
    
    
    
    
    
    
    (99,744
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )94,431
    
    
    
    6,755
    
    
    
    46,227
    
    
    
    
    
    
    
    
    
    
    
    147,413Development costsFeasibility studies and other deferred costsIraq and Libya  HTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,888
    )
    
    
    (5,888
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,868
    
    
    
    10,868Accumulated depreciation and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393
    )
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,475
    
    
    
    10,475Furniture and equipment
    
    
    24
    
    
    
    169
    
    
    
    135
    
    
    
    968
    
    
    
    22
    
    
    
    1,318Accumulated depreciation
    
    
    (8
    )
    
    
    (53
    )
    
    
    (92
    )
    
    
    (650
    )
    
    
    (11
    )
    
    
    (814
    )16
    
    
    
    116
    
    
    
    43
    
    
    
    318
    
    
    
    11
    
    
    
    50494,447
    
    
    
    6,871
    
    
    
    46,270
    
    
    
    318
    
    
    
    10,486
    
    
    
    158,392
    ($/bbl)2011
    
    
    88.002012
    
    
    89.002013
    
    
    90.002014
    
    
    92.002015
    
    
    95.172016
    
    
    97.552017
    
    
    100.262018
    
    
    102.742019
    
    
    105.452020
    
    
    107.56Thereafter
    
    2% per year
   46




---



##### Table of Contents



4. INTANGIBLE ASSETS
 
 5. DEBT
 As at December 31,
    
    2010
    
    
    2009Convertible note
    
    
    40,217
    
    
    
    38,005Unamortized discount
    
    
    (385
    )
    
    
    (1,071
    )39,832
    
    
    
    36,934
     6. ASSET RETIREMENT OBLIGATIONS
  As at December 31,
    
    2010
    
    
    2009Asset retirement obligations, beginning of year
    
    
    948
    
    
    
    1,928Liabilities incurred
    
    
    479
    
    
    
    185Liabilities settled
    
    
    (179
    )
    
    
    (118
    )Accretion expense
    
    
    23
    
    
    
    79Revisions in estimated cash flows
    
    
    (527
    )
    
    
    (1,126
    )744
    
    
    
    948Less current portion
    
    
    
    
    
    
    (753
    )Asset retirement obligations, end of year
    
    
    744
    
    
    
    195
  47




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##### Table of Contents



7. COMMITMENTS AND CONTINGENCIES
 Long Term Obligation
  Income Taxes
    Lease Commitments
  2011
    
    
    1,7692012
    
    
    8852013
    
    
    3352,989
 Other
     48




---



##### Table of Contents



8. SHAREHOLDERS EQUITY
  (000s)
    
    2010
    
    
    2009
    
    
    2008Common shares, beginning of year
    
    
    282,559
    
    
    
    279,381
    
    
    
    244,874Shares issued for cash
    
    
    50,000
    
    
    
    
    
    
    
    29,334Shares issued for services
    
    
    280
    
    
    
    81
    
    
    
    Shares issued for acquisition of a business (Note 17)
    
    
    
    
    
    
    2,683
    
    
    
    Exercise of stock options
    
    
    1,525
    
    
    
    414
    
    
    
    2,666Exercise of purchase warrants
    
    
    2
    
    
    
    
    
    
    
    Exercise of convertible debt
    
    
    
    
    
    
    
    
    
    
    2,291Shares issued for employee bonuses
    
    
    
    
    
    
    
    
    
    
    216End of year
    
    
    334,366
    
    
    
    282,559
    
    
    
    279,381
  (000s)
    
    2010
    
    
    2009
    
    
    2008Purchase warrants, beginning of year
    
    
    12,135
    
    
    
    11,400
    
    
    
    26,496Private placements
    
    
    12,500
    
    
    
    
    
    
    
    29,334Issued on acquisition
    
    
    
    
    
    
    735
    
    
    
    Exercised
    
    
    (2
    )
    
    
    
    
    
    
    (29,334
    )Expired
    
    
    
    
    
    
    
    
    
    
    (15,096
    )End of year
    
    
    24,633
    
    
    
    12,135
    
    
    
    11,400
 CashPrice per
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Value onYear of
    
    Special
    
    
    Outstanding(1)
    
    
    Value
    
    
    Expiry
    
    
    Price per
    
    
    ExerciseIssue
    
    Warrant
    
    
    (000s)
    
    
    ($US000s)
    
    
    Date
    
    
    Share
    
    
    ($US000s)2006
    
    US$
    2.23
    
    
    
    11,398
    
    
    
    18,802
    
    
    May 2011
    
Cdn$
    2.93
(2)
    
    
    33,5772009
    
    
    N/A
    
    
    
    735
    
    
    
    622
    
    
    Feb 2011
    
    Cdn$
    4.05
    
    
    
    2,9932010
    
    Cdn$
    3.00
    
    
    
    10,417
    
    
    
    11,419
    
    
    Feb 2011
    
    Cdn$
    3.16
    
    
    
    33,0952010
    
    Cdn$
    3.00
    
    
    
    2,083
    
    
    
    2,580
    
    
    Feb 2011
    
    Cdn$

    3.16
    
    
    
    6,61924,633
    
    
    
    33,423
    
    
    
    
    
    
    
    
    
    
    
    76,284
 (1)
    
    One common share is issuable for each purchase warrant upon exercise.(2)
    
    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.
In September 2006, these warrants were listed on the Toronto Stock Exchange and the
exercise price was changed to Cdn$2.93.    49




---



##### Table of Contents



(000s of common shares)
    
    2010
    
    
    2009
    
    
    2008Stock options
    
    
    16,927
    
    
    
    15,013
    
    
    
    11,913Purchase warrants
    
    
    24,633
    
    
    
    12,135
    
    
    
    11,400Convertible debt
    
    
    12,780
    
    
    
    12,780
    
    
    
    12,78054,340
    
    
    
    39,928
    
    
    
    36,093
 9. STOCK-BASED COMPENSATION
    50




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    Averageof Stock
    
    
    Exercise
    
    
    of Stock
    
    
    Exercise
    
    
    of Stock
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    Price(000s)
    
    
    (Cdn$)
    
    
    (000s)
    
    
    (Cdn$)
    
    
    (000s)
    
    
    (Cdn$)Outstanding, beginning of year
    
    
    15,013
    
    
    
    2.27
    
    
    
    11,913
    
    
    
    2.32
    
    
    
    12,945
    
    
    
    2.37Granted
    
    
    6,041
    
    
    
    2.56
    
    
    
    4,188
    
    
    
    2.17
    
    
    
    3,832
    
    
    
    1.79Exercised
    
    
    (2,743
    )
    
    
    2.28
    
    
    
    (413
    )
    
    
    2.46
    
    
    
    (3,067
    )
    
    
    0.90Expired
    
    
    (635
    )
    
    
    2.60
    
    
    
    (114
    )
    
    
    2.44
    
    
    
    (580
    )
    
    
    5.78Forfeited
    
    
    (749
    )
    
    
    2.64
    
    
    
    (561
    )
    
    
    2.41
    
    
    
    (1,217
    )
    
    
    3.05Outstanding, end of year
    
    
    16,927
    
    
    
    2.24
    
    
    
    15,013
    
    
    
    2.27
    
    
    
    11,913
    
    
    
    2.32Exercisable, end of year
    
    
    7,324
    
    
    
    2.19
    
    
    
    7,101
    
    
    
    2.48
    
    
    
    5,062
    
    
    
    2.61
  Outstanding
    
    
    ExercisableWeighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageRange of
    
    
    
    
    
    Remaining
    
    
    Weighted Average
    
    
    
    
    
    
    Remaining
    
    
    Weighted AverageExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Contractual Life
    
    
    Exercise Price(Cdn$)
    
    (000s)
    
    
    (years)
    
    
    (Cdn$)
    
    
    (000s)
    
    
    (years)
    
    
    (Cdn$)1.51 to 2.06
    
    
    6,289
    
    
    
    2.7
    
    
    
    1.74
    
    
    
    3,723
    
    
    
    2.3
    
    
    
    1.732.15 to 2.71
    
    
    7,788
    
    
    
    4.9
    
    
    
    2.34
    
    
    
    2,079
    
    
    
    2.7
    
    
    
    2.412.77 to 3.41
    
    
    2,850
    
    
    
    3.8
    
    
    
    3.08
    
    
    
    1,522
    
    
    
    1.6
    
    
    
    2.9816,927
    
    
    
    3.9
    
    
    
    2.24
    
    
    
    7,324
    
    
    
    2.3
    
    
    
    2.19
  2010
    
    
    2009
    
    
    2008Expected life (in years)
    
    
    6.0
    
    
    
    4.6
    
    
    
    4.0Volatility
    
    
    75.2
    %
    
    
    81.1
    %
    
    
    63.5
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free rate
    
    
    2.6
    %
    
    
    2.6
    %
    
    
    3.1
    %
   51




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008General and administrativeOption awards
    
    
    5,695
    
    
    
    3,484
    
    
    
    2,241Share bonus awards
    
    
    
    
    
    
    
    
    
    
    207Shares issued for services
    
    
    
    
    
    
    207
    
    
    
    5,695
    
    
    
    3,691
    
    
    
    2,448Business and technology developmentOption awards
    
    
    400
    
    
    
    158
    
    
    
    432Share bonus awards
    
    
    
    
    
    
    
    
    
    
    136400
    
    
    
    158
    
    
    
    568Discontinued operationsOption awards
    
    
    
    
    
    
    17
    
    
    
    391Share bonus awards
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    17
    
    
    
    5386,095
    
    
    
    3,866
    
    
    
    3,554
  10. RETIREMENT PLAN
  11. SEGMENT INFORMATION
  Oil and Gas  Integrated
  Oil and Gas  Conventional
  Business and Technology Development
   52




---



##### Table of Contents



Corporate
 ,
 2010Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US(1)
    
    
    Development
    
    
    Corporate(2)
    
    
    TotalRevenueOil(3)
    
    
    
    
    
    
    
    
    
    
    21,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,720Interest
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    208
    
    
    
    
    
    
    
    21,726
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    21,928ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    9,503
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,503General and administrative
    
    
    1,802
    
    
    
    2,707
    
    
    
    3,619
    
    
    
    
    
    
    
    
    
    
    
    18,132
    
    
    
    26,260Business and technology development
    
    
    187
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    10,385
    
    
    
    
    
    
    
    10,615Depletion and depreciation
    
    
    9
    
    
    
    47
    
    
    
    8,697
    
    
    
    
    
    
    
    (36
    )
    
    
    243
    
    
    
    8,960Foreign exchange
    
    
    (15
    )
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    (3,248
    )
    
    
    (3,325
    )Interest and financing
    
    
    6
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    241,989
    
    
    
    2,804
    
    
    
    21,757
    
    
    
    
    
    
    
    10,360
    
    
    
    15,127
    
    
    
    52,037Loss  continuing operations before
income taxes
    
    
    (1,989
    )
    
    
    (2,804
    )
    
    
    (31
    )
    
    
    
    
    
    
    (10,360
    )
    
    
    (14,925
    )
    
    
    (30,109
    )(Provision for) recovery of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (126
    )Future
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    1,198
    
    
    
    
    
    
    
    1,125
    
    
    
    
    
    
    
    (184
    )
    
    
    
    
    
    
    1,198
    
    
    
    (15
    )
    
    
    999Net loss  continuing operations
    
    
    (1,989
    )
    
    
    (2,804
    )
    
    
    (215
    )
    
    
    
    
    
    
    (9,162
    )
    
    
    (14,940
    )
    
    
    (29,110
    )Net loss  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss and comprehensive loss
    
    
    (1,989
    )
    
    
    (2,804
    )
    
    
    (215
    )
    
    
    
    
    
    
    (9,162
    )
    
    
    (14,940
    )
    
    
    (29,110
    )Capital investments
    
    
    29,987
    
    
    
    18,727
    
    
    
    36,613
    
    
    
    
    
    
    
    567
    
    
    
    391
    
    
    
    86,285Identifiable assets as at December 31, 2010
    
    
    125,569
    
    
    
    28,916
    
    
    
    91,189
    
    
    
    
    
    
    
    102,810
    
    
    
    61,101
    
    
    
    409,585
 (1)
    
    The Company sold its US operations in the third quarter of 2009.(2)
    
    Corporate activities undertaken on behalf of a segment are allocated to that segment at
cost.(3)
    
    All revenues in Asia are generated from the sale of production to one customer.  53




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##### Table of Contents



2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US(1)
    
    
    Development
    
    
    Corporate(2)
    
    
    TotalRevenueOil(3)
    
    
    
    
    
    
    
    
    
    
    24,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,968Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,335
    )Interest
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    25
    
    
    
    
    
    
    
    23,639
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    23,658ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    10,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,191General and administrative
    
    
    1,129
    
    
    
    2,269
    
    
    
    2,777
    
    
    
    
    
    
    
    
    
    
    
    15,518
    
    
    
    21,693Business and technology development
    
    
    560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,941
    
    
    
    
    
    
    
    9,501Depletion and depreciation
    
    
    4
    
    
    
    53
    
    
    
    18,033
    
    
    
    
    
    
    
    1,633
    
    
    
    145
    
    
    
    19,868Foreign exchange
    
    
    (8
    )
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    2
    
    
    
    5,155
    
    
    
    5,220Interest and financing
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    
    
    
    
    79
    
    
    
    7
    
    
    
    856Provision for impairment of intangible
asset and development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,903
    
    
    
    
    
    
    
    1,9031,685
    
    
    
    2,322
    
    
    
    31,842
    
    
    
    
    
    
    
    12,558
    
    
    
    20,825
    
    
    
    69,232Loss  continuing operations before
income taxes
    
    
    (1,685
    )
    
    
    (2,322
    )
    
    
    (8,203
    )
    
    
    
    
    
    
    (12,558
    )
    
    
    (20,806
    )
    
    
    (45,574
    )(Provision for) recovery of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (1,399
    )
    
    
    
    
    
    
    
    
    
    
    (358
    )
    
    
    (1,757
    )Future
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,600
    
    
    
    
    
    
    
    9,600
    
    
    
    
    
    
    
    (1,399
    )
    
    
    
    
    
    
    9,600
    
    
    
    (358
    )
    
    
    7,843Net loss  continuing operations
    
    
    (1,685
    )
    
    
    (2,322
    )
    
    
    (9,602
    )
    
    
    
    
    
    
    (2,958
    )
    
    
    (21,164
    )
    
    
    (37,731
    )Net loss  discontinued operations (net
of tax of $29.6 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,921
    )
    
    
    
    
    
    
    
    
    
    
    (23,921
    )Net loss and comprehensive loss
    
    
    (1,685
    )
    
    
    (2,322
    )
    
    
    (9,602
    )
    
    
    (23,921
    )
    
    
    (2,958
    )
    
    
    (21,164
    )
    
    
    (61,652
    )Capital investments
    
    
    12,756
    
    
    
    5,380
    
    
    
    6,049
    
    
    
    
    
    
    
    2,093
    
    
    
    95
    
    
    
    26,373Identifiable assets as at December 31, 2009
    
    
    94,594
    
    
    
    7,597
    
    
    
    57,528
    
    
    
    
    
    
    
    102,878
    
    
    
    19,166
    
    
    
    281,763
 (1)
    
    The Company sold its US operations in the third quarter of 2009.(2)
    
    Corporate activities undertaken on behalf of a segment are allocated to that segment at
cost.(3)
    
    All revenues in Asia are generated from the sale of production to one customer.  54




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##### Table of Contents



2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    US(1)
    
    
    Development
    
    
    Corporate(2)
    
    
    TotalRevenueOil(3)
    
    
    
    
    
    
    
    
    
    
    48,370
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,370Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,688Interest
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    612
    
    
    
    
    
    
    
    50,108
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    50,670ExpensesOperating
    
    
    
    
    
    
    
    
    
    
    21,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,515General and administrative
    
    
    1,627
    
    
    
    658
    
    
    
    1,967
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    14,252Business and technology development
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,264
    
    
    
    
    
    
    
    6,453Depletion and depreciation
    
    
    3
    
    
    
    
    
    
    
    23,135
    
    
    
    
    
    
    
    2,618
    
    
    
    5
    
    
    
    25,761Foreign exchange
    
    
    26
    
    
    
    
    
    
    
    278
    
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    1,527Interest expense and financing
    
    
    
    
    
    
    
    
    
    
    821
    
    
    
    
    
    
    
    76
    
    
    
    412
    
    
    
    1,309Provision for impairment of GTL intangible
assets and development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,054
    
    
    
    
    
    
    
    15,054Write off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    2,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,6211,845
    
    
    
    658
    
    
    
    50,337
    
    
    
    
    
    
    
    24,012
    
    
    
    11,640
    
    
    
    88,492Loss  continuing operations before income taxes
    
    
    (1,845
    )
    
    
    (658
    )
    
    
    (229
    )
    
    
    
    
    
    
    (24,012
    )
    
    
    (11,078
    )
    
    
    (37,822
    )Current provision for income taxes
    
    
    
    
    
    
    
    
    
    
    (650
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (654
    )Net loss  continuing operations
    
    
    (1,845
    )
    
    
    (658
    )
    
    
    (879
    )
    
    
    
    
    
    
    (24,014
    )
    
    
    (11,080
    )
    
    
    (38,476
    )Net income  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,283
    
    
    
    
    
    
    
    
    
    
    
    4,283Net (loss) income and comprehensive (loss) income
    
    
    (1,845
    )
    
    
    (658
    )
    
    
    (879
    )
    
    
    4,283
    
    
    
    (24,014
    )
    
    
    (11,080
    )
    
    
    (34,193
    )Capital investments
    
    
    6,484
    
    
    
    1,369
    
    
    
    8,378
    
    
    
    
    
    
    
    4,832
    
    
    
    
    
    
    
    21,063Identifiable assets as at December 31, 2008
    
    
    81,126
    
    
    
    1,766
    
    
    
    64,901
    
    
    
    65,371
    
    
    
    105,587
    
    
    
    28,124
    
    
    
    346,875
 (1)
    
    The Company sold its US operations in the third quarter of 2009.(2)
    
    Corporate activities undertaken on behalf of a segment are allocated to that segment at
cost.(3)
    
    All revenues in Asia are generated from the sale of production to one customer. 12. FINANCIAL INSTRUMENTS
    Financial Risk Factors
   55




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##### Table of Contents



Commodity Price Risks
    2010
    
    
    2009
    
    
    2008Realized gains (losses) on derivative transactions
    
    
    
    
    
    
    124
    
    
    
    (4,430
    )Unrealized gains (losses) on derivative transactions
    
    
    
    
    
    
    (1,459
    )
    
    
    6,118
    
    
    
    (1,335
    )
    
    
    1,688
 Foreign Currency Exchange Rate Risk
   Change From a 10%
    
    
    Change From a 10%(Increase) Decrease in Net Loss and Comprehensive Loss
    
    Increase or Weakening
    
    
    Decrease or StrengtheningChinese renminbi
    
    
    1,438
    
    
    
    (1,758
    )Canadian dollar
    
    
    (2,089
    )
    
    
    167
 Interest Rate Risk
  Credit Risk
   56




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##### Table of Contents



As at      December 31,
    
    2010
    
    
    2009Accounts receivable  current
    
    
    6,329
    
    
    
    5,004Accounts receivable  over 90 days
    
    
    30
    
    
    
    176,359
    
    
    
    5,021
 Liquidity Risk
  As at      December 31, 2010
    
    Less than 1 yearAccounts payable and accrued liabilities
    
    
    21,482Long term debt and interest
    
    
    41,275
 13. CAPITAL MANAGEMENT
   As at December 31,
    
    2010
    
    
    2009Cash and cash equivalents
    
    
    67,817
    
    
    
    21,512Debt
    
    
    39,832
    
    
    
    Long term debt
    
    
    
    
    
    
    36,934Shareholders equity
    
    
    324,109
    
    
    
    208,029
     57




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##### Table of Contents



14. INCOME TAXES
  2010
    
    
    2009
    
    
    2008Loss from continuing operations before income taxes
    
    
    (30,109
    )
    
    
    (45,574
    )
    
    
    (37,822
    )Combined Canadian federal and provincial statutory rates
    
    
    28.0
    %
    
    
    29.0
    %
    
    
    29.5
    %Tax benefit
    
    
    (8,431
    )
    
    
    (13,217
    )
    
    
    (11,158
    )Foreign net (gains) losses affected at lower income tax rates
    
    
    (396
    )
    
    
    106
    
    
    
    4,562Effect of change in foreign exchange rates
    
    
    (2,309
    )
    
    
    (2,858
    )
    
    
    3,006Expiry of tax loss carry-forwards
    
    
    982
    
    
    
    911
    
    
    
    2,875Tax credit carry-forward
    
    
    
    
    
    
    (350
    )
    
    
    Compensation not deductible
    
    
    1,310
    
    
    
    1,456
    
    
    
    753Financing costs not deductible
    
    
    
    
    
    
    
    
    
    
    695Net currency exchange (gains) losses not deductible
    
    
    (900
    )
    
    
    1,501
    
    
    
    402Change in prior year estimate of tax loss carry-forwards
    
    
    (918
    )
    
    
    3,941
    
    
    
    (59
    )Realized derivative (gains) losses not taxable/deductible
    
    
    
    
    
    
    334
    
    
    
    (422
    )Effect of change in effective income tax rates on future tax assets
    
    
    1,096
    
    
    
    (4,453
    )
    
    
    (331
    )Other differences
    
    
    425
    
    
    
    32
    
    
    
    (127
    )(9,141
    )
    
    
    (12,597
    )
    
    
    196Change in valuation allowance
    
    
    8,142
    
    
    
    4,754
    
    
    
    458Provision for (recovery of) income taxes
    
    
    (999
    )
    
    
    (7,843
    )
    
    
    654
  As at December 31,
    
    2010
    
    
    2009Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesOil and gas properties and investments
    
    
    266
    
    
    
    (8,569
    )
    
    
    471
    
    
    
    (1,124
    )Intangibles
    
    
    
    
    
    
    (30,493
    )
    
    
    
    
    
    
    (30,354
    )Tax loss carry-forwards
    
    
    54,990
    
    
    
    
    
    
    
    37,583
    
    
    
    Tax credit carry-forward
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    Valuation allowance
    
    
    (37,712
    )
    
    
    
    
    
    
    (29,570
    )
    
    
    17,544
    
    
    
    (39,062
    )
    
    
    8,834
    
    
    
    (31,478
    )
  58




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##### Table of Contents



Year of Expiry2011
    
    
    5052012
    
    
    2,3272014
    
    
    5,2432015
    
    
    6,8032018
    
    
    2,0932019
    
    
    1,0792020  2025
    
    
    5,5082026  2030
    
    
    116,123No expiry
    
    
    63,994203,675
      59




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##### Table of Contents



15. SUPPLEMENTAL CASH FLOW INFORMATION
  2010
    
    
    2009
    
    
    2008Cash paid during the year forIncome taxes
    
    
    656
    
    
    
    1,876
    
    
    
    5Interest
    
    
    1,610
    
    
    
    2,122
    
    
    
    1,120Investing and financing activities, non-cashAcquisition of business/assetsShares issued
    
    
    
    
    
    
    6,899
    
    
    
    Warrants issued
    
    
    
    
    
    
    622
    
    
    
    Debt issued
    
    
    
    
    
    
    
    
    
    
    52,052
    
    
    
    7,521
    
    
    
    52,052Conversion of debt to common sharesExtinguishment of debt
    
    
    
    
    
    
    
    
    
    
    4,737Extinguishment of interest
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    4,862Shares issued for bonuses and services
    
    
    799
    
    
    
    207
    
    
    
    490Stock-based compensation capitalized
    
    
    
    
    
    
    
    
    
    
    175
 2010
    
    
    2009
    
    
    2008Changes in non-cash working capital itemsOperating activitiesAccounts receivable
    
    
    (551
    )
    
    
    (1,253
    )
    
    
    3,509Note receivable
    
    
    (39
    )
    
    
    (225
    )
    
    
    Prepaid and other current assets
    
    
    176
    
    
    
    (175
    )
    
    
    (48
    )Accounts payable and accrued liabilities
    
    
    2,076
    
    
    
    1,314
    
    
    
    1,905Income tax payable
    
    
    (530
    )
    
    
    (120
    )
    
    
    6501,132
    
    
    
    (459
    )
    
    
    6,016Investing activitiesAccounts receivable
    
    
    (775
    )
    
    
    (140
    )
    
    
    7Prepaid and other current assets
    
    
    (2,264
    )
    
    
    41
    
    
    
    (70
    )Accounts payable and accrued liabilities
    
    
    8,672
    
    
    
    163
    
    
    
    (972
    )5,633
    
    
    
    64
    
    
    
    (1,035
    )Financing activitiesAccounts payable and accrued liabilities
    
    
    (10
    )
    
    
    (26
    )
    
    
    266,755
    
    
    
    (421
    )
    
    
    5,007
  As at December 31,
    
    2010
    
    
    2009Bank accounts
    
    
    10,147
    
    
    
    21,512Term deposit
    
    
    57,670
    
    
    
    67,817
    
    
    
    21,512
  60




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##### Table of Contents



16. RELATED PARTY TRANSACTIONS
  17. ACQUISITION AND PROJECT-RELATED AGREEMENTS
 Mongolia
   Purchase consideration2,683,291 common shares(1)
    
    
    6,899735,449 warrants to purchase Ivanhoe common shares (Note 8)
    
    
    6227,521Net assets acquiredCash
    
    
    29Non-cash working capital, net
    
    
    (606
    )Oil and gas properties  unproved
    
    
    10,742Future income tax liability
    
    
    (2,644
    )7,521
 (1)
    
    The closing share price on the Toronto Stock Exchange on the date of acquisition,
November 26, 2009, was Cdn$2.70. Canada
     Ecuador
   61




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##### Table of Contents



18. DISCONTINUED OPERATIONS
      2010
    
    
    2009
    
    
    2008RevenueOil and gas
    
    
    
    
    
    
    5,455
    
    
    
    18,120Gain on derivative instruments
    
    
    
    
    
    
    189
    
    
    
    278Interest
    
    
    
    
    
    
    8
    
    
    
    98
    
    
    
    5,652
    
    
    
    18,496ExpensesOperating
    
    
    
    
    
    
    2,132
    
    
    
    5,137General and administrative
    
    
    
    
    
    
    139
    
    
    
    2,413Depletion and depreciation
    
    
    
    
    
    
    3,772
    
    
    
    6,143Interest and financing
    
    
    
    
    
    
    173
    
    
    
    520
    
    
    
    6,216
    
    
    
    14,213Income (loss) before disposition
    
    
    
    
    
    
    (564
    )
    
    
    4,283Loss on disposition (net of tax of $29.6 million for 2009, nil for 2008)
    
    
    
    
    
    
    (23,357
    )
    
    
    Net income (loss) from discontinued operations
    
    
    
    
    
    
    (23,921
    )
    
    
    4,283
 19. SUBSEQUENT EVENTS
   62




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##### Table of Contents



20. ADDITIONAL DISCLOSURES REQUIRED UNDER US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  Consolidated Balance Sheets
  As at December 31,
    
    2010
    
    
    2009Canadian
    
    
    Increase
    
    
    
    
    US
    
    
    Canadian
    
    
    Increase
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPAssetsCurrent assetsCash and cash equivalents
    
    
    67,817
    
    
    
    
    
    
    
    
    
    67,817
    
    
    
    21,512
    
    
    
    
    
    
    
    
    
    21,512Accounts receivable
    
    
    6,359
    
    
    
    
    
    
    
    
    
    6,359
    
    
    
    5,021
    
    
    
    
    
    
    
    
    
    5,021Note receivable
    
    
    264
    
    
    
    
    
    
    
    
    
    264
    
    
    
    225
    
    
    
    
    
    
    
    
    
    225Prepaid and other current assets
    
    
    2,859
    
    
    
    
    
    
    
    
    
    2,859
    
    
    
    771
    
    
    
    
    
    
    
    
    
    771Restricted cash
    
    
    500
    
    
    
    
    
    
    
    
    
    500
    
    
    
    2,850
    
    
    
    
    
    
    
    
    
    2,850Total current assets
    
    
    77,799
    
    
    
    
    
    
    
    
    
    77,799
    
    
    
    30,379
    
    
    
    
    
    
    
    
    
    30,379Oil and gas properties and development
costs, net
    
    
    237,200
    
    
    
    (38,500
    )
    
    (i)
    
    
    221,290
    
    
    
    158,392
    
    
    
    (38,500
    )
    
    (i)
    
    
    139,34624,172
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    20,315
    
    
    (ii)(1,582
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (861
    )
    
    (iii)Intangible assets
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153Long term receivables
    
    
    2,433
    
    
    
    
    
    
    
    
    
    2,433
    
    
    
    839
    
    
    
    
    
    
    
    
    
    839Total assets
    
    
    409,585
    
    
    
    (15,910
    )
    
    
    
    
    393,675
    
    
    
    281,763
    
    
    
    (19,046
    )
    
    
    
    
    262,717Liabilities and shareholders equityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    21,482
    
    
    
    
    
    
    
    
    
    21,482
    
    
    
    10,779
    
    
    
    
    
    
    
    
    
    10,779Debt
    
    
    39,832
    
    
    
    504
    
    
    (iii)
    
    
    40,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    -Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    
    
    530Derivative instruments
    
    
    
    
    
    
    7,228
    
    
    (vi)
    
    
    7,228
    
    
    
    
    
    
    
    8,249
    
    
    (vi)
    
    
    8,249Asset retirement obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    753Total current liabilities
    
    
    61,314
    
    
    
    7,613
    
    
    
    
    
    68,927
    
    
    
    12,062
    
    
    
    8,249
    
    
    
    
    
    20,311Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,934
    
    
    
    1,225
    
    
    (iii)
    
    
    38,005
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154
    )
    
    (iii)Asset retirement obligations
    
    
    744
    
    
    
    
    
    
    
    
    
    744
    
    
    
    195
    
    
    
    
    
    
    
    
    
    195Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900Future income tax liability
    
    
    21,518
    
    
    
    
    
    
    
    
    
    21,518
    
    
    
    22,643
    
    
    
    
    
    
    
    
    
    22,643Total liabilities
    
    
    85,476
    
    
    
    7,613
    
    
    
    
    
    93,089
    
    
    
    73,734
    
    
    
    9,320
    
    
    
    
    
    83,054Shareholders equityShare capital
    
    
    550,562
    
    
    
    74,455
    
    
    (iv)
    
    
    638,420
    
    
    
    422,322
    
    
    
    74,455
    
    
    (iv)
    
    
    510,784(1,155
    )
    
    (v)
    
    
    
    
    
    
    
    
    
    
    (551
    )
    
    (v)1,358
    
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (vii)13,200
    
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (vi)Purchase warrants
    
    
    33,423
    
    
    
    (33,423
    )
    
    (vi)
    
    
    
    
    
    
    19,427
    
    
    
    (19,427
    )
    
    (vi)
    
    
    Contributed surplus
    
    
    22,983
    
    
    
    (2,593
    )
    
    (v)
    
    
    17,443
    
    
    
    20,029
    
    
    
    (3,197
    )
    
    (v)
    
    
    13,885(2,947
    )
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    (2,947
    )
    
    (vi)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iii)
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iii)
    
    
    Accumulated deficit
    
    
    (284,945
    )
    
    
    (70,332
    )
    
    
    
    
    (355,277
    )
    
    
    (255,835
    )
    
    
    (89,171
    )
    
    
    
    
    (345,006
    )Total shareholders equity
    
    
    324,109
    
    
    
    (23,523
    )
    
    
    
    
    300,586
    
    
    
    208,029
    
    
    
    (28,366
    )
    
    
    
    
    179,663Total liabilities and shareholders equity
    
    
    409,585
    
    
    
    (15,910
    )
    
    
    
    
    393,675
    
    
    
    281,763
    
    
    
    (19,046
    )
    
    
    
    
    262,717
  63




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##### Table of Contents



Oil and Gas Properties and Development Costs
 (i)
    
    There are certain differences between the full cost method of accounting for oil and gas
properties as applied in Canada and as applied in the US. The principal difference is in
the method of performing ceiling test evaluations. In the ceiling test evaluation for US
GAAP purposes, the Company limits, on a country-by-country basis, the capitalized costs of
oil and gas properties, net of accumulated depletion, depreciation and amortization and
deferred income taxes, to (a) the present value of estimated future net revenues computed by
applying a 12 month average oil price to reserves to estimated future production of proved
oil and gas reserves as of the date of the latest balance sheet presented, less estimated
future expenditures (based on current costs) to be incurred in developing and producing the
proved reserves computed using a discount factor of 10% and assuming continuation of
existing economic conditions; plus (b) the cost of properties not being amortized (e.g.
major development projects) and (c) the lower of cost or fair value of unproved properties
included in the costs being amortized less (d) income tax effects related to the difference
between the book and tax basis of the properties referred to in (b) and (c) above. If
capitalized costs exceed this limit, the excess is charged as a provision for impairment.
Unproved properties and major development projects are assessed on a quarterly basis for
possible impairments or reductions in value. If a reduction in value has occurred, the
impairment is transferred to the carrying value of proved oil and gas properties. The
Company performed the ceiling test in accordance with US GAAP and determined that for the
year ended December 31, 2010, no impairment provision was required. The cumulative
differences in the amount of impairment provisions between US and Canadian GAAP were $38.5
million at December 31, 2010, and December 31, 2009.
 (ii)
    
    The cumulative differences in the amount of impairment provisions between US and Canadian
GAAP resulted in reductions in accumulated depletion.
 (iii)
    
    Under Canadian GAAP, the Company was required to bifurcate the value of the Convertible
Note, allocating a portion to debt and a portion to equity. Under US GAAP, convertible debt
securities are classified as debt in their entirety. Under Canadian GAAP, this discount
accretion was capitalized. To reconcile to US GAAP the entire $2.1 million recorded in
equity is reversed as well as the unamortized discount of $0.4 million and the accreted
discount that was capitalized in the amount of $1.6 million. In addition, because the
convertible note is not denominated in US currency the re-measurement of the different
carrying value for US GAAP results in an increase to net income. The foreign exchange gain
of $0.1 million is shown as a separate amount in the US GAAP reconciliation of the Companys
balance sheet shown above and is adjusted to the foreign exchange expense line item in the
US GAAP reconciliation of the statement of operations below.
 Shareholders Equity
 (iv)
    
    In June 1999, the shareholders approved a reduction of stated capital in respect of the
common shares by an amount of $74.5 million being equal to the accumulated deficit as at
December 31, 1998. Under US GAAP, a reduction of the accumulated deficit such as this is not
recognized except in the case of a quasi reorganization.
 (v)
    
    Under Canadian GAAP, the Company accounts for all stock options granted to employees and
directors since January 1, 2002 using the fair value based method of accounting. Under this
method, compensation costs are recognized in the financial statements over the stock
options vesting period using an option-pricing model for determining the fair value of the
stock options at the grant date. Under US GAAP, prior to January 1, 2006, the Company
applied Accounting Principles Board (APB) Opinion No. 25, as interpreted by Financial
Accounting Standards Board (FASB) Interpretation No. 44, in accounting for its stock
option plan and did not recognize compensation costs in its financial statements for stock
options issued to employees and directors. Beginning January 1, 2006, the Company applied
the revision to FASBs Accounting Standards Codification Manual (ASC) Topic 718 Stock
Compensation (formerly Statement of Financial Accounting Standards (SFAS) No. 123R) which
supersedes APB No. 25, Accounting for Stock Issued to Employees. The Company elected to
implement this statement on a modified prospective basis whereby the Company began
recognizing stock-based compensation in its US GAAP results of operations for the unvested
portion of awards outstanding as at January 1, 2006 and for all awards granted after
January 1, 2006. There are no significant differences between the accounting for stock
options under Canadian GAAP and US GAAP subsequent to January 1, 2006.
  64




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##### Table of Contents



(vi)
    
    The Company accounts for purchase warrants as equity under Canadian GAAP. The accounting
treatment of warrants under US GAAP reflects the application of ASC Topic 815 Derivatives
and Hedging (formerly SFAS No. 133). Under ASC Topic 815, share purchase warrants with an
exercise price denominated in a currency other than a companys functional currency are
accounted for as derivative liabilities. Changes in the fair value of the warrants are
required to be recognized in the statement of operations each reporting period for US GAAP
purposes. At the time that the Companys share purchase warrants are exercised, the value of
the warrants will be reclassified to shareholders equity for US GAAP purposes. Under
Canadian GAAP, the fair value of the warrants on the issue date is recorded as a reduction
to the proceeds from the issuance of common shares, with the offset to the warrant component
of equity. The warrants are not revalued to fair value under Canadian GAAP.
 (vii)
    
    Under US GAAP, the aggregate value attributed to the acquisition of royalty rights
during 1999 and 2000 was $1.4 million higher, due to the difference between Canadian and US
GAAP in the value ascribed to the common shares issued, primarily resulting from
differences in the recognition of effective dates of the transactions.
 Consolidated Statements of Loss and Comprehensive Loss
  2010Canadian
    
    
    Increase
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil
    
    
    21,720
    
    
    
    
    
    
    
    
    
    21,720Gain on derivative instruments
    
    
    
    
    
    
    15,017
    
    
    (vi)
    
    
    15,017Interest
    
    
    208
    
    
    
    
    
    
    
    
    
    20821,928
    
    
    
    15,017
    
    
    
    
    
    36,945ExpensesOperating
    
    
    9,503
    
    
    
    
    
    
    
    
    
    9,503General and administrative
    
    
    26,260
    
    
    
    
    
    
    
    
    
    26,260Business and technology development
    
    
    10,615
    
    
    
    
    
    
    
    
    
    10,615Depletion and depreciation
    
    
    8,960
    
    
    
    (3,857
    )
    
    (ix)
    
    
    5,103Foreign exchange
    
    
    (3,325
    )
    
    
    35
    
    
    (iii)
    
    
    (3,290
    )Interest and financing
    
    
    24
    
    
    
    
    
    
    
    
    
    2452,037
    
    
    
    (3,822
    )
    
    
    
    
    48,215Loss from continuing operations before income taxes
    
    
    (30,109
    )
    
    
    18,839
    
    
    
    
    
    (11,270
    )(Provision for) recovery of income taxesCurrent
    
    
    (126
    )
    
    
    
    
    
    
    
    
    (126
    )Future
    
    
    1,125
    
    
    
    
    
    
    
    
    
    1,125999
    
    
    
    
    
    
    
    
    
    999Net loss continuing operations
    
    
    (29,110
    )
    
    
    18,839
    
    
    
    
    
    (10,271
    )Net loss  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss and comprehensive loss
    
    
    (29,110
    )
    
    
    18,839
    
    
    
    
    
    (10,271
    )Net loss per shareNet loss  continuing operations, basic and diluted
    
    
    (0.09
    )
    
    
    0.06
    
    
    
    
    
    (0.03
    )Net loss  discontinued operations, basic and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share, basic and diluted
    
    
    (0.09
    )
    
    
    0.06
    
    
    
    
    
    (0.03
    )Weighted average number of common sharesBasic and diluted (000s)
    
    
    327,442
    
    
    
    
    
    
    
    
    
    327,442
  65




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##### Table of Contents



2009Canadian
    
    
    Increase
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil
    
    
    24,968
    
    
    
    
    
    
    
    
    
    24,968Loss on derivative instruments
    
    
    (1,335
    )
    
    
    (6,506
    )
    
    (vi)
    
    
    (7,841
    )Interest
    
    
    25
    
    
    
    
    
    
    
    
    
    2523,658
    
    
    
    (6,506
    )
    
    
    
    
    17,152ExpensesOperating
    
    
    10,191
    
    
    
    
    
    
    
    
    
    10,191General and administrative
    
    
    21,693
    
    
    
    
    
    
    
    
    
    21,693Business and technology development
    
    
    9,501
    
    
    
    150
    
    
    (viii)
    
    
    9,651Depletion and depreciation
    
    
    19,868
    
    
    
    (10,574
    )
    
    (ix)
    
    
    9,294Foreign exchange
    
    
    5,220
    
    
    
    (154
    )
    
    (iii)
    
    
    5,066Interest and financing
    
    
    856
    
    
    
    
    
    
    
    
    
    856Provision for impairment of intangible asset and development
    
    
    1,903
    
    
    
    (980
    )
    
    (viii)
    
    
    92369,232
    
    
    
    (11,558
    )
    
    
    
    
    57,674Loss from continuing operations before income taxes
    
    
    (45,574
    )
    
    
    5,052
    
    
    
    
    
    (40,522
    )(Provision for) recovery of income taxesCurrent
    
    
    (1,757
    )
    
    
    
    
    
    
    
    
    (1,757
    )Future
    
    
    9,600
    
    
    
    
    
    
    
    
    
    9,6007,843
    
    
    
    
    
    
    
    
    
    7,843Net loss continuing operations
    
    
    (37,731
    )
    
    
    5,052
    
    
    
    
    
    (32,679
    )Net income (loss)  discontinued operations (net of tax of $29.6 million)
    
    
    (23,921
    )
    
    
    24,890
    
    
    (x)
    
    
    969Net loss and comprehensive loss
    
    
    (61,652
    )
    
    
    29,942
    
    
    
    
    
    (31,710
    )Net income (loss) per shareNet loss  continuing operations, basic and diluted
    
    
    (0.13
    )
    
    
    0.01
    
    
    
    
    
    (0.12
    )Net income (loss)  discontinued operations, basic and diluted
    
    
    (0.09
    )
    
    
    0.10
    
    
    
    
    
    0.01Net loss per share, basic and diluted
    
    
    (0.22
    )
    
    
    0.11
    
    
    
    
    
    (0.11
    )Weighted average number of common sharesBasic and diluted (000s)
    
    
    279,722
    
    
    
    
    
    
    
    
    
    279,722
  66




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##### Table of Contents



2008Canadian
    
    
    Increase
    
    
    
    
    USGAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil
    
    
    48,370
    
    
    
    
    
    
    
    
    
    48,370Gain on derivative instruments
    
    
    1,688
    
    
    
    4,665
    
    
    (vi)
    
    
    6,353Interest
    
    
    612
    
    
    
    
    
    
    
    
    
    61250,670
    
    
    
    4,665
    
    
    
    
    
    55,335ExpensesOperating
    
    
    21,515
    
    
    
    
    
    
    
    
    
    21,515General and administrative
    
    
    14,252
    
    
    
    
    
    
    
    
    
    14,252Business and technology development
    
    
    6,453
    
    
    
    
    
    
    
    
    
    6,453Depletion and depreciation
    
    
    25,761
    
    
    
    (2,820
    )
    
    (ix)
    
    
    22,941Foreign exchange
    
    
    1,527
    
    
    
    
    
    
    
    
    
    1,527Interest and financing
    
    
    1,309
    
    
    
    
    
    
    
    
    
    1,309Provision for impairment of intangible asset and development
    
    
    15,054
    
    
    
    (4,640
    )
    
    (viii)
    
    
    10,414Write off of deferred financing
    
    
    2,621
    
    
    
    
    
    
    
    
    
    2,621Provision for impairment of oil and gas properties
    
    
    
    
    
    
    21,560
    
    
    (ix)
    
    
    21,56088,492
    
    
    
    14,100
    
    
    
    
    
    102,592Loss from continuing operations before income taxes
    
    
    (37,822
    )
    
    
    (9,435
    )
    
    
    
    
    (47,257
    )Current provision for income taxes
    
    
    (654
    )
    
    
    
    
    
    
    
    
    (654
    )Net loss continuing operations
    
    
    (38,476
    )
    
    
    (9,435
    )
    
    
    
    
    (47,911
    )Net income (loss) discontinued operations
    
    
    4,283
    
    
    
    (19,423
    )
    
    (x)
    
    
    (15,140
    )Net loss and comprehensive loss
    
    
    (34,193
    )
    
    
    (28,858
    )
    
    
    
    
    (63,051
    )Net income (loss) per shareNet loss  continuing operations, basic and diluted
    
    
    (0.15
    )
    
    
    (0.04
    )
    
    
    
    
    (0.19
    )Net income (loss)  from discontinued operations, basic and diluted
    
    
    0.02
    
    
    
    (0.07
    )
    
    
    
    
    (0.05
    )Net loss per share, basic and diluted
    
    
    (0.13
    )
    
    
    (0.11
    )
    
    
    
    
    (0.24
    )Weighted average number of common sharesBasic and diluted (000s)
    
    
    258,815
    
    
    
    
    
    
    
    
    
    258,815
 Development Costs
 (viii)
    
    For Canadian GAAP, feasibility, marketing and related costs incurred prior to executing a
HTL or GTL definitive agreement are capitalized and are subsequently written down upon
determination that a projects future value has been impaired. The Company wrote off $5.1
million in GTL development costs under Canadian GAAP. These costs had already been expensed
under US GAAP in previous periods and therefore this transaction reduced the net loss for US
GAAP purposes in 2008.
 Depletion and Depreciation
 (ix)
    
    As discussed under Oil and Gas Properties and Development Costs in this note, there is
a difference between US and Canadian GAAP in performing the ceiling test evaluation under
the full cost method. Application of the ceiling test evaluation under US GAAP has resulted
in an accumulated net increase in impairment provisions on the Companys US and China oil
and gas properties. This net increase in US GAAP impairment provisions has resulted in lower
depletion rates for US GAAP purposes and a reduction in the net losses for the years ended
December 31, 2010, 2009 and 2008.
  67




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##### Table of Contents



Discontinued Operations
 (x)
    
    As at December 31, 2009, the $24.9 million adjustment related to discontinued operations
included a $1.4 million increase that is attributed to the acquisition of royalty rights
during 2000 and 1999 due to the difference between
Canadian and US GAAP in the value ascribed to the common shares issued, primarily resulting
from differences in the recognition of effective dates of the transactions. Additionally,
there was a $3.1 million increase due to depletion. These increases were offset by $29.4
million decrease due to impairment differences. These accumulated balance sheet adjustments
were charged off as part of the gain/loss calculation at the time of sale and flow through
the statement of operations for the year ended December 31, 2009 in the Net Loss from
Discontinued Operations line item.
 Consolidated Statements of Cash Flows
  Additional US GAAP Disclosures
 Oil and Gas Properties and Development Costs
  Business andTechnologyAs at December 31, 2010
    
    Canada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalProperty acquisition
    
    
    77,742
    
    
    
    2,089
    
    
    
    31,137
    
    
    
    
    
    
    
    
    
    
    
    110,968Capitalized interest
    
    
    4,936
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,936Exploration
    
    
    30,085
    
    
    
    19,763
    
    
    
    75,091
    
    
    
    
    
    
    
    
    
    
    
    124,939Development
    
    
    
    
    
    
    
    
    
    
    91,885
    
    
    
    
    
    
    
    
    
    
    
    91,885Production facilities
    
    
    
    
    
    
    4,397
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,397HTL facilities
    
    
    11,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,426
    
    
    
    22,515Support equipment and general property
    
    
    27
    
    
    
    436
    
    
    
    1,157
    
    
    
    1,361
    
    
    
    58
    
    
    
    3,039123,879
    
    
    
    26,685
    
    
    
    199,270
    
    
    
    1,361
    
    
    
    11,484
    
    
    
    362,679Accumulated depletion and depreciation
    
    
    (17
    )
    
    
    (101
    )
    
    
    (84,391
    )
    
    
    (894
    )
    
    
    (936
    )
    
    
    (86,339
    )Provision for impairment
    
    
    
    
    
    
    
    
    
    
    (55,050
    )
    
    
    
    
    
    
    
    
    
    
    (55,050
    )123,862
    
    
    
    26,584
    
    
    
    59,829
    
    
    
    467
    
    
    
    10,548
    
    
    
    221,290
 Business andTechnologyAs at December 31, 2009
    
    Canada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalProperty acquisition
    
    
    77,093
    
    
    
    852
    
    
    
    42,298
    
    
    
    
    
    
    
    
    
    
    
    120,243Capitalized interest
    
    
    3,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,049Exploration
    
    
    6,437
    
    
    
    2,988
    
    
    
    32,831
    
    
    
    
    
    
    
    
    
    
    
    42,256Development
    
    
    
    
    
    
    
    
    
    
    87,100
    
    
    
    
    
    
    
    
    
    
    
    87,100Production facilities
    
    
    
    
    
    
    2,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,483HTL facilities
    
    
    6,991
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,868
    
    
    
    17,859Support equipment and general property
    
    
    24
    
    
    
    601
    
    
    
    427
    
    
    
    968
    
    
    
    22
    
    
    
    2,04293,594
    
    
    
    6,924
    
    
    
    162,656
    
    
    
    968
    
    
    
    10,890
    
    
    
    275,032Accumulated depletion and depreciation
    
    
    (8
    )
    
    
    (53
    )
    
    
    (79,521
    )
    
    
    (650
    )
    
    
    (404
    )
    
    
    (80,636
    )Provision for impairment
    
    
    
    
    
    
    
    
    
    
    (55,050
    )
    
    
    
    
    
    
    
    
    
    
    (55,050
    )93,586
    
    
    
    6,871
    
    
    
    28,085
    
    
    
    318
    
    
    
    10,486
    
    
    
    139,346
  Total
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    Prior to 2008Property acquisition
    
    
    90,992
    
    
    
    1,786
    
    
    
    11,920
    
    
    
    77,187
    
    
    
    99Exploration
    
    
    98,235
    
    
    
    72,705
    
    
    
    17,655
    
    
    
    6,325
    
    
    
    1,550189,227
    
    
    
    74,491
    
    
    
    29,575
    
    
    
    83,512
    
    
    
    1,649
  68




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Total
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    Prior to 2008CanadaTamarack
    
    
    123,852
    
    
    
    30,282
    
    
    
    12,480
    
    
    
    81,090
    
    
    
    EcuadorBlock 20
    
    
    26,249
    
    
    
    19,494
    
    
    
    5,301
    
    
    
    1,454
    
    
    
    AsiaZitong Block
    
    
    23,652
    
    
    
    20,403
    
    
    
    632
    
    
    
    968
    
    
    
    1,649Nyalga Block
    
    
    15,474
    
    
    
    4,312
    
    
    
    11,162
    
    
    
    
    
    
    
    39,126
    
    
    
    24,715
    
    
    
    11,794
    
    
    
    968
    
    
    
    1,649189,227
    
    
    
    74,491
    
    
    
    29,575
    
    
    
    83,512
    
    
    
    1,649
 Accounts Payable and Accrued Liabilities
  Trade payables
    
    
    8,922
    
    
    
    3,767Accrued liabilities
    
    
    12,560
    
    
    
    7,01221,482
    
    
    
    10,779
 Stock-based Compensation
   Number of
    
    
    Weighted-AverageStock Options
    
    
    Grant Date Fair Value(000s)
    
    
    (Cdn$)Outstanding, beginning of year
    
    
    7,912
    
    
    
    1.21Granted
    
    
    6,040
    
    
    
    1.73Vested
    
    
    (3,060
    )
    
    
    1.53Cancelled and forfeited
    
    
    (748
    )
    
    
    1.77Outstanding, end of year
    
    
    10,144
    
    
    
    1.55
  Based on fulfilling service conditions
    
    
    9,665Based on fulfilling performance conditions
    
    
    47910,144
   69




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Impact of New and Pending US GAAP Accounting Standards
   70




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SUPPLEMENTARY DISCLOSURES ABOUT OIL AND GAS PRODUCTION ACTIVITIES
 
  Oil and Gas Reserves
     (mbbls)Net proved reserves, December 31, 2007
    
    
    1,280Revisions of previous estimates
    
    
    242
    (1)Production
    
    
    (490
    )Net proved reserves, December 31, 2008
    
    
    1,032Revisions of previous estimates
    
    
    535
    (2)Production
    
    
    (466
    )Net proved reserves, December 31, 2009
    
    
    1,101Revisions of previous estimates
    
    
    925
    (3)Production
    
    
    (288
    )Net proved reserves, December 31, 2010
    
    
    1,738
 (1)
    
    The oil reserve revision is due to better performance of the Dagang property in
relation to the 2007 reserve report.(2)
    
    The oil reserve revision is due to improved production and fracture performance of the
Dagang property in relation to what was estimated in the 2008 reserve report.(3)
    
    The reserve revision in 2010 is mainly related to lower estimated decline rates on the
Dagang property based on production to date.  (mbbls)2008
    
    
    8622009
    
    
    8852010
    
    
    1,265
  71




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Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to
Proved Oil and Gas Reserves
   
    
    future production from proved reserves will differ from estimated production;
 
    
    future production may also include production from probable and possible reserves;
 
    
    future, rather than average annual, prices and costs will apply; and
 
    
    existing economic, operating and regulatory conditions are subject to change.
  72




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2010Future cash inflows
    
    
    132,745Future development and restoration costs
    
    
    (7,209
    )Future production costs
    
    
    (58,790
    )Future income taxes
    
    
    (12,238
    )Future net cash flows
    
    
    54,50810% annual discount
    
    
    (14,861
    )Standardized measure
    
    
    39,647
 2009Future cash inflows
    
    
    63,862Future development and restoration costs
    
    
    (3,307
    )Future production costs
    
    
    (36,825
    )Future income taxes
    
    
    (593
    )Future net cash flows
    
    
    23,13710% annual discount
    
    
    (4,589
    )Standardized measure
    
    
    18,548
 2008Future cash inflows
    
    
    42,906Future development and restoration costs
    
    
    (3,310
    )Future production costs
    
    
    (22,934
    )Future net cash flows
    
    
    16,66210% annual discount
    
    
    (2,576
    )Standardized measure
    
    
    14,086
  1.
    
    In March 2006, the Ministry of Finance of the Peoples Republic of China (PRC) issued
the Administrative Measures on Collection of Windfall Gain Levy on Oil Exploitation
Business (the Windfall Levy Measures). According to the Windfall Levy Measures,
effective as of March 26, 2006, enterprises exploiting and selling oil in the
PRC are subject to a windfall gain levy (the Windfall Levy) if the monthly weighted
average price of oil is above $40.00/bbl. The Windfall Levy is imposed at progressive rates
from 20% to 40% on the portion of the weighted average sales price exceeding $40.00/bbl. As
a result, the cost associated with the Windfall Levy is not related to production volumes
but instead is related to the commodity price. As an example, as oil prices increased
during 2008, the amount of the Windfall Levy also increased significantly, resulting in a
$13.46 per bbl increase in 2008 when compared to 2007. The Windfall Levy accounted for
$21.14/bbl cost of the total $43.92/bbl operating costs in our China operations, or in
absolute terms $10.4 million of the total $21.5 million. This compared to only $4.00/bbl or
$1.9 million in absolute terms incurred during 2009.
 2.
    
    Effective January 1, 2009, the Dagang field reached Commercial Production status as
defined by the Production Sharing Contract with our partner CNPC. The effect of this change
is that the Company no longer pays 100% of operating costs but now pays 82%, representing
the pre-cost recovery proportionate share. Effective September 1, 2009, the project
reached cost recovery and the working interests changed to 51% CNPC and 49% for the
Company. In our 2008 independent reserve report that was used to prepare the standardized
measure disclosures above, the 49/51% reversion was estimated based on total costs yet to
recover.
  73




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##### Table of Contents



2010Sale of oil and gas, net of production costs
    
    
    (12,216
    )Net changes in prices and production costs
    
    
    15,878Net change in future development costs
    
    
    (8,082
    )Development costs incurred during the period that reduced future development costs
    
    
    4,924Revisions of previous quantity estimates
    
    
    31,578Accretion of discount
    
    
    1,855Net change in income taxes
    
    
    (11,645
    )Changes in production rates (timing) and other
    
    
    (1,193
    )Increase
    
    
    21,099Standardized measure, beginning of year
    
    
    18,548Standardized measure, end of year
    
    
    39,647
 2009Sale of oil and gas, net of production costs
    
    
    (14,777
    )Net changes in prices and production costs
    
    
    6,396Net change in future development costs
    
    
    (3,536
    )Development costs incurred during the period that reduced future development costs
    
    
    3,712Revisions of previous quantity estimates
    
    
    11,106Accretion of discount
    
    
    1,409Net change in income taxes
    
    
    (593
    )Changes in production rates (timing) and other
    
    
    745Increase
    
    
    4,462Standardized measure, beginning of year
    
    
    14,086Standardized measure, end of year
    
    
    18,548
 2008Sale of oil and gas, net of production costs
    
    
    (26,855
    )Net changes in prices and production costs
    
    
    (21,620
    )Net change in future development costs
    
    
    (2,708
    )Development costs incurred during the period that reduced future development costs
    
    
    4,720Revisions of previous quantity estimates
    
    
    3,739Accretion of discount
    
    
    4,959Net change in income taxes
    
    
    925Changes in production rates (timing) and other
    
    
    1,335Decrease
    
    
    (35,505
    )Standardized measure, beginning of year
    
    
    49,591Standardized measure, end of year
    
    
    14,086
  74




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##### Table of Contents



2010
    
    
    2009
    
    
    2008CanadaProperty acquisitionUnproved
    
    
    649
    
    
    
    1,361
    
    
    
    75,732Exploration
    
    
    29,634
    
    
    
    11,119
    
    
    
    5,35730,283
    
    
    
    12,480
    
    
    
    81,089EcuadorProperty acquisitionUnproved
    
    
    1,237
    
    
    
    
    
    
    
    863Exploration
    
    
    18,257
    
    
    
    5,301
    
    
    
    59119,494
    
    
    
    5,301
    
    
    
    1,454AsiaProperty acquisitionUnproved
    
    
    
    
    
    
    11,161
    
    
    
    Exploration
    
    
    31,326
    
    
    
    1,253
    
    
    
    1,956Development
    
    
    5,057
    
    
    
    3,785
    
    
    
    6,42036,383
    
    
    
    16,199
    
    
    
    8,376Total
    
    
    86,160
    
    
    
    33,980
    
    
    
    90,919
  China ($/bbl)2010
    
    
    16.452009
    
    
    16.062008
    
    
    41.61
  2010
    
    
    2009
    
    
    2008Oil revenue
    
    
    21,720
    
    
    
    24,968
    
    
    
    48,370Operating
    
    
    (9,503
    )
    
    
    (10,191
    )
    
    
    (21,515
    )Depletion
    
    
    (8,590
    )
    
    
    (7,479
    )
    
    
    (20,385
    )Provision for impairment
    
    
    
    
    
    
    
    
    
    
    (21,560
    )Results of operations from producing activities
    
    
    3,627
    
    
    
    7,298
    
    
    
    (15,090
    )
  75




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A:
    
    CONTROLS AND PROCEDURES
  MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of consolidated financial statements in accordance with Canadian generally
accepted accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the consolidated financial statements.
 Internal Control Integrated Framework.
 /s/ Robert M. Friedland
    
    /s/ Gerald D. SchiefelbeinRobert M. Friedland
    
    Gerald D. SchiefelbeinChief Executive Officer
    
    Chief Financial OfficerMarch 4, 2011
  76




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REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
        /s/ Deloitte & Touche LLP

Deloitte & Touche LLPIndependent Registered Chartered AccountantsCalgary, CanadaMarch 4, 2011
  77




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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 PART III
 ITEM 10:
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Ivanhoe DirectorName
    
    Age
    
    Positions Held
    
    SinceA. Robert Abboud
    
    81
    
    Co-Chairman and Independent Lead Director
    
    2006Robert M. Friedland
    
    60
    
    Executive Co-Chairman
    
    1995Howard R. Balloch
    
    59
    
    Director
    
    2002Carlos A. Cabrera
    
    59
    
    Director
    
    2010Brian F. Downey
    
    69
    
    Director
    
    2005Robert G. Graham
    
    57
    
    Director
    
    2005Peter G. Meredith
    
    67
    
    Director
    
    2007Alexander A. Molyneux
    
    36
    
    Director
    
    2010Robert A. Pirraglia
    
    61
    
    Director
    
    2005
  Executive OfficerName
    
    Age
    
    Current Position
    
    SinceRobert M. Friedland
    
    60
    
    Chief Executive Officer
    
    2008David A. Dyck
    
    50
    
    President and Chief Operating Officer
    
    2010Gerald D. Schiefelbein
    
    53
    
    Chief Financial Officer
    
    2009Ian Barnett
    
    56
    
    Executive Vice President, Corporate Development
    
    2007K. C. Patrick Chua
    
    55
    
    Executive Vice President
    
    1999David R. Martin
    
    80
    
    President, Chief Executive Officer & Co-Chairman of Ivanhoe
Energy Latin America Inc. Co-Chairman of Ivanhoe Energy Ecuador Inc.
    
    2008Gerald G. Moench
    
    61
    
    Executive Vice President
    
    1999Michael A. Silverman
    
    58
    
    Executive Vice President, Technology and Chief Technology Officer
    
    2007Edwin J. Veith
    
    52
    
    Executive Vice President, Upstream
    
    2007
 A. ROBERT ABBOUD
   78




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##### Table of Contents



ROBERT M. FRIEDLAND
  HOWARD R. BALLOCH
  CARLOS A. CABRERA
  BRIAN F. DOWNEY
   79




---



##### Table of Contents



DR. ROBERT G. GRAHAM
  PETER G. MEREDITH
  ALEXANDER A. MOLYNEUX
  ROBERT A. PIRRAGLIA
  DAVID A. DYCK
   80




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##### Table of Contents



GERALD D. SCHIEFELBEIN
  IAN BARNETT
  K. C. PATRICK CHUA
  DAVID R. MARTIN
   GERALD G. MOENCH
  MICHAEL A. SILVERMAN
  EDWIN J. VEITH
  OTHER PUBLIC COMPANY DIRECTORSHIPS
   BOARD COMMITTEES
   CODE OF BUSINESS CONDUCT AND ETHICS
   81




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##### Table of Contents



ITEM 11.
    
    EXECUTIVE COMPENSATION
  COMPENSATION DISCUSSION AND ANALYSIS
 Compensation and Benefits Committee, Philosophy and Goals
   
    
    to provide a strong incentive to management to contribute to the achievement of
Ivanhoes short-term and long-term corporate goals;
    
    to ensure that the interests of Ivanhoes executive officers and the interests of the
Companys shareholders are aligned;
    
    to ensure that Ivanhoe is able to attract, retain and motivate executive officers of the
highest caliber in light of the strong competition in the oil and gas industry for
qualified personnel;
    
    to recognize that the successful implementation of Ivanhoes corporate strategy cannot
necessarily be measured, at this stage of its development, only with reference to
quantitative measurement criteria of corporate or individual performance; and
    
    to provide fair, transparent, and defensible compensation
 Recent Developments Related to Executive Compensation
  How We Make Compensation Decisions
     82




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Elements of Total Compensation
   
    
    Base salary  paid in cash as a fixed amount of compensation for performing the day to
day responsibilities of the job.
    
    Performance bonus  annual award, paid in cash and earned for the achievement of near
term critical strategic corporate and project goals.
    
    Long Term Incentive awards  annual equity award, in the form of a combination of stock
options and restricted share units, granted to align the interests of the executive with
longer term Company goals, the creation of shareholder value and the retention of key
executives.
 Peer Comparator Group
   Base Salary
    83




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##### Table of Contents



Cash Performance Bonus
    Long Term Incentive Plan
      2010 EXECUTIVE COMPENSATION DECISIONS
 Salary Compensation
    84




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##### Table of Contents



Bonus Compensation
  Incentive Compensation
    Other Compensation
   85




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##### Table of Contents



Performance Graph
  
  Option-Based Awards
    86




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##### Table of Contents



SUMMARY COMPENSATION TABLE
  Non-Equity IncentiveShare-
    
    
    Option-
    
    
    Plan CompensationBased
    
    
    Based
    
    
    Annual Incentive
    
    
    
    
    
    
    All Other
    
    
    TotalSalary(1)
    
    
    Awards
    
    
    Awards(2)
    
    
    Awards(3)
    
    
    Pension
    
    
    Compensation
    
    
    CompensationName and Principal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Value ($)
    
    
    ($)
    
    
    ($)Robert M. Friedland(4)
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    1,497,797
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,497,797Executive Co-Chairman & CEO
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    1,977,888
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,977,888David A. Dyck
    
    
    2010
    
    
    
    374,297
    
    
    
    
    
    
    
    299,559
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    673,856President & COO
    
    
    2009
    (5)
    
    
    82,842
    
    
    
    
    
    
    
    982,223
    
    
    
    42,424
    
    
    
    
    
    
    
    
    
    
    
    1,107,4892008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gerald D. Schiefelbein
    
    
    2010
    
    
    
    264,523
    
    
    
    
    
    
    
    194,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    459,237CFO
    
    
    2009
    (6)
    
    
    61,750
    
    
    
    
    
    
    
    392,889
    
    
    
    29,874
    
    
    
    
    
    
    
    
    
    
    
    484,5132008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David R. Martin
    
    
    2010
    
    
    
    296,971
    
    
    
    
    
    
    
    194,714
    
    
    
    
    
    
    
    22,000
    
    
    
    
    
    
    
    513,685President, CEO & Co-Chairman,
    
    
    2009
    
    
    
    285,000
    
    
    
    
    
    
    
    537,100
    (7)
    
    
    134,942
    
    
    
    19,645
    
    
    
    
    
    
    
    976,687Ivanhoe Energy Latin America Inc.
    
    
    2008
    
    
    
    285,000
    
    
    
    29,965
    (8)
    
    
    
    
    
    
    
    
    
    
    21,354
    
    
    
    
    
    
    
    336,319Edwin J. Veith
    
    
    2010
    
    
    
    263,627
    
    
    
    
    
    
    
    194,714
    
    
    
    
    
    
    
    22,000
    
    
    
    31,914
    (9)
    
    
    512,255Executive VP, Upstream
    
    
    2009
    
    
    
    253,000
    
    
    
    
    
    
    
    228,623
    
    
    
    128,936
    
    
    
    21,083
    
    
    
    
    
    
    
    631,6422008
    
    
    
    239,250
    
    
    
    29,965
    (8)
    
    
    
    
    
    
    
    
    
    
    19,958
    
    
    
    
    
    
    
    289,173
 (1)
    
    Amounts paid in Canadian dollars to Messrs. Dyck and Schiefelbein were converted to US
currency based on the monthly average exchange rate during the pay periods.(2)
    
    Estimated fair value on date of grant calculated using the Black Scholes option pricing
model. Key assumptions are outlined in Note 9 to the consolidated financial statements. The
value of stock options with a Canadian dollar exercise price was converted to US dollars
using the Bank of Canada exchange rate on date of grant.(3)
    
    A cash bonus was paid in 2010 in connection with the NEOs performance in 2009. The
bonus was not previously disclosed as the amounts had not been finalized by the filing date
of our 2009 10K report.(4)
    
    Mr. Friedland is also a director of the Company. Pursuant to the Companys policies
regarding management directors, Mr. Friedland does not receive compensation from the
Company for acting as a director.(5)
    
    Mr. Dyck joined the Corporation effective October 21, 2009, and was employed for
approximately two months during 2009.(6)
    
    Mr. Schiefelbein joined the Corporation effective October 1, 2009, and was employed for
three months during 2009.(7)
    
    Stock options were awarded to Mr. Martin in 2010 in connection with 2009 events. The
options were not previously disclosed as they had not been finalized by the filing date of
our 2009 10K report.(8)
    
    Estimated fair value calculated as the closing trading price for the Companys common
shares on August 5, 2008, when a treasury order for the award was delivered to the
Companys transfer agent, multiplied by the number of common shares awarded.(9)
    
    Includes $28,570 paid as an expatriate housing allowance. Ivanhoe reimburses Mr. Veith
for the difference between the actual Canadian income taxes paid by him and the US income
taxes that would have been paid if Mr. Veith had remained in the US. This amount has not
yet been determined for 2010.  87




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INCENTIVE PLAN AWARDS
  Outstanding option-based awards at December 31, 2010
 Number Of Securities
    
    
    Option Exercise
    
    
    Option
    
    
    Total Value of UnexercisedUnderlying Unexercised
    
    
    Price
    
    
    Expiration
    
    
    in-the-Money Options(1)Name
    
    Options (#)
    
    
    ($)
    
    
    Date
    
    
    (US$)Robert M. Friedland
    
    
    1,000,000
    
    
    Cdn$2.28
    
    Oct 28, 2017
    
    
    3,232,4562,500,000
    
    
    Cdn$1.61
    
    Mar 5, 2013David A. Dyck
    
    
    200,000
    
    
    Cdn$2.28
    
    Oct 28, 2017
    
    
    194,048500,000
    
    
    Cdn$2.51
    
    Oct 15, 2016Gerald D. Schiefelbein
    
    
    130,000
    
    
    Cdn$2.28
    
    Oct 28, 2017
    
    
    99,739200,000
    
    
    Cdn$2.51
    
    Oct 1, 2016David R. Martin
    
    
    130,000
    
    
    Cdn$2.28
    
    Oct 28, 2017
    
    
    57,511250,000
    
    
    Cdn$3.26
    
    Apr 29, 2017Edwin J. Veith
    
    
    130,000
    
    
    Cdn$2.28
    
    Oct 28, 2017
    
    
    274,928150,000
    
    
    Cdn$2.22
    
    Sep 17, 2014158,000
    
    
    US $1.92
    
    Oct 4, 2012250,000
    
    
    US $2.70
    
    Jun 2, 201170,734
    
    
    US $2.57
    
    Apr 18, 201122,000
    
    
    US $3.06
    
    Mar 8, 2011
 (1)
    
    Calculated as the difference between the December 31, 2010, closing market price of our
common shares and the exercise price of the options, multiplied by the number of
unexercised options. The value of options with a US dollar exercise price is calculated
using the NASDAQ closing price of $2.72 per common share. The value of options with a
Canadian dollar exercise price is calculated using the TSX closing price of Cdn$2.72 per
common share and converted to US dollars using the December 31, 2010, Bank of Canada
closing rate. Where the exercise price exceeds the market value per common share, the value
is zero. Incentive plan awards  value vested in 2010
 Option-Based AwardsValue Vested During the Year(1)Name
    
    (US$)Robert M. Friedland
    
    
    960,699David A. Dyck
    
    
    nilGerald D. Schiefelbein
    
    
    nilDavid R. Martin
    
    
    nilEdwin J. Veith
    
    
    11,132
 (1)
    
    Calculated as the difference between the closing market price of our common shares on
the vesting date and the exercise price of the options, multiplied by the number of options
vesting in the current year. The value of options with a Canadian dollar exercise price
were converted to US dollars using the Bank of Canada closing rate on the vesting date.
Where the exercise price exceeds the market price per common share, the value is nil.  88




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PENSION PLAN
   Accumulated Value
    
    
    
    
    
    
    
    
    
    
    Accumulated Value atat January 1, 2010
    
    
    Compensatory
    
    
    Non-compensatory
    
    
    December 31, 2010Name
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)David R. Martin
    
    
    342,031
    
    
    
    22,000
    
    
    
    27,559
    
    
    
    391,590Edwin J. Veith
    
    
    282,345
    
    
    
    22,000
    
    
    
    48,613
    
    
    
    352,958
 TERMINATION AND CHANGE OF CONTROL BENEFITS
   David A. Dyck
  (a)
    
    in the case of termination without cause or termination upon disability, the Company must
pay twelve months wages in a lump sum, cause all of the unvested stock options that would
vest in the succeeding twelve months to vest immediately and generally remain exercisable
for six months;(b)
    
    in the case of termination of the employment contract by the Company within twelve months
of a change of control, the Company must pay twelve months wages in a lump sum and cause all
stock options to vest immediately and generally remain exercisable for six months; and(c)
    
    Mr. Dyck is bound by a confidentiality clause that is effective for three years after the
termination of active employment.
  Gerald D. Schiefelbein
  (a)
    
    in the case of termination without cause or termination upon disability, the Company must
pay twelve months wages in a lump sum, cause all of the unvested stock options that would
vest in the succeeding twelve months to vest immediately and generally remain exercisable
for six months;(b)
    
    in the case of termination of the employment contract by the Company within twelve months
of a change of control, the Company must pay twelve months wages in a lump sum and cause all
of the unvested stock options to vest immediately and remain generally exercisable for six
months;(c)
    
    in the case that Mr. Schiefelbein does not continue to have all the necessary work
permits to be employed in Canada and is unable to fulfill the role of CFO due to legal or
regulatory requirements, the Company must pay six
months wages in a lump sum, vested stock options will remain generally exercisable for six
months from the date that employment terminates, all unvested stock options will terminate
immediately;
  89




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##### Table of Contents



(d)
    
    Mr. Schiefelbein is bound by a non-competition clause effective until the later of twelve
months after the termination of active employment or the date he no longer receives
compensation of any kind under the employment contract;(e)
    
    Mr. Schiefelbein is bound by a non-solicitation clause effective for twelve months after
the termination of active employment; and(f)
    
    Mr. Schiefelbein is bound by a confidentiality clause that is effective for three years
after the termination of active employment.
  DIRECTOR COMPENSATION
  NON-MANAGEMENT DIRECTOR COMPENSATION TABLE
  Fees Earned
    
    
    Option-Based
    
    
    TotalName
    
    ($)
    
    

Awards (1)(US$)
    
    
    ($)A. Robert Abboud
    
    
    100,000
    
    
    
    107,420
    
    
    
    207,420Howard R. Balloch
    
    
    69,000
    
    
    
    107,420
    
    
    
    176,420Carlos A. Cabrera
    
    
    53,667
    
    
    
    408,504
    
    
    
    462,171Brian F. Downey
    
    
    71,542
    
    
    
    107,420
    
    
    
    178,962Robert G. Graham
    
    
    49,000
    
    
    
    107,420
    
    
    
    156,420Peter G. Meredith
    
    
    49,000
    
    
    
    107,420
    
    
    
    156,420Alexander A. Molyneux
    
    
    27,000
    
    
    
    154,291
    
    
    
    181,291Robert A. Pirraglia
    
    
    60,000
    
    
    
    107,420
    
    
    
    167,420
 (1)
    
    Estimated fair value of stock options on date of grant calculated using the Black
Scholes option pricing model. Key assumptions are outlined in Note 9 to the consolidated
financial statements. The value of stock options with a Canadian dollar exercise price was
converted to US dollars using the Bank of Canada exchange rate on date of grant.  90




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Outstanding option-based awards at December 31, 2010
 Number of Securities
    
    
    Option
    
    
    Option
    
    
    Total Value of UnexercisedUnderlying Unexercised
    
    
    Exercise Price
    
    
    Expiration
    
    
    in-the-Money Options(1)Name
    
    Options (#)
    
    
    ($)
    
    
    Date
    
    
    (US$)A. Robert Abboud
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    1,50050,000
    
    
    US $2.69
    
    May 29, 2013480,000
    
    
    US $2.85
    
    May 15, 2011Howard R. Balloch
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    84,95950,000
    
    
    Cdn$1.51
    
    Apr 29, 201650,000
    
    
    Cdn$2.66
    
    May 29, 201350,000
    
    
    Cdn$2.30
    
    May 3, 201250,000
    
    
    Cdn$3.12
    
    May 4, 2011Carlos A. Cabrera
    
    
    200,000
    
    
    Cdn$2.00
    
    Jul 28, 2017
    
    
    153,831100,000
    
    
    Cdn$2.63
    
    May 18, 2017Brian F. Downey
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    95,32850,000
    
    
    Cdn$1.51
    
    Apr 29, 201650,000
    
    
    US $2.69
    
    May 29, 201350,000
    
    
    US $2.06
    
    May 3, 201220,000
    
    
    US $2.80
    
    May 4, 2011Robert G. Graham
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    150,31250,000
    
    
    Cdn$1.51
    
    Apr 29, 201650,000
    
    
    Cdn$2.66
    
    May 29, 2013200,000
    
    
    Cdn$2.29
    
    Mar 8, 201250,000
    
    
    Cdn$3.12
    
    May 4, 2011Peter G. Meredith
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    349,38750,000
    
    
    Cdn$1.51
    
    Apr 29, 201650,000
    
    
    Cdn$2.66
    
    May 29, 2013100,000
    
    
    Cdn$1.68
    
    Mar 11, 2013150,000
    
    
    Cdn$1.52
    
    Dec 19, 2012Alexander A. Molyneux
    
    
    100,000
    
    
    Cdn$2.63
    
    May 18, 2017
    
    
    49,26680,000
    
    
    Cdn$2.22
    
    Sep 17, 2014Robert A. Pirraglia
    
    
    50,000
    
    
    Cdn$3.26
    
    Apr 29, 2017
    
    
    95,32850,000
    
    
    Cdn$1.51
    
    Apr 29, 201650,000
    
    
    US $2.69
    
    May 29, 201350,000
    
    
    US $2.06
    
    May 3, 201250,000
    
    
    US $2.80
    
    May 4, 2011
 (1)
    
    Calculated as the difference between the December 31, 2010, closing market price of our
common shares and the exercise price of the options, multiplied by the number of
unexercised options. The value of options with a US dollar exercise price is calculated
using the NASDAQ closing price of $2.72 per common share. The value of options with a
Canadian dollar exercise price is calculated using the TSX closing price of Cdn$2.72 per
common share and converted to US dollars using the December 31, 2010, Bank of Canada
closing rate. Where the exercise price exceeds the market value per common share, the value
is nil.  91




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Incentive plan awards  value vested in 2010
 Option-Based AwardsValue Vested During the Year(1)Name
    
    (US$)A. Robert Abboud
    
    
    172,568Howard R. Balloch
    
    
    82,554Carlos A. Cabrera
    
    
    nilBrian F. Downey
    
    
    84,654Robert G. Graham
    
    
    102,951Peter G. Meredith
    
    
    150,849Alexander A. Molyneux
    
    
    nilRobert A. Pirraglia
    
    
    84,654
 (1)
    
    Calculated as the difference between the closing market price of our common shares on
the vesting date and the exercise price of the options, multiplied by the number of options
vesting in the current year. The value of options with a Canadian dollar exercise price
were converted to US dollars using the Bank of Canada closing rate on the vesting date.
Where the exercise price exceeds the market price per common share, the value is nil. 
 ITEM 12:
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  Number of Shares BeneficiallyName and Address of Beneficial Owner
    
    Owned(1)
    
    
    Percentage of ClassRobert M. Friedland
    
    
    53,411,725
    (2)
    
    
    15.22150 Beach Road
#25-03 The Gateway West
Singapore 189720Directors and Executive Officers as a group (17 persons)
    
    
    64,173,532
    (2)(3)
    
    
    18.29Caisse de dépôt et placement du Québec
    
    
    19,442,822
    
    
    
    5.541000 place Jean-Paul-Riopelle
Montreal, Quebec, H2Z 2B3FMR LLC
    
    
    19,025,800
    
    
    
    5.4282 Devonshire Street
Boston, Massachusetts
USA 02109
 (1)
    
    Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities. Unissued common
shares subject to options, warrants or other convertible securities currently exercisable
or convertible, or exercisable or convertible within 60 days, are deemed outstanding for
the purpose of computing the beneficial ownership of common shares of the person holding
such convertible security but are not deemed outstanding for computing the beneficial
ownership of common shares of any other person.(2)
    
    Includes 48,794,620 common shares and 2,200,000 common shares issuable upon the exercise of common share purchase
warrants held indirectly through Newstar Securities SRL, Premier Mines SRL and Evershine SRL, companies controlled by Mr.
Friedland. Also includes 2,000,000 common shares issuable upon the exercise of stock options and 417,105 common shares held
directly by Mr. Friedland.(3)
    
    Includes 4,697,734 unissued common shares issuable to directors and senior officers
upon exercise of incentive stock options and 2,210,500 common shares issuable upon the
exercise of common share purchase warrants.  92




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Security Ownership of Management
  Amount And Nature of
    
    
    Percentage
    
    
    Incentive Stock OptionsBeneficial Ownership(1)
    
    
    of Class
    
    
    Included in (a)Name of Beneficial Owner
    
    (a)
    
    
    (b)
    
    
    (c)A. Robert Abboud
    
    
    834,624
    
    
    
    0.24
    
    
    
    100,000Robert M. Friedland
    
    
    53,411,725
    (2)
    
    
    15.22
    
    
    
    2,000,000Howard R. Balloch
    
    
    300,000
    
    
    
    0.09
    
    
    
    250,000Carlos A. Cabrera
    
    
    
    
    
    
    0.00
    
    
    
    Brian F. Downey
    
    
    224,707
    
    
    
    0.06
    
    
    
    100,000Robert G. Graham
    
    
    4,896,726
    
    
    
    1.40
    
    
    
    400,000Peter G. Meredith
    
    
    398,000
    (3)
    
    
    0.11
    
    
    
    350,000Alexander A. Molyneux
    
    
    32,000
    
    
    
    0.01
    
    
    
    32,000Robert A. Pirraglia
    
    
    515,929
    
    
    
    0.15
    
    
    
    200,000David A. Dyck
    
    
    485,000
    
    
    
    0.14
    
    
    
    125,000Gerald D. Schiefelbein
    
    
    50,000
    
    
    
    0.01
    
    
    
    50,000Ian Barnett
    
    
    19,020
    
    
    
    0.01
    
    
    
    Patrick Chua
    
    
    202,318
    
    
    
    0.06
    
    
    
    148,000David Martin
    
    
    1,814,213
    
    
    
    0.52
    
    
    
    125,000Gerald Moench
    
    
    290,151
    
    
    
    0.08
    
    
    
    200,000Michael A. Silverman
    
    
    127,259
    
    
    
    0.04
    
    
    
    114,000Edwin J. Veith
    
    
    571,860
    
    
    
    0.16
    
    
    
    503,734All directors and executive officers as a group (17 persons)
    
    
    64,173,532
    
    
    
    18.29
    
    
    
    4,697,734
 (1)
    
    Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities. Unissued common
shares subject to options, warrants or other convertible securities currently exercisable
or convertible, or exercisable or convertible within 60 days, are deemed outstanding for
the purpose of computing the beneficial ownership of common shares of the person holding
such convertible security but are not deemed outstanding for computing the beneficial
ownership of common shares of any other person.(2)
    
    Includes 48,794,620 common shares and 2,200,000 common shares issuable upon the exercise of common share purchase
warrants which are held indirectly through Newstar Securities SRL, Premier Mines SRL and Evershine SRL, companies controlled
by Mr. Friedland. 417,105 common shares are held directly by Mr.  Friedland.(3)
    
    Includes 10,500 common shares issuable upon the exercise of common share purchase
warrants. Securities Authorized for Issuance under Equity Compensation Plans
  Number of Securities to be
    
    
    Weighted-Average
    
    
    Number of Securities to be RemainingIssued Upon Exercise of
    
    
    Exercise Price of
    
    
    Available for Future Issuance UnderPlan category
    
    Outstanding Options
    
    
    Outstanding Options (Cdn$)
    
    
    Equity Compensation PlansEquity compensation
plans approved by
Security holders
    
    
    16,877,275
    
    
    
    2.24
    
    
    
    4,589,957Equity compensation
plans not approved by
Security
holders(1)
    
    
    50,000
    
    
    
    2.15
    
    
    
    Total
    
    
    16,927,275
    
    
    
    2.24
    
    
    
    4,589,957
 (1)
    
    50,000 stock options were granted as employment inducements and therefore were not
granted under the Companys stock option plan.  93




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##### Table of Contents



ITEM 13:
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 RELATED TRANSACTIONS
     DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  (Cdn$000s)
    
    2010
    
    
    2009Audit fees
    
    
    551
    
    
    
    791Audit related fees
    
    
    93
    
    
    
    119Tax fees
    
    
    223
    
    
    
    274Other fees
    
    
    242
    
    
    
    861,111
    
    
    
    1,270
    94




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##### Table of Contents



AUDIT COMMITTEE PRE-APPROVAL POLICY
   95




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##### Table of Contents



PART IV
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Incorporated by ReferenceExhibit
    
    
    
    
    
    Filing Date/
    
    Exhibit NumberNumber
    
    Description of Document
    
    Form
    
    Period End Date
    
    (if different)3.1
    
    
    Articles of Ivanhoe Energy Inc. as amended to May 3, 2007
    
    10-K
    
    March 17, 2008
    
    3.2
    
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further
amended March 8, 2007
    
    10-K
    
    March 17, 2008
    
    10.1
    
    
    Petroleum Contract for Kongnan Block, Dagang Oilfield of the Peoples
Republic of China dated September 8, 1997 between China National
Petroleum Corporation and Pan-China Resources Ltd., as amended June 11,
1999
    
    20-F
    
    February 28, 2000
    
    
    3.1510.2
    
    
    Petroleum Contract dated September 19, 2002 between China National
Petroleum Corporation and Pan-China Resources Ltd. for Zitong Block,
Sichuan Basin of the Peoples Republic of China
    
    10-K
    
    March 19, 2003
    
    
    10.1210.3
    
    
    Employees and Directors Equity Incentive Plan as amended April 28, 2010
    
    S-8
    
    August 20, 2010
    
    10.4
    
    
    Amended and Restated License Agreement dated December 8, 1997 between
Ensyn Technologies Inc. and Ensyn Group, Inc. and as amended on February
12, 1999
    
    10-K
    
    March 15, 2006
    
    
    10.1210.5
    
    
    Indemnification Agreements entered into during the first quarter of 2008
between Ivanhoe Energy Inc. and its executive officers and directors
    
    10-K
    
    March 17, 2008
    
    
    10.1610.6
    
    
    Employment Agreement, dated May 2, 2007 between Ivanhoe Energy Inc. and
Michael Silverman
    
    10-K
    
    March 17, 2008
    
    
    10.1710.7
    
    
    Asset Transfer Agreement dated July 11, 2008 between Ivanhoe Energy Inc.
and Talisman Energy Canada
    
    10-Q
    
    August 11, 2008
    
    
    10.110.8
    
    
    Back-In Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and
Talisman Energy Canada
    
    10-Q
    
    August 11, 2008
    
    
    10.210.9
    
    
    Cdn$40 million Promissory Note in favour of Talisman Energy Canada due
July 11, 2011 and convertible at the option of Talisman Energy
Canada into 12,779,552 common shares at Cdn $3.13 per share
    
    10-Q
    
    November 11, 2008
    
    
    10.210.10
    
    
    Fixed and Floating Charge Debenture of Ivanhoe Energy Inc. in favour of
Talisman Energy Canada dated July 11, 2008 in the principal sum of
Cdn$67.5 million
    
    10-Q
    
    November 11, 2008
    
    
    10.310.11
    
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and
Talisman Energy Canada
    
    10-Q
    
    November 11, 2008
    
    
    10.410.12
    
    
    English translation of Specific Services Contract dated October 8, 2008
between Ivanhoe Energy Ecuador Inc., Empresa Estatal de Petroleos del
Ecuador, Petroecuador and Empresa Estatal de Exploracion y Produccion de
Petroleos del Ecuador, Petroproduccion
    
    10-K
    
    March 16, 2009
    
    
    10.2410.13
    
    
    English translation of Contract Modification to the Specific Services
Contract dated February 13, 2009 between Ivanhoe Energy Ecuador Inc.,
Empresa Estatal de Petroleos del Ecuador, Petroecuador and Empresa
Estatal de Exploracion y Produccion de Petroleos del Ecuador,
Petroproduccion
    
    10-K
    
    March 16, 2009
    
    
    10.2510.14
    
    
    Stock Purchase Agreement dated June 16, 2009 among Ivanhoe Energy
Holdings Inc., Ivanhoe Energy Inc., Seneca South Midway LLC and Seneca
Resources Corporation
    
    10-Q
    
    November 9, 2009
    
    
    10.1
  96




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    Filing Date/
    
    Exhibit NumberNumber
    
    Description of Document
    
    Form
    
    Period End Date
    
    (if different)10.15
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy Inc.
and Gerald D. Schiefelbein
    
    8-K
    
    November 17, 2009
    
    
    10.110.16
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy Inc.
and David A. Dyck
    
    8-K
    
    May 24, 2010
    
    
    10.110.17
    
    
    Amended and Restated Employees and Directors Equity Incentive Plan
dated April 28, 2010
    
    S-8
    
    August 20, 2010
    
    
    5.110.18
    
    
    Employment Agreement dated March 15, 2007 between Ivanhoe Energy Inc.
and Ian Barnett10.19
    
    
    Employment Agreement dated September 1, 2010 between Ivanhoe Energy Inc.
and Ian Barnett10.20
    
    
    Indemnification Agreement dated May 18, 2010 between Ivanhoe Energy Inc.
and Carlos A. Cabrera10.21
    
    
    Indemnification Agreement dated May 18, 2010 between Ivanhoe Energy Inc.
and Alexander A. Molyneux20.1
    
    
    Submission of Matters to a Vote of Security Holders
    
    8-K
    
    July 29, 2010
    
    21.1
    
    
    Subsidiaries of Ivanhoe Energy Inc.23.1
    
    
    Consent of GLJ Petroleum Consultants Ltd., Petroleum Engineers23.2
    
    
    Consent of Deloitte & Touche LLP31.1
    
    
    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 200299.1
    
    
    GLJ Petroleum Consultants Ltd., Report on Reserves Data by Independent
Qualified Reserves Evaluator or Auditor as of December 31, 2010
  97




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##### Table of Contents



SIGNATURES
   By:
    
    /s/ Robert M. FriedlandRobert M. FriedlandExecutive Co-ChairmanChief Executive Officer(Principal Executive Officer)
  /s/ Robert M. Friedland
    
    /s/ A. Robert AbboudRobert M. Friedland
    
    A. Robert AbboudExecutive Co-Chairman
    
    Co-Chairman and Independent Lead DirectorChief Executive Officer(Principal Executive Officer)
    
    /s/ Howard R. Balloch

Howard R. Balloch, Director/s/ Gerald D. SchiefelbeinGerald D. Schiefelbein
    
    /s/ Carlos A. CabreraChief Financial Officer
    
    Carlos A. Cabrera, Director(Principal Financial and Accounting Officer)/s/ Brian F. Downey

Brian F. Downey, Director/s/ Robert G. Graham

Robert G. Graham, Director/s/ Peter G. MeredithPeter G. Meredith, Director/s/ Alexander A. Molyneux

Alexander A. Molyneux, Director/s/ Robert A. Pirraglia

Robert A. Pirraglia, Director
  98